Why is financial advice important?

Getting the right financial advice is important for people of all ages, and maximises investment outcomes.

Whether you’re starting out or well into your wealth creation journey, good financial advice defines your goals and the path to getting there. It gives you a map and ongoing support to help you take control of your future.

Financial advice encompasses many areas including investing, insurance and estate planning. It should be personalised to your individual situation based on your needs and goals.

Stockspot provides personalised advice on one particular part of your financial life which is investing. To provide advice we take into account other areas of your financial life like your debts and cashflow but our advice centers around whether you should invest and what you should invest in.

Regardless of where you get investment advice from, if you’re not given a statement of advice (SOA) and investment plan then it’s not advice, because you’re making your own decision about whether a product is suitable for you.

Investment profile

When you get personalised investment advice, you should always take into account your investment profile. This helps shape what type of investment strategy you should be considering.

To understand your investment profile, you will typically be asked a series of questions that relate to the following areas:

Risk capacity and investment experience

Your risk profile helps determine your experience and approach to investing. It takes into account how you feel about market movements and how you think you would react if the market were to fall. How you think you would react and how people actually react are often very different which is where investment experience comes into effect.

A good investment adviser will help with behavioural coaching along the way to ensure clients don’t harm themselves by selling when the markets dips, which they inevitably do.

We’ve found that keeping clients continually updated is the best way help them stay on the right track and avoid the temptation to sell when the media broadcasts negativity around the sharemarket.

If market falls make you nervous or if a significant market fall would cause you to sell all your investments, your may be suited to a more conservative investment strategy. If you’re the type of person with the capacity and inclination to add to your investments when the market falls, you may be suited to a higher growth portfolio.

Investment horizon

Your investment profile also seeks to understand your investment horizon. This is how long you intend to invest for and whether you plan to make withdrawals along the way.

If it’s for the long-term (7 or more years), you may be better suited to a portfolio that has a higher percentage of growth assets like shares. Shares have higher growth potential but are riskier than other assets like bond,  so your investment timeframe needs to be longer to give you the best chance of reaching your goals. A long investment horizon means you can weather ups and downs in your portfolio to ultimately achieve a better result.

Investors with a shorter term investment horizon (4 or less years) could be better suited to balanced or conservative portfolios. These types of portfolios have a higher percentage of defensive assets like bonds and gold (and less shares).

Stage of life and cashflow needs

Connected to investment horizon, your life stage may impact your need for regular cashflow. Younger people have a longer investment timeline and less short term costs so can afford to take on more risk.

Older people nearing retirement are generally suited to a more conservative strategy as they will be looking to use the distributions and dividends they receive and potentially draw down on their investment capital also.

There is an interplay between these areas and getting good investment advice considers all these aspects to determine the best investment strategy for you.


Ensure you have enough for a rainy day

If you start investing it’s vital that you have a rainy day fund (aka an emergency fund or savings buffer). It’s an amount of money you have saved that can cover the costs of a surprise expense or a period without an income.

Having some cash set aside means you don’t need to borrow or dip into your longer term investments if you need money quickly. It gives you some breathing space if things go wrong.

Investing isn’t right for everyone, it’s more important to pay off high interest debt before investing your savings. This is because the interest rate on loans like credit cards is higher than the returns you can expect to make from investing.

Avoid behavioural mistakes

Good investment advice helps you to avoid decisions motivated by emotions which can harm your ability to make good returns. In practice most people (including experts) make costly behavioural mistakes when given full control of their investment decision making.

A US investment research firm that analysed individual investor behaviour for over 20 years and found the average investor loses approximately 4% per year from behavioural mistakes. Some of these mistakes include:

Investment advice from Stockspot is designed to help you avoid these behavioural mistakes and help you stick to a long-term plan. The advice you get from us is kept up-to-date with your situation and goals and we adjust your investment portfolio accordingly.

Doing this is as in individual DIY investor is extremely hard. You have to battle your emotions and take counter intuitive actions like selling an investment that is performing well to reduce risk. We make these investment decisions easy because we do them on your behalf.

Ongoing advice keeps you on track

Investment advice isn’t just a one off process, it needs to be updated in line with your life. Our investment recommendations are personalised for each client and reviewed at least annually. We also provide ongoing investment coaching to keep you on track.

It gives you the best chance of reaching your goals and means you have peace of mind that your investment strategy is suitable for where you are in life, your goals, time-frame and personal risk profile.

If you’re ready to start investing with Stockspot, fill out our short questionnaire. Find out which portfolio would suit you best and what kind of returns you can expect over the long term.

Advice & Client Care

Sarah is a FASEA qualified Investment Adviser. She has over 16 years experience in the financial services sector. She has spent most of her career working in financial advisory, operations and administrative roles. She holds a B.Business/BA International Studies from UTS, Sydney and Graduate Diploma in Financial Planning from Kaplan. She is driven to improve the financial literacy of all Australians and to empower both women and men to challenge the status quo and make good financial choices.

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