The results of Tuesday’s poll are in (see below) and they paint something of a bleak picture in terms of consumers’ approach to financial planning. The good news, however, is that there’s plenty we can do to improve on this.
A clear majority—more than two-thirds—say they have not looked into how best to achieve their financial goals and the same proportion of respondents claim to have not considered seeking professional financial planning advice. The results suggest that the majority of people have not actually set financial goals, or can’t describe them clearly enough to get motivated to take action.
“One of the big challenges for advisers is to move their focus from the products to the needs of the client,” comments Nick Cann, chief executive of the IFP. “The needs of the client extend much further than these and better outcomes will be found if the clients’ goals are properly researched and understood.”
More than half (55%) admit to not budgeting each month and almost two-thirds (61%) say their financial position will impact their decision to make large commitments such as starting a family. So what’s the barrier that’s preventing consumers from taking a more active interest in their finances? The key seems to be a lack, or perceived lack, of investment knowledge, claiming that this is preventing them from planning their finances.
Of course, this is exactly what Financial Planning Week is all about: encouraging individuals to cast an all encompassing eye over their current needs and future goals with a view to defining a clear and achievable plan of action. Whether you are yet to set up such goals or you have long been striving to achieve set objectives that may be in need of a re-jig due to changing circumstances or the economic climate, Morningstar provides a plethora of data, tools and educational material to inform both the investment-suspicious and the well-invested. And professional advice from Certified Financial Planners’ can play a key role in helping people recognise and realise their goals.
Craig Palfrey, certified financial planner with the St. James Partnership, comments: “I think these results are fairly typical of what I would expect to see, with the lack of information and confidence out there, and a certain lack of trust in our industry, especially in light of the banking scandal, people are not going to know where to go to get advice.”
Naturally, each person’s goals will be different and any advice they may seek needs to be tailor-made. Alan Dick, certified financial planner with Forty Two Wealth Management LLP, says that a key question that financial planners should ask their client is: “What’s important about money to you?”“Money is simply a tool to achieve our goals it is not a goal in itself,” Dick says. “If more clients were able to experience true financial planning that inspires them to make changes in their life to achieve big and exciting goals I am sure the poll would show a totally different result.”
Budgeting, for example, is considerably easier once you have a clear image in your mind of what it is you’re budgeting for. “If people have really clear and exciting goals they are normally able to make informed decisions about managing their short term spending in pursuit of these goals,” Dick says.
The lack of investment knowledge is probably the fault of the investment industry not the investors, Dick says. “The industry has done a fantastic job of making investments seem complex and confusing in an attempt to make investors reliant on the advice of a financial guru, but what this has actually done is turn many investors off altogether. “
Dick adds: “Investing is unlikely to be sexy to anyone other than speculators who see investment as a form of gambling. Real people need to be able to see the big picture and the target they are working towards to become motivated and engaged. This leads us right back to the need for planners to really dig deep enough to help clients understand their values and goals before trying to give answers to technical issues. “
For practical lessons on how to give your finances a much-needed once over, check out Morningstar’s spring clean To Do list here. And for tips on how to simplify your investment lift, read this article by Christine Benz.
Throughout the week we are asking you to participate in our daily poll--you could be rewarded with one of five prizes of an hour’s free and independent financial advice from one of the IFP’s members. Click here to keep up to date with Morningstar's content and features throughout Financial Planning Week.
