FINANCIAL PRODUCTS CAN HELP YOU ON YOUR JOURNEY… BUT YOU NEED A FINANCIAL PLAN FIRST
The financial world, much like every industry, is awash with retail products. From managed funds to insurance policies, from stocks to bonds, the marketplace offers a bewildering array of options all claiming to grow, protect, and preserve your wealth.
A solid investment approach is about you. Your goals, your objectives, your family’s future, all pertaining to your unique situation. But a product for sale, even a financial product, is about profit for a company. Mistaking products for a strategic approach, unfortunately, can lead individuals to make decisions better suiting a salesperson’s targets than their own financial wellbeing.
It’s “You’ve been sold” vs “You’ve been advised”.
The difference is night and day. One is about pushing products; the other is about providing thoughtful guidance for your financial journey.
PLAN FIRST, PRODUCTS LATER
Make a plan and define your goals before committing to the products that can help you get there. This is not about picking an investment or guessing what the market will do next, but rather creating a financial roadmap to align your money with your life’s goals.
From there you can start to think about how you will overcome barriers to these goals, including:
1. An investment approach: This supports your big goals over time – you decide what these are.
2. A savings strategy: Create a nest egg separate to your investments, so you don’t have to dip into them for rainy days, holidays, or if your employment status changes unexpectedly.
3. A framework for making decisions about insurance coverage: For your health, your home, and even your income.
These steps are all about designing a structure that helps you achieve your objectives while managing risk and adapting to changes over time. Then, and only then, do you reach the final step: Selecting specific financial products.
Financial products are the tools to implement your plan. They are not the plan itself. Too often people make the mistake of focusing on the products first, thinking that picking the right one will guarantee financial success.
It won’t. If we’re still thinking of catchy phrases think “all gear no idea”. You can have the best tools in the world for a home project, but you could still end up with wonky shelves if you ignore tried and true methodology – the same rule applies here.
Investors are bombarded with headlines proclaiming the next hot stock or the latest market trend, that appear to promise outsized returns.
Books, podcasts, and articles on finance frequently follow the same path, offering information about products while skipping over the most crucial element of the equation: Your plan.
All the noise about products just distracts from what really matters – defining your goals, understanding your situation, and building a robust financial strategy. Product-focused decisions are little more than gambling, and they often leave individuals chasing short-term gains at the expense of longterm success.
Make sure you’re fully aware of the T&Cs. Are there management fees, advisory fees, commissions? Hidden fees or complex fee structures can obscure the true cost a financial product, eating away at the sum of your returns.
In my younger years at university, I studied property valuation amongst other things. There’s an old saying that a real estate appraisal isn’t a valuation. An appraisal is provided for free, by someone keen to earn a commission by selling the property. A valuation is a detailed, impartial assessment provided by someone who is paid a fee for their expertise, with no vested interest in the outcome.
Don’t get sold a dream product from someone who gets comission or other benefits – get solid, unbiased, strategic advice from a trusted financial adviser instead.
