Firstly I want to discuss some real client cases where they have got it wrong, not followed the rules and it ended up costing them big time, and not only money.
But if you get this right the rewards are massive. We’ll discuss the Secret Sauce, the rules you should be following to keep you on track.
It was in my early 20’s when I started in this industry. I wanted to create all the opportunities for myself and my future family and kids. My parents were never well off, but they did what they could to give us everything. I wouldn’t have what I have today if they did not push me. Like many parents they wanted us to be better off in life than they were. I wanted this and more for my future family and kids in the future.
You could say I fell into financial planning, I trained as an accountant but found I was more than a numbers person, I loved interacting with people, finding out what they are all about, their dreams and I eventually fell into financial planning.
My why is to help more people make more of what they have, protect them from the blind side and give them the right information at the right time to make the right decisions without the influence of higher powers, ie selling just product.
Some of you may have seen the recent ABC spread on AMP. I worked and partly owned a financial planning practice a number of years ago prior to going it alone without a connection with a product.
As I was listening to this I was not surprised what was said and really felt for the clients that were impacted.
It also made me reflect on some of the conversations that were had at board level in the business I was involved where I was grilled about not using their product, although not part of this show it is a major issue in the current Royal Commission, conflicts.
I remember being grilled to the point they said not to do it again, ie don’t recommend anything other than AMP product and it would be best if you considered our product first. This did not sit well with me and I did stand firm, I was very firm that I worked for the client and if it was in their best interests I would recommend.
But the writing was on the wall and the rest is history, I decided to leave and started my own business which was all about the right solutions for clients without the influence of product.
However, there were a few defining moments in my time as a financial planner that really stand out.
Where it went wrong for clients:-
One of my very first experiences was with a middle-aged couple where it had all gone wrong.
They had a couple of kids at school and all they wanted to do was get ahead financially, much like most of us.
So, they took action, they had been to a property seminar, were convinced to fly to Qld for free to view the investment properties(major red flag).
They were taken to view the properties, wined and dined to the point where they were convinced to purchase one of the properties. But did they walk away with one property, no way, the high-pressure sales guys made it difficult to get back on the plane without signing up to two properties.
In their own words, they were pressured to sign on the dotted line, not right in my eyes.
As the clients were telling me this story, I was starting to feel a little sick in the stomach as I knew what was coming.
Yep, the next thing they told me was those same properties were now worth $300,000 less than what they purchased them for. I was dumbfounded to the point I did not know what to say.
They wanted to know what they could do, but if they sold they would lose $300,000 and still need to pay the debt back to the bank. Unfortunately, there was little I could do at this point in time.
It was most probably the most defining and hardest moments in my career as a financial adviser.
From here I wanted to help people make the right decision and avoid these costly mistakes.
After all these guys only wanted to get ahead and create wealth for their family however they were sold a get rich scheme, only to be in debt to the tune of hundreds of thousands of dollars.
This meeting floored me for many days after as I really felt for them, had they not got on that flight they would never have made that bad investment decision.
One of my clients around the time of the Global Financial Crisis told me of the heartache her son was going through.
Just prior to the collapse, as most people did, thought that they would all make money, thinking markets never go down.
My client’s son went out and got a margin loan to invest. Margin loans can be very dangerous if not used correctly.
To cut a long story short, when the markets crashed he lost everything and ended up depressed as a result of the bad decisions.
All the way through my career, I have been focused on assisting clients to make the right decisions and keeping them away from the bad stuff and although they have not got rich quickly, they have grown their wealth at a nice steady pace over time.
There are many more I could tell you however we would be here all day.
But what happens if you get it right?
I had a previous client of mine get in contact with me recently. They couldn’t come with me when I left my previous business as there were legal restraints that prevented me from taking on my old clients.
But these clients, I had worked with for many years, they had worked hard all their life, not high-income earners but had focused on what they wanted to do in retirement. We started planning out 10 years for these guys. They had a clear plan for what they wanted when they retired. They wanted to maintain their lifestyle but were keen to undertake some overseas travel while exploring Australia at the same time.
They were close but not retired when I left.
About six months ago they got in contact with me and this is what they had to say.
“We retired nearly 4 years ago and life is great!. Barb and I have been doing an enormous amount of travel both within Oz and OS. Late last year we did a tour through Eastern Europe (Russia, Baltic states, Belarus, Poland and Czech Republic) followed by a week in Berlin and a week in Malta. We have done China, Europe and Hawaii as well. Within Oz we have done the Kimberly twice, Savannah Way, Cape Yorke to name the big trips plus many small 1-2 week trips as well. This year we have to pull our heads in a bit and we are just in Hong Kong for 10 days as well as 6-7, 1-3 week trips around Oz. Our current life still is mostly due to the excellent advice we received from you for the time you were looking after us.
This is the result of getting it right.
So, what’s the Secret Sauce?
1) The first rule I think is the most important one and comes from Warren Buffett(he has two rules), one of the world’s best investors:-
Rule 1: Don’t lose Money
Rule 2: Never, forget Rule number 1
That’s not to say don’t invest, but to do it in a safe and measured way.
2) If it sounds too good to be true, then it probably is.
3) If you don’t understand what you are investing it, either seek proper advice or don’t invest.
4) If you think you can beat the market, lose this ego now. Very few people beat the market and when they do are unable to do it year in year out.
5) Understand that investing is boring if you just follow the rules. If you’re looking for excitement go to an amusement park.
6) Einstein once said, “compounding is the 8th wonder of the world”, use it to your advantage.
7) Invest regularly and often. Those that win at this game invest on a regular basis and often.
8) Work out the level of risk you are willing to take and invest accordingly, after all, you want to be able to sleep at night.
9) Diversify, Diversify, Diversify
10) Don’t listen to the latest hot tip.
11) Reduce your overall investment costs, they will add to the pool.
12) Understand there is no silver bullet.
Now, the above is not everything but it is enough to keep you out of trouble so you don’t make the mistake of the people I talked about above.
Hope that helps.
What were the best investment decisions you have made or the worst and why? I would love to hear from you.
If you have a question you are trying to get an answer for or you are wanting to get more control of your money feel free to book a 15min strategy session and we’ll help you dissect it and give you 1-3 tips on how to move forward. I have a few sessions free over the coming weeks. You can book by clicking here>>
If there are questions you have, feel free to email me and I’ll answer them for you.
Make it a great Life!
Glenn Doherty – CFP – Founder & Financial Organiser at Jigsaw Private Wealth
Email: [email protected]
Mob: 0401 253 729
Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at June 2018. This is an online information blog. It does not imply an offering of securities.