We often think that only the financial illiterate need wealth advice. However, in our own experience, it is not uncommon for financially savvy individuals to reach out to explore our services. We also have a pool of clients who are financially savvy themselves.
- They send us their spreadsheets, tracking their finances, including budget tracking, cashflow forecast and investment performance.
- They know the various markets very well, at times even better than our advisers. They could be working in the financial sector or have been investing for a long time.
Therefore, why do they look for wealth advice?
1) No Time and/or Interest in Managing Their Family Finances but Have Been Doing It Out of Need
Like many endeavours in life, we pursue because we have these 3 ingredients “CIT”:
- Competence
- Interest
- Time
If we find ourselves lacking any of the above ingredients, we may consider having someone else to perform the tasks for us. Even though you can and enjoy cooking, it does not mean that you want to cook every day. Because it is an essential aspect of your life, you either do it yourself or find someone to do it for you.
It is very common to find a couple dynamic where the one who works in the finance industry or likes to dabble with spreadsheets manages the family finances. It is a very logical segregation of duties. However, this does not mean this partner enjoys looking at numbers and charts after a long day at work also looking at numbers. This also does not mean that they have the time to do so.
Managing personal finances well to ensure one or their family achieves their life and wealth goals requires competence in these different areas of accounting and wealth management:
- Financial Accounting: Being disciplined in keeping track and updating the balance sheet (assets and liabilities) and cash flow (income and expenses) of the family.
- Management Accounting: Planning out the family budget and cash flow forecast to aid in decision-making (e.g., can we afford a bigger house? Can we increase our travel budget? Is our income growing fast enough?) and ensuring that the family wealth goals are on track or being met.
- Investing: Deploying the family savings in the right instruments and asset allocation to grow them in a reliable manner.
They also require one to have time and interest because it is a continuous process and a cycle:
It is a big endeavor and responsibility, especially as one progresses towards the end of one’s career, where the stakes are higher. A serious financial mistake could curtail what they have been working towards their entire career.
Therefore, it is usually at a phase in their life that they decide to find a professional to take over this aspect of their lives, so they can focus on living the desired lives they want. At the same time, they have the assurance that their financial life is well looked after on a day-to-day basis and reviewed regularly.
2) Their Spouse or Key Family Members Are Not Financially Savvy or Interested in Finance
They need a professional firm to partner with and guide their loved ones in case something happens to them.
We often hear this concern from our financially savvy clients. It is increasingly common for us to meet clients who are enthusiastic about sharing their spreadsheets and research, but whose spouses are either not interested, do not understand, or do not see the need to know more (since their partner is already capable).
These observations are not limited to older clients. We also see young parents who hope their dependents’ financial lives can continue to be well taken care of, as well as couples without children who wish for their partner or key family members to lead a worry-free financial life if they were to pass away or suffer from a disability or serious illness.
3) To Provide Them with Objective and Unbiased Perspectives to Identify Potential Blind Spots and Avoid Emotional Decision Making
Financially savvy clients pay us to help them spot potential gaps or risks as our advisory process allows us to have a comprehensive view of their life goals, important people in their lives, financial/non-financial concerns, and financial situation, considering all aspects such as investments, insurance, retirement planning, and estate planning.
They recognise that their decisions can often be influenced by emotions. They look to us to offer a rational perspective and social proof of what others like them should be doing to achieve their life goals.
For example, I have a client who has been investing in foreign properties for many years. Unfortunately, these investments have not worked out, resulting in capital losses. He is also looking to slow down and simplify his financial life as they take up a significant amount of his time liaising with agents and tracking their rental.
Various research has shown us that we humans have a cognitive bias called endowment effect that causes us to overvalue things simply because they own them, regardless of their objective market value. Similarly, it is also tied to loss aversion, which suggests that we feel the pain of losing something more acutely than the pleasure of gaining something of equivalent value.
Through a facilitated conversation, this client concluded that these investments are no longer in alignment with his long-term plans. If he sells them, the sale proceeds he gets back can be otherwise better invested to give him more reliably the returns he needs for his retirement needs. His time can also be better spent on things that matter more to him.
In summary, while it may seem counterintuitive, financially savvy individuals often seek our advisory services for their own unique reasons. They may lack the time or interest to manage their finances, want to ensure their loved ones are well-guided in their absence, and value the objective perspective and assurance that our professional advice provides. By partnering with us, they can focus on what matters most and be confident that their financial well-being and goals are in good hands.
As our CEO Chris wrote in his article on the 7 reasons to choose Providend over DIY-ETF investing, if I may summarise, clients choose us to gain clarity on what truly matters in their lives and what needs to be done—beyond just financial aspects—to achieve those goals. They seek a comprehensive wealth plan that offers a clear roadmap and effective execution to meet their financial objectives and, consequently, their life goals. Additionally, they value having a reliable adviser to help avoid costly mistakes and provide ongoing support and advice.
This is an original article written by Loh Yong Cheng, Lead of Advisory Team at Providend, Southeast Asia’s first fee-only wealth advisory firm.
For more related resources, check out:
1. Here’s Why We Charge a Higher Fee Than Robos
2. Client Case Study: When You Give Up Being A DIY Investor
3. I Am a Wealth Adviser, Seeking for a Review of My Own Wealth Plan
Through deep conversations with our advisers, you will gain clarity on what matters most in life and what needs to be done to live a good life, both financially and non-financially. Learn more about our wealth management philosophy here.
We do not charge a fee at the first consultation meeting. If you would like an honest opinion on your current estate plan, investment portfolio, financial and/or retirement plan, make an appointment with us today.
