Who do you go to for financial advice? If you're anything like the respondents to a recent Financial Markets Authority survey, you're probably more likely to seek the opinions of your family and friends than those of an accountant or financial adviser.
The study found that 47 per cent ofpeople would go to their friends and family, 48 per cent would turn to the bank. That's compared to 30 per cent who would seek an accountant's view and 30 per cent who'd go to a financial adviser. Respondents could choose more than one source of advice.
I can understand the sentiment. You would expect that family would have your interests at heart and the opinions of those closest to you matter. But the FMA is worried about this and I believe it is right to be.
Maybe people are seeking cheaper sources of advice. But when it comes to your investments and financial wellbeing, you don't want to scrimp. You need to do your due diligence on investments as much as you would on a house or a business. That is as true for KiwiSaver as it is for big lump sum investments. The wrong call could leave you tens of thousands of dollars worse off -- or even more -- when you hit retirement.
People are making big financial decisions that will affect the rest of their lives and potentially the lives of future generations on the basis of what a neighbour or family member says. Putting money into an investment that someone down the road says is a sure bet can be a big mistake.
I see this every so often -- people who have been advised by well-meaning but often misinformed acquaintances. If this isn't caught early enough, it can cause serious problems.
If you're making financial decisions, you need to know that they are right for your own circumstances, which will be different to those of your neighbour or friend. Your goals and needs will be different. Your tolerance for risk won't be the same.
Don't cut corners. The same FMA survey showed New Zealanders' levels of financial literacy are not high. A small spend now -- whether that's time to seek out a financial adviser or a fee to talk to an accountant -- could prove to be one of the best investments you'll ever make.
