An independent financial adviser’s role in your investment success

Your financial wellbeing should be seen as just as important as your health; you would likely visit a doctor if you were sick, right? Consulting an independent financial adviser (IFA) can help you heal and boost your investments for optimal performance.

It’s important to understand that IFAs are much more than investment product selectors. They aren’t affiliated to any service provider; their job can be seen as assisting you with effective long-term financial planning that suits your circumstances. Therefore, they shouldn’t push any company’s specific product (such as unit trusts) on you.

Investors, particularly those beginning their investment journey, can make mistakes that may jeopardise investment performance. Here are six mistakes that investors could potentially make.

An independent financial adviser (IFA) can help you to side-step common investing errors.

  1. Investing without a strategic financial plan

Never invest blindly. A well-developed, customised financial plan can serve as a roadmap to reaching your financial destination successfully. An IFA can use their objectivity and experience to help you craft a workable plan to suit your goals and needs.

  1. Investing in the incorrect product

There are many investment products available; the characteristics and objectives of the investment should suit your long-term strategy. Products have different objectives as well as tax implications. An adviser can aid you to make informed choices.

  1. Forgetting about inflation

The value of money can be eroded by time, meaning the same amount of rands typically buys fewer items. This is known as inflation. An IFA can recommend investment products that have the potential to, at least, meet inflation, so the returns on your investment have the best chance of being maintained.

  1. ‘Blowing’ your retirement savings when changing jobs

Should you change jobs or be retrenched, it’s highly advised that you preserve retirement savings. If you don’t, it’s doubtful that you would be able to retire with enough money to live comfortably. An IFA generally encourages you to keep your retirement savings intact.

  1. Why you should consider portfolio diversification

One of the key factors to investing successfully is portfolio diversification, meaning that you don’t have all your investment ‘eggs in one basket’. An IFA can provide you with ways to expand, giving you exposure to numerous investment options which may help you manage risk.

  1. Letting emotions cloud your decisions

Market fluctuations can cause investors to make irrational decisions. For example, in the heat of the moment, it’s possible you may feel that you want to switch to another fund; this may lock in losses, destroying the value of your savings. It’s essential to keep a level head when it comes to making investment decisions.

Reputable IFAs should take the time to understand your needs and help you put a plan in place that can be tailored to your goals and risk appetite. A plan can assist in developing a disciplined approach to investing. An IFA’s job is to assist you to view your finances rationally, and only act when necessary.