Why financial advice is so important

Why financial advice is so important

All financial advice is important but retirement advice is even more important. Get good advice and your personal finances will be in good shape and you can look forward to a financially secure retirement with peace of mind and security.

However, if you don’t take financial advice and make your own decisions you run the risk of making some serious mistakes which could result in a less financially secure retirment with lots of worry and anxiety.

Financial advice is more than just making sure your finances are in good shape, it is also about making sure you have don’t have to worry about money matters so you can enjoy your life. Money matters may seem boring and complex, but if your personal finances are in good order it will be so much easier to enjoy the rest of your life.

It’s more complex that it seems and it easy to make mistakes.

Pension freedoms have transformed the way you can access your pension pots at retirement because you now have the control and flexibility to spend your pension pot as you want.

It easy to fall into the trap of thinking you can make the right retirement decisions without financial advice. But retirement advice is much more complex than you might think:

• There is a lot at stake - you shouldn't gamble with your personal finances
• Be serious - it’s more complex that it seems and it easy to make mistakes
• It’s difficult to make the right investment decisions - you can’t always trust your own instincts
• You could end up paying a lot of necessary tax

• There are many different pension options and retirement solutions
• It is easy to underestimate how much income you need in retirment and how long you might live
• It can be difficult to work out your retirment income needs and attitude to risk
• You could end up paying a lot of necessary tax

You probably think you are sensible and can make rational decisions.

But you may not realise that you are influenced by a number of behavioural biases which can result in poor decision making.

Poor numeracy skills and lack of understanding will have a negative influence on your decision making. A good adviser will help you overcome your behavioural biases.

Some of the most common behavioural biases are as follows:

• Overconfidence – You may overestimate your ability to make the right decisions
• Information bias – Watch out for fake or misleading news
• Loss aversion – Fear about short term losses may result in you being over cautious
• Hyperbolic discounting – You should avoid short-termism and take a longer-term view

By presenting facts and figures in a clear and concise way and making sure you understand the importance of taking a long-term view of your retirement needs, a good adviser will help you avoid making mistakes resulting from your behavioural biases.

You may be tempted to make your own investment decisions but if you don’t have the expertise to make the right fund selection you may end much worse compared to getting financial advice.

If you need investment advice for your savings or investments, a good adviser will discuss your attitude to risk and longer-term objectives and then recommend a suitable strategy.