Financial Advice Myths



Holly Black: Welcome to the Morningstar series, “Ask the Expert.” I’m Holly Black. With me is Anna Sofat. She is a Financial Planner at Addidi Wealth. Hello.

Anna Sofat: Hello.

Black: We’re here today to bust some myths about financial planning. I think a lot of people have concerns or misconceptions. So, I thought I would ask you some of the most common ones that we hear.

Sofat: Yeah.

Black: So, I think, the first one is that financial advice is only for super rich people.

Sofat: Totally wrong. I think, in most cases, the need is often the greatest for the younger people with lower income or lower asset base, because actually, some of the basic building blocks around financial planning is all around budgeting and emergency funds and getting the building blocks right. That isn’t necessarily conventionally associated with our industry. People will go and try and do that on their own. I think in 5, 10 years’ time, it will be totally different. As an individual, you can know where you’re heading. But without actually doing some work and building a good foundation, a good plan for yourself, chances are you’re not going to get there.

Black: And another myth, I think, is that it’s something you don’t really need to think about until you’re older and probably coming up to retirement because that’s obviously a time when a lot of people do make decisions.

Sofat: Yes. I think probably there are two wrong assumptions there. One is that even if you’ve been saving into pensions and stuff, it’s all doing fine, because it’s over there. And what I would say is, if you got money invested in pensions, actually, you need to make sure from day one that it’s invested rightly, and it’s working as best as it can do for you. So, you’re actually losing money in some way by not consulting and just making sure that it’s efficiently working for you. So, I think that’s totally wrong. Secondly, often I think there is a perception that you need 100,000, 200,000 investments to be of interest to the industry. And I think again, that’s terribly wrong. I think there are financial advisors, financial planners, particularly all shapes and sizes, who work with different people, and it’s just a matter of finding them.

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Black: And how about the idea that advice is going to be super expensive, so I can’t afford it?

Sofat: Again, I think it is based on a false premise, and probably twofold, I think. I would say, you have financial planners who have very big tickets, and who are very modest fees as well, it’s finding one that’s going to suit you. There’s some – who based on an hourly rates, and from anything, I would say, from about £150 an hour. Now that might seem like a great deal of money. But when you – I would say, as an individual, you need to decide what’s your priority. So, there are all sorts of spends that you have, what you have to understand, I suppose, and for yourself, not the industry, is what value you’re going to place on your financial wellbeing. What is very obvious is that if financially you’re not well, then actually, mentally, you’re not well either somewhere in there. So, if you want to be fit and well, and you want to be spending money on wellbeing, then that financial wellbeing has to be one part of that plank.

Black: Thank you so much for your time.

Sofat: Thank you, Holly.

Black: And thanks for joining us.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person’s sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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