Written By Premier Financial based in Tralee, Co.Kerry.
We are in the business of helping you to achieve the life that you want to lead, through wise management of your money and by helping you to establish sound financial behaviours. We know from experience that developing a financial plan for you is the first step to enabling you to achieve your desired lifestyle, followed by years and years of relentless and rigorous focus on this plan. It will never be achieved by short term tactical genius and taking bets.
In relation to your financial behaviours, our role is akin to being your (financial) guardian angel! The biggest factor in wealth destruction is very often the investor’s own misguided behaviours and actions. As a result the most important role that we can play is to stop you making mistakes that will impact your wealth. This is sometimes the unseen work that we do, so we thought it would be useful to give you a sense of a few ways in which we add value, without you probably even realising it!
1. Keeping a long-term perspective
This is probably the biggest challenge for investors. You are bombarded every day by news of markets falling (this is followed at some stage by a rise again – every time), economic warnings, news of financial meltdown – all potential threats to your financial wellbeing. As a result you could be tempted to constantly make “tactical” changes. The problem is that more often than not, you’ll make the wrong changes and most of these doomsday scenarios never come to pass. Even when they do, they correct themselves given time.
So we avoid this short-term news and focus on your plan, which is all about your long-term financial health. We are confident that we have put the right strategies in place to help you achieve your goals over the long-term and we don’t get distracted by short-term noise. It might appear like we’re doing very little. In fact we’re usually doing you a huge favour by avoiding any unwanted activity!
2. Seeing volatility as your friend
Volatile markets are very good for your wealth! While they might (temporarily) be very bad for your nerves, there is a real upside to volatile markets. We are real believers that saving regularly is a core principle of long term wealth. When markets drop, your savings buy more assets – think of these opportunities as an asset sale! Market falls offer a great opportunity for buyers (savers). Unfortunately for many people, market falls result in the panic button being pressed and people getting out of markets – selling when prices are low. This is bad for your financial health… so we will help calm your nerves when markets are volatile.
3. We’ll encourage you to do very little
Constantly tweaking your portfolio makes an adviser look very busy, possibly even appear as an expert who is making highly brilliant changes for your benefit. Unfortunately in most situations, the opposite is actually the case. Developing a plan, developing the right investment strategy to achieve that plan and then sticking with the strategy (and right behaviours) over many years is the road to success.
4. We’ll follow the plan and not the markets
Following the markets means you’re driving while looking through the rear view mirror. You’re basing your future decisions on what is gone and behind you, rather than the road in front of you. We want to keep you looking forwards, as this is all you can influence. If we can help you do the right things that will have a huge impact on your future financial wealth, then we’ll have done a good job. So we’ll spend much more time talking about how much you are saving (and spending!) rather than investment performance, as these are the factors that will make the most difference to the achievement of your financial plan, and ultimately your desired lifestyle.
Yes investment performance is important. But it’s gone, it’s over. And it doesn’t tell us anything about the future. We can’t time markets any better than you can. Nor can fund managers. So very often those little tweaks will simply be the wrong action to take. Review the plan, change the plan as needed and adjust the investment strategy in line with the plan is the road to success. Not “brilliant” short-term bets.
5. Not getting bogged down in products
Similar to the last point, we can make the biggest difference to your financial health by helping you to avoid making mistakes, and by guiding you to do the right things to improve your future. This usually has very little to do with products. Of course, we will make sure that you have the right life cover, income protection and investment products in place, that goes without saying. But while keeping them under review, we let them do what they are meant to do.
Instead we focus on the more important items. Have you got your wills completed and up to date? Should you have Enduring Power of Attorney in place? Are your bank accounts optimally set up to enable you always to be able to access your money? Are you controlling your spending, in line with your financial plan? And are you saving enough for your desired future life? All nothing really to do with products, but these are the things that will make the big difference to you in the future.
In summary, it all comes back to developing your financial plan, and the strategy to achieve that plan. And then by all of us staying out of the way (while keeping everything under constant review) and letting products and markets do what they are supposed to do over many years.