Online investing vs using adviser investing for young professionals

By Janice Roberts
Andrew Cross, CFP at BDO South Africa

Andrew Cross, CFP at BDO South Africa

We find ourselves in a digital world with volumes of information accessible by almost anyone, at any given time, writes Andrew Cross, CFP at BDO South Africa.

“E-commerce is one the most innovative advancements of our time and has empowered people to make purchases and sales at the click of button, without consulting anyone. So what does this mean for the financial services industry? With online investment options and financial advice readily available for anyone who searches for it, the traditional face-to-face consulting is at risk, especially for young professionals who are well versed in this digital language. On the other side of the coin, consumers are also put at risk and have become more susceptible to fraud and cyber-crime. Never-the-less, this wheel will not be stopped from turning.”

Cross cautions consumers, especially young professionals, to be more alert and tech savvy to ensure that they are working with authentic and legitimate service providers. “The ‘Google generation’ tends to think that they can do everything themselves, which is a misguided notion. Assuming that you know it all can be detrimental in planning your finances,” he says.

There are various presumptions which are to be avoided by young professionals as outlined by Cross below:

  • I can learn for myself what an adviser can tell me.
  • I do not need to pay for advice for something that I can easily do by myself.
  • Financial planners are too expensive.
  • I am in complete control of my finances.
  • I am fully aware of the impact investment fees have on my investment performance.

Dispelling these myths is key in helping young professionals plan their finances.

Advisers provide invaluable expert advice:

The first few meetings with a financial planner allow them to get to know a client in person, understanding their relationship with money and their life goals. When both the client and the planner are confident enough to continue the professional relationship and understand what is expected from each other, the planner will do more detailed analysis on their specific financial situation and use this information to develop a holistic financial plan.

“A fee for services will be agreed to in advance, but remember that full disclosure of what you are paying for the advice must be documented,” adds Cross. The plan and all necessary transactions will be described to the client and once that has happened, the plan will be executed. The plan should then be continuously reviewed to make sure the client’s plan is still on track.

Only platforms are not all-encompassing:

Online investing is not equipped to provide detailed, in depth financial planning services as these platforms may explain advantages/disadvantages of different investment vehicles and portfolios, but will not be able to explain how they will fit into each person’s individual circumstances. “Certified financial planners have the necessary education, experience and expertise to construct holistic, tailor-made financial plans comprising financial products and investment portfolios based on the individual’s specific goals and objectives,” adds Cross.

Advisers help provide more control over finances:

Direct human contact and forming a relationship with a trusted expert is extremely important to prevent the individual from making emotionally driven money decisions in the short-term that can be detrimental in the long-term investment plan. “Objectivity is key when implementing financial strategies, adds Cross.

Expert understanding of the impact of investment fees on performance is key:

Financial planners offer comprehensive investment analysis, better investment selection and diversification based on individual investment horizons and risk tolerance. “They will work with you through various life transitions, ensuring that you transition emotionally and financially,” adds Cross.

Summary of tips for financial planning for young professional:

Don’t do this:
  • Do not underestimate the importance of a professionally qualified financial adviser.
  • Do not make rash, emotional decisions regarding your money.
  • Do not delay the decision to invest money because of your reluctance to use a financial planner and your uncertainty regarding the investment process.
Do this:
  • Find a financial planner who is suitably qualified to give holistic financial advice.
  • Be in a position where you feel comfortable with the financial planner. All financial planners are different people with different personalities, so choose one that you feel you will be able to enjoy a long-term professional relationship with. You should be able to trust this person with personal financial matters and believe that he/she is acting with your best interests at heart.

Be prepared to work interactively with your financial planner. Stay involved in your financial decisions and ongoing analysis over time. Be prepared to be honest with yourself and your financial planner.

Do your own research online to find out more about the different investment options. This coupled with certified financial planning will ensure that you are equipped to make the right investments.

Author Andrew Cross, CFP, BDO South Africa

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