‘Buy this investment’ said John over a conversation in theatre
‘Compare your credit cards’ advised your colleague in the coffee line
‘Establish these bank accounts’ said your husband’s cousin at the last family gathering
‘Save your income’ said Jen, over a random chat about a patient
‘Review your interest rates’ shouted Jorge during last Saturday’s nine-hole golf round
Do these terms sound familiar?
In this age of boundless information, we are witnessing a real effort amongst the general population to improve their financial knowledge. Television, print and social media are awash with information, ideas and advice on investments for doctors, and how you could be managing your financial affairs.
From a financial adviser’s perspective, it’s really pleasing to see more doctors take stock of their financial position, understand their options and make a concerted effort to improve their long term outlook.
Understanding your financial options and implementing changes to improve your financial position or achieve a financial goal, can be both enlightening and rewarding. However, failing to consider your personal circumstances and following inappropriate advice can have dire consequences.
Investigating the source of your information can make all the difference
In a recent development to help improve consumer protection, the Australian Securities and Investments Commission (ASIC), recognised the importance of potentially inappropriate and unqualified advice amongst a pool of people called ‘Finfluencers’.
Finfluencers are social media content creators who discuss financial topics such as money, budgeting and investing. Most do not have a financial services license (AFSL).
Whilst using social media to increase one’s financial knowledge should be encouraged, the Finfluencers’ space has been largely unregulated and some providers have been paid through advertising and sponsored partnerships with companies to recommend their products. Others have potentially made money in what’s known as ‘pump and dump’ scams, where a Finfluencer may ‘pump’ up a stock, they probably own, encouraging others to buy and increasing the stock price. The Finfluencer would then ‘dump’ the stock and the share price would drop accordingly.
What types of advice exists and how can doctors seek advice?
In the world of financial advice, there are 2 distinct types of advice that advisers may provide – general and personal advice.
There are many experts and market commentators who are making a living divulging general advice for their many followers.
However, the very nature of ‘general’ advice means that individual particular circumstances (such as objectives, financial position and timeline) are not taken into account.
Consider the young couple of medical professionals who are saving to buy their first home in the next 12-18 months. Rather than continuing to diligently save cash towards their short-term goal, they have decided to ‘risk’ their money in the stock market following stock-picks in a financial podcast they like.
Fast forward 6 months, having underestimated the risk and volatility in the share market, their investments have dropped in value, they have no direction or risk management plan to manage their investment and their housing dream is on hold as they desperately seek to cover their losses.
A disciplined, diversified and long term investment in share markets may provide a positive return, however too often we are witnessing prospective clients who have indiscriminately followed ‘general advice’ and ended up making financial decisions to their detriment.
Failing to consider the risk, their investment time horizons and personal circumstances can result in considerable financial loss and stress.
General advice vs personal advice
There are 3 different types of personal advice that a licensed financial adviser can provide to address your personal financial situation, needs and goals
- Limited scope, single issue advice
Addresses a particular issue or aspect of your financial position, for example the best way to manage your cash flow or contribute to superannuation.
- Comprehensive financial advice
Involves a holistic review of your current financial position and developing a plan to help achieve short, medium and long-term goals. This advice should not only consider multiple aspects of advice such as cash flow, superannuation, investments and insurance, but the interrelationship between these advice areas.
- Ongoing advice and management
Your adviser will regularly monitor and review your financial position and suggest changes to your recommended strategies and financial plan. Ongoing or fixed-term advice may also incorporate the management of your superannuation and investments to ensure your investments and assets are closely aligned to the agreed mix.
Personal medical financial advice from a trusted source
Gathering general financial advice is a fantastic way to improve your financial knowledge, however caution must be taken before applying these recommendations on the home front.
Whilst it will come at a cost, the alternative is to consult a licensed financial adviser to help understand your financial position, objectives and needs and provide personal financial advice on a limited, comprehensive or ongoing basis that is applicable to you.
Please contact a DPM Private Wealth Consultant to discuss your personal circumstances or goals further on 1800 376 376 or enquire for a free no-obligation initial consultation here.
Disclaimer:* This article contains general information only and does not consider your personal objectives, financial situation or needs. You should assess whether the information contained in this communication is appropriate in relation to your own objectives, financial situation or needs.
