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  • Writer's pictureAkshay Nayak

The Aversion To Advice

Seeking financial advice from competent professionals is a perfectly viable option for most individuals to consider when they need help with their money. But it also an option that most of us hesitate to opt for. This may be due to a variety of reasons. Some of us may be able to deal with our money without professional help. But very often, we may hesitate to seek professional help even when we need it. This could be attributed to a variety of reasons. And such an aversion to seeking professional advice usually has grave negative implications, which may be lasting and irreversible. Therefore, today I will be talking about the most common reasons as to why people hesitate to seek professional help from financial advisors and also be showing how we can work around them.

The predominant perception that most people associate with financial advice is that it is only meant for a certain section of individuals who have already built up a significant net worth. Therefore, most of us feel that professional financial advice is not meant for us. But in truth, the relevance of financial advice has very little to do with the size of our net worth. Financial advice is just as applicable and relevant to any other individual as it is to those with a significant net worth. In fact it is perfectly plausible to say that common individuals need professional advice more than those who have already achieved a state of financial security. This is because it is only when relatively smaller sums of money are managed well that large sums of money and lasting wealth are created. Moreover, financial advice is not concerned solely with managing investments and optimising taxes. It is actually concerned with creating a comprehensive and highly customised plan that encompasses all major aspects of personal finance such as cashflow management, insurance, retirement planning, estate planning and so on in addition to investment management and tax optimisation. These are aspects that are relevant to each and everyone of us regardless of our financial standing. And working with professional advisors to such a broad based plan would mean that we significantly reduce our chances of making mistakes when managing our money, automatically improving our chances of success. Therefore, all individuals would benefit from working with competent professional advisors regardless of their net worth.

That being said, individuals with a significant net worth often display an aversion to seeking professional advice too. This is because they may feel that since they have already built up a significant investment corpus and asset base, they can afford to take it easy and see out the remainder of their lifetimes on the back of their accumulated wealth. But, accumulating wealth and preserving it are two entirely different ball games. Left unmanaged, any investment corpus or asset base would lose its worth to the effects of inflation regardless of the magnitude of our current net worth. Therefore, we would more than likely lose our sense of financial stability and security at some point of time in the future. Then there is also the challenge of ensuring that our assets are optimally structured and passed on to the beneficiaries of our choice in seamless fashion. And these are things that require expert guidance in order for them to be done well. Working with professional advisors would give such individuals the benefits of an objective sounding board and strategist with whom they can collaborate and effectively devise a holistic solution to these matters.

Apprehensions over an advisor’s approach and philosophy with regard to managing and planning finances is another aspect that causes an aversion towards professional advice in people’s minds. A mismatch of philosophies between advisors and individuals who work with them can cause individuals to lose faith in their advisors, thereby making them averse to leaning on professional advice. An individual with an overly aggressive approach to managing money may have a hard time buying into the ideas of an advisor whose philosophies are centered around prudence and conservatism. Someone who actively tries to take on as little risk as possible would have a hard time working with an advisor who prioritises maximising returns over everything else, even at the cost ignoring risk. This may cause individuals to lack trust in their advisors and the advice imparted to them. To avoid such situations those who wish to lean on professional advice must have a clear idea of what they want out of their advisors. Before getting into an engagement with their advisors, individuals must take the time out to ask their prospective advisors about their philosophies on money management and financial planning. This would allow them to pick advisors who are the best possible fit for them, thereby making them more comfortable with their advisors and ensuring that they stick with their advisors over long periods of time.

Monetary costs involved with employing professional advice also tend to put people off the idea of working with advisors. Individuals usually choose to manage their money themselves simply to avoid the costs inherent with employing a professional advisor. While this may seem like an intelligent move at first, they may soon find out that they cannot devote the requisite amount of time to manage their finances effectively. This usually leads to financial mistakes and half baked decision making. Therefore the decision to manage money on their own turns out to be more costly for such individuals as compared to working with advisors. And today there are dedicated fee only financial planners who prepare customised and comprehensive financial plans for individuals at perfectly reasonable prices. Most fee only financial planners charge a flat annual fee for their services, with the fee being paid in semiannual instalments. And there would be no commissions or profit sharing fees involved. So the fee would effectively work out to a few thousand rupees for a period of six months. This means that each instalment would be equivalent to a fraction of the monthly salary of most individuals. This offers most individuals the option of working with professional advisors without having to worry about the burden it creates on their pockets. Once we feel we have learnt enough from our advisors and are more confident about our money management skills we may explore the option of managing our money on our own.

When we are not in good physical or mental health, we do not hesitate to seek the help of the best medical professionals we can find. But the fact remains that most of us are still quite aversed to the idea of seeking professional help when we need help managing our money and planning our finances, even though the kind of services both doctors and financial advisors perform are essentially similar. The reasons given by most individuals for not wanting to employ professional advisors are perfectly logical and understandable. But at the same time, the drawbacks of not employing professional advice especially when needed, far outweigh the apparent benefits of not doing so. Leaning on professional advice allows us to build our net worth, manage it and pass it on to those who would come after us while avoiding mistakes along the way. And provided we find an advisor whose philosophies on money match ours, we must not hesitate to compensate them reasonably to enlist their services. Because an objective look at the benefits that professional advice would bestow on us would reveal that the costs of not leaning on professional advice outweigh the costs involved with having a competent advisor by our side. In other words, professional advice is not something that should be avoided, but rather something that is as beneficial as it is essential.

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