Neglecting financial advice costs health and wealth

Financial advisers say not enough people are seeking their services despite evidence it makes them wealthier and happier.

Thursday, December 3rd 2020, 6:34AM

by BusinessDesk

A Financial Services Council commissioned survey found only 18 percent of Kiwis were taking advice, while 40 percent didn’t see any benefit in it.

The survey of 2,000 New Zealanders said those who did receive advice reported much higher levels of both financial and overall wellbeing.

Almost half of people who received financial advice rated their wellbeing as being high or very high, compared to less than a fifth of those who hadn’t.

This comes with the caveat that those seeking advice tend to be wealthier to begin with and may find it easier to get richer and find greater wellbeing than those with less money and not seeking advice.

Despite this caveat, all age groups noted significant improvements to their wellbeing after taking advice, with millennials benefitting the most markedly.

Besides overall wellbeing, the survey said those who sought financial advice received better investment returns than those going it alone. Those getting financial advice had an average of 4 percent better returns, 3.7 percent more income saved, and a 50 percent bigger KiwiSaver balance.

Financial Services Council chief executive Richard Klipin said: “The alarming stat that only 18 percent of people get advice points to the fact that the sector has a lot of work to do in articulating the value in talking to someone,” he said.

Dentist, doctor, and financial adviser
Klipin said having a financial adviser was like having a family doctor, one guiding your wealth and the other your health. However, most New Zealanders are passing up advice for a range of reasons.

“The main barriers to people getting advice is a perceived lack of wealth, and the affordability of advice,” Klipin said. "65.2 percent think they don’t have enough wealth or assets to warrant it, and 62.5 percent believe it’s too expensive.”

The third barrier is a question of who to trust, as many advisers are employed by financial services firms simply pushing their products.

Almost 30 percent of survey respondents said they didn’t trust advisers and almost half of those who did see one had been referred by trusted friends or family.

“These are issues for the sector to address,” Klipin said. “How you build trust, in whatever industry, is by showing up and doing what you say you are going to do.”

Those who don’t feel they have enough money to need financial advice have the wrong idea about the types of advice they could benefit from, Klipin said.

While not everyone needs an investment adviser to build them a share portfolio, most would benefit from a budgeting plan or advice about KiwiSaver — which three-quarters of New Zealanders are invested in.

“KiwiSaver is a game changer, it’s the place where almost all New Zealanders might need to have an advice conversation,” he said.

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