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First time seeking financial advice? What you need to know

Written by: Daniel Jones
The current crisis and being in lockdown will have impacted people in many ways and caused some to think about seeking financial advice for the first time.

This might be motivated by financial or emotional factors. Many people will have suffered financial hardship as a result of the lockdown or have worries about the value of their pensions or investments and want someone to answer that all important question – “Am I going to be OK?”.

For others, it may be a realisation of how much money is frittered away easily without even realising it. It’s a lot more difficult to spend in lockdown and people may see surplus income that could really be put to better use going forward.

This period could also have been a wake-up call for people that life is to be lived. There’s perhaps nothing like being told “you must stay at home and do nothing” to make you realise all the things you’d love to do, all those places you’d like to visit.

This is a fantastic opportunity for people to take control of their finances and, more importantly, their life. A good financial planner will be able to listen to an individual, ask questions and get to find out what it is that they really want from life, what’s most important to them and what brings them joy and happiness. This gives a clear direction of travel and ensures everyone is on the same page.

A plan is then put in place to make those dreams a reality and a key part of the journey is accountability. A good financial advisor and planner will hold you to that plan and not let you deviate.

Imagine if you set a goal to lose three stone. You could do that by yourself, but for most of us what happens is we go to the gym regularly for a period and make good progress, but before long the weather, injury, life gets in the way and suddenly that goal is nowhere closer to being achieved.

Instead, if you hired a personal trainer, they’d put a plan in place for you, advise you on nutrition, help avoid injuries and because they’re paid in advance, you always show up. And it’s the same with a financial planner, although this perhaps isn’t really well known or appreciated for those that haven’t had the experience.

The final part is for the planner to recommend products and solutions. These pensions, investments, investment funds etc. are simply tools to help you achieve your objectives. It’s important that these are suitably matched to your needs but are the last part of the puzzle.

A financial advice service can vary throughout your life. What I’ve described above is ‘lifestyle financial planning’ and is usually most sought after by those between around 45 and 60 years old when you’ve got a good idea of what you want from life. Earlier on you’re really finding your way in the world, getting on the property ladder and starting a family.

Financial planners can certainly help here too but it may be that it is more of a transactional relationship. A loose plan that’s going to serve you well in future is to start to save early. By setting aside a small amount from your salary each month, you can make those conversations and plans at 45 much easier because you’ve had a head start.

Commissions – where advisers were paid incentives to recommend certain products to clients – were banned from the industry in 2012, so nowadays you should expect to pay a fee for advice or planning work. This should be explained to you clearly so you can decide if you wish to proceed or not. Most initial conversations are free – but still check in advance.

A one-off piece of advice may encompass a one-off fee whereas ongoing relationships will carry an ongoing fee. Different advice firms will have different fee models so you should consider which you prefer as there is no right way.

I’m often surprised that people think they don’t have enough wealth to warrant seeking advice. The reality is that pretty much everyone could benefit from a financial plan and I would encourage anyone wanting to make a positive change to seek advice.

Don’t be put off by ‘huge fees’. As I said, most initial meetings are free and the fee will then be explained to you and will probably be more affordable than you think.

You should also consider what you are getting for those initial and ongoing fees. We only get one life and should make the most of it. A planner will help you live the best life possible with the money you have, so don’t be too quick to dismiss this purely on the basis of cost.

Daniel Jones is senior wealth planner at Sanlam Wealth Planning

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