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  • Keren-Jo Thomas

Why Financial Literacy is Vitally Important

In these unprecedented times, being financially literate is vital. People need to understand what’s happening in the economy and in the financial world, especially now that high inflation is present and interest rates are increasing.

Financial literacy provides consumers with important tools to help them become more resilient to shocks. Those with greater financial literacy are less likely to be or become financially fragile.

When managing their day-to-day finances, they’re in a better position to make decisions that suit their needs and goals. They’re more capable of anticipating and dealing with adverse economic conditions, namely by building up savings.

Planning your investments can seem like a daunting task. On the one hand, there’s a bewildering array of choices, and on the other is the effort required to plan, monitor, and always adjust one’s portfolio.


DIY or Done for You?

There are so many ways that we can invest. From doing it ourselves through a robo-advisor, going to our bank, or engaging with a financial planner like me.

One of the questions you might be asking yourself is: what’s the cost of using a financial planner versus the value you get in return?

Or worse still, you might be telling yourself that it’s too difficult a subject to understand, so you put it on your to do list for another time and it just ends up languishing there un-actioned. I encourage all my clients to start educating themselves about investing so we can make our meetings more meaningful.

There’s no denying that when you first start researching, it’s a minefield of information. I see so many social media channels advising the best way to invest is to do it yourself and save on fees.

This is dangerous advice in my humble opinion!

Clients who manage their own investments are not protected in the same way as advised clients. If you’re advised via consultations with an adviser and have a poor outcome, then you have regulation to protect you, if you do it all yourself, you don’t.

Managing your own investments is less accepted among high-net worth individuals with a large portfolio, or those looking to invest a significant portion of their savings wallets. Such investors are more likely to look for validation through human advice, especially when the markets become volatile.


How I invest

Up until recently I managed my own investment portfolio and believe me it was time consuming!

My pension portfolio has grown to a significant size, so this year I decided to use a discretionary fund manager to manage my portfolio.

I can also give my input as to what my preferences are, for example ESG investments, however I also give them the freedom to act quickly if needed. Like many people, my time is a precious commodity, so I’m happy to pay someone.


What are the benefits of using a financial planner


Benefit 1: Emotional Guardrails

Keep your politics separate from your investing and managing your market psychology. Both topics speak to the same underlying issue: your emotions, which can wreck even the most well-built financial plan.

A good financial planner will help protect you from yourself, and if you have the self-awareness to know that you occasionally make rash or emotion-fuelled decisions, having those “guardrails” is invaluable.

No, your financial planner cannot stop you from feeling whatever emotions you’re feeling, just like the guardrail can’t stop every car from going into the ditch. In those moments where you want to push the eject button because you’re scared, the planner’s job is to remind you of the plan you created and what you’re working toward: a fulfilling and successful retirement.


Benefit 2: A Comprehensive Plan

A second benefit of working with a planner: having a plan that considers factors you might not be thinking about.

You might be looking at which investments to add to your portfolio, and that’s no doubt an important piece of the puzzle. But have you considered tax planning? What about developing a spending plan or combatting inflation during your retirement? Then there’s healthcare: does your plan include dealing with medical expenses?

Of course, you can pull all these pieces together yourself if you wish too. You just need to keep in mind that the landscape is always shifting, so you’ll want to ensure you keep on top of new laws and regulations that are passed every year that can impact your plan.

If you want to keep track of it yourself, go for it.

The other option is to outsource it to a planner whose job is to make sure your plan stays updated and you stay on track toward your goals.


Benefit 3: A Champion for Your Success

Investing and planning for retirement is difficult. Wouldn’t it be nice to embark on that endeavour with someone in your corner who’s as invested in your success as you are?

I’m talking about someone who thoroughly knows you, your spouse, kids, job, dreams, hopes, goals, and the future you one day hope to achieve. Not only do they know you, but they’re proactively working to bring these things to fruition.

Just knowing that someone cares about you in this way is psychologically impactful. It’s part of the reason people hire personal trainers or business coaches.

A financial planner who’s worth their fee will not only set you up for success, but they’ll also be rooting for you every step of the way. If you don’t have that connection with your planner, I would say keep looking until you find it.


An Investment in Your Future

The reason I wanted to write this article was to draw your attention to some of the benefits of working with a planner that I believe don’t get discussed enough when the fee gets brought up. Is your advisor’s fee an expense? Yes, it does cost you money. But it’s more than that.

It’s also an investment because unlike an expense, which is defined as “the cost required for something,” an investment is “worth buying because it may be profitable or useful in the future.”

A financial planner’s fee is the cost of doing business with them. But I think if you examine the ROI (return on investment) you’ll see it’s worth buying because of what you could get out of it now and down the road.

Whether you’re just getting started and are thinking about putting a financial plan together, or you’re already a seasoned investment pro looking for additional expert support, my financial planning service will help you. CLICK HERE to get in touch and let’s get the conversation started.


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