This year’s Financial Planning Week, which took place at the end of January, was all about dispelling the myths around financial planning.
These myths can prevent people from getting the advice they need, so myth busting is important.
But what myths do advisers encounter the most? Where do they come from? And what is the best way to banish them?
Advisers often come across the same myths time and time again. A common one is that advice is only for the wealthy.
People will say things like, ‘My parents told me I’d lose money in a pension’
“Many people believe that you need to have already built your wealth to truly benefit from financial planning,” says BRI Wealth Management paraplanner Brad Sheridan.
“In reality, a financial planner is there to guide you in the journey of building your wealth, helping you to make the right decisions and make the most of every opportunity.”
Financial advice should be available for everyone, regardless of income level, say experts.
“It helps in managing finances, saving for emergencies, planning for future expenses and achieving financial goals,” says Mike Smith, director at the Business Expert website. “It’s not about how much money you have, but how well you manage it.”
Stereotypes
A prime example is tax planning. People may envisage the wealthy trying to protect their fortune from the taxman, but this is a stereotype rather than reflective of reality.
We have an Instagram account. We wanted to be on the radar of where people get information
“It isn’t true, particularly with things like inheritance tax [IHT], as house-price increases have put a lot of people into the IHT bracket who weren’t there before,” says Stevie Heafford, tax partner at accountancy firm HW Fisher.
A related myth is of someone being ‘too young’ for financial planning, but commentators want to debunk the idea that advice can wait until one’s 30s and beyond.
For Heafford, it is important to be prepared for tomorrow, even when just starting to build wealth.
“It might be that an insurance policy is fine at that point,” she says. “And, if people get their personal cashflow done, they can see their sources of income and capital. For the big life events, they can see what they can afford to do.”
Twenty7tec chief executive James Tucker agrees.
It’s about not giving too much information, but giving enough to debunk the myths
“Age should never be a barrier to financial empowerment,” he says.
“The earlier you start financial planning, the greater the impact on your future.”
Perpetuating illusions
Well-intentioned family members, friends and social-media connections may perpetuate the myths around financial planning, even without realising it.
“A good example is retirement planning,” says wealth planner Daniel Mellor of Succession Wealth.
“Lots of people down the pub say they’re investing in ‘bricks and mortar’; that is their ‘retirement plan’. People will say, ‘My parents told me I’d lose money in a pension.’ A lack of financial education adds to the myth.”
It’s not about how much money you have, but how well you manage it
Perhaps most worrying is some people’s belief that they do not need financial advice and can ‘do it themselves’. There are several reasons why this view is becoming more prevalent, says Ingenious senior business development director Simon Harryman.
“Influencers and other social-media connections may offer unregulated advice that, at no obvious cost, may seem attractive compared to seemingly expensive professional advice,” he says.
Individuals can also bury their head in the sand and may not trust financial advisers.
“The combined effect is that often people don’t see the value in seeking professional help,” adds Harryman.
Debunking incorrect beliefs
Many of those who perpetuate the myths do not understand what financial planning is.
“Myths snowball because of social media,” observes Mellor.
This is why lots of advice firms can now be found on social-media platforms.
Many people believe that you need to have already built your wealth to truly benefit from financial planning
“We have an Instagram account,” says Mellor. “We wanted to be on the radar of where people get information.”
He spends time on the Reddit platform, debunking the myths, but is careful to ensure this cannot be construed as advice.
“We have a duty of care; we do need to educate people,” he says.
“It’s about not giving too much information, but giving enough to debunk the myths.”
This article featured in the February 2024 edition of MM.
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