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Research conducted in 2006 by the Australian Securities Exchange has shown that over 46% of Australians, or 7.3 million, own shares either directly or indirectly through managed funds. This means that Australians have one of the highest percentages of share ownership in the world.
Alarming however, was the statistic which showed that 17% of investors depended on newspapers for advice regarding their investments and a further 16% relied on friends and family. Only 16% relied on the advice of a professional!
Investing without sound advice is like flying blind. Newspapers and magazines mainly report past events and their content is frequently written to sell additional copies. Friends and family will always rely on their own past experiences when making financial and investment recommendations and you have to ask yourself whether such advice is truly objective. The old saying “past returns are no indication of future performance” is more true than ever in today’s complex financial and investment markets.
A good financial planner can help you reach your financial or investment goals but in the context of YOUR specific needs and objectives. In general, the value of advice lies in the following areas:
• Addressing urgent needs – Before any long-term financial strategies can be undertaken it is essential to address issues (the obstacles and traps) which could prevent you from reaching your objectives. Aspects such as cash flows, debt, estate planning and insurance are just as important as the type of investment or the returns.
• Identifying strategic opportunities – By understanding your personal circumstances and financial goals, a good adviser will be able to identify legislative and tax opportunities which you can take advantage of to maximize the chance of achieving your objectives.
• Planning for the future – The next step is to “run the numbers”, or in other words, to model your circumstances in as many different scenarios as possible to identify the strategy that helps you to reach your goal. Your previous experiences, knowledge and attitudes towards the myriad of different areas of financial markets play a key role in determining which strategy is best for you.
• Mentoring and guidance – Financial and investment markets today are constantly being flooded with new and ‘improved products’. A good financial adviser is there to help you separate the wheat from the chaff and provide guidance which does not result in you becoming the next Fincorp or Westpoint victim.
• Staying the course – Deciding to take control of your future and finances is one thing – staying the course until completion to reap the rewards is another. A good financial adviser will be there to provide counsel and advice when your circumstances change or when you want to consider alternative strategies.