Almost one in four Australians say they’re stressed about money, according to a recent study by the Financial Planning Association of Australia.
It doesn’t have to be that way.
Financial planners provide far more than technical advice – they also provide emotional support and guidance to help you through life’s changes and the market’s ups and downs.
In fact, emotional support such as trust, a personal connection, help staying on track to meet goals, and reassurance accounts for 45% of the total perceived value of an adviser, according to 500 investors surveyed by Vanguard.
This is crucial because stress often causes people to make poor financial decisions.
For example, when the COVID-19 downturn first struck in March 2020, investors were met with media headlines such as “Carnage as shares eclipse GFC losses” and “ASX suffers biggest fall since 1987 crash[BS1] “.
Many unadvised investors felt enormous pressure and switched their superannuation into ‘safer’ investment options such as cash as the market fell. Investors switched about $25 billion into cash in the March 2020 quarter alone, according to RBA data. One fund recorded outflows to cash of about 8%.
Those investors missed out on one of the fastest market rebounds in history.
A Russell analysis estimated an investor with a $250,000 super balance in the Russell Investments Balanced Fund who switched to cash at the market’s low point on March 16, 2020 would have locked in losses of more than $50,000.
Their actions effectively reversed the advice ‘buy low and sell high’ as they succumbed to a behavioural bias known as loss aversion.
It describes how the pain from a loss tends to hurt twice as much as the equivalent pleasure from a gain. Older investors with higher super balances are even more prone to loss aversion.
A good financial adviser can help investors maintain their perspective even when markets are volatile. It helps to have someone who not only understands investing but can help you maintain an objective view when under pressure.
A good adviser will create a disciplined decision-making framework and provide ongoing engagement and education to keep you headed in the right direction.
The flip side of loss aversion is over-confidence. As the pandemic took hold and markets fell, new share trading accounts more than tripled in number and trading in leveraged products such as CFDs rose sharply.
For more than two-thirds of the days on which investors were net buyers, their share prices declined the next day, accruing $230 million in potential losses.
Just as a good financial adviser can help stop investors selling after a market crash, a good adviser can also help stop investors from speculating and chasing high-risk gains.
It’s important to maintain a long-term view while appropriately managing risk on the way to achieving financial goals.
A good financial plan is not a gamble – it balances risk and return and is adjusted along the journey to ensure you have the best chance of achieving your goals.
Emotions are a fundamental part of being human, but they can also lead to poor decisions without personal and objective support.
An adviser can be your sounding board to keep you on track.
 In challenging times financial advisers still deliver value | Russell Investments. (2021, October 31). Retrieved from https://russellinvestments.com/au/about-us/press/2020/in-challenging-times-financial-advisers-still-deliver-value
 20-102MR Retail investors at risk in volatile markets | ASIC – Australian Securities and Investments Commission. (2021, November 08). Retrieved from https://asic.gov.au/about-asic/news-centre/find-a-media-release/2020-releases/20-102mr-retail-investors-at-risk-in-volatile-markets
[BS1]AFR and SMH March 17, 2020
If you’d like to discuss your current situation or have any questions please contact us.
The information contained within this website does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances. Before purchasing any financial product, always consider the relevant Product Disclosure Statement (if applicable) which provides full details of risks, terms and conditions.
Some details (including names) have been modified for privacy purposes and assumptions have been applied regarding future interest rates, investment returns, the client’s circumstances and other financial and economic variables for illustrative purposes – actual outcomes may vary.
Suite 505 35 Lime StSydney NSW 2000
See directions here.
For more details about the Miranda office, please contact us.
(02) 9555-8188 (Head Office)
Copyright © 2023 Advise Wise Pty Ltd