As teenagers we hated it but as we enter into the hard and confusing slog of adulthood, many of us realise that, actually, it’s quite nice occasionally being told what to do.
We have never had more access to information but that means we face a brain-melting range of options and opinions when trying to figure out what is the best approach to a range of challenges.
Podcasts, books, documentaries, psychologists and Gwyneth Paltrow have all impressed on us the need to “live our best life” by making the right decisions. Every aspect of our life must be optimised – diet, exercise, money, house interiors and parenting through careful choice.
Even shopping for a new vacuum cleaner can see us sitting in front of our laptop at 1am with five Google tabs open of reviews debating suction power, paralysed in a loop of questions, reversed decisions and anxiety about picking the wrong one. God help you if you make the wrong choice and are stuck with a vacuum cleaner you hate – or an ugly feature wall or five extra kilos or a child who grows up to resent you because they never got cello lessons.
The stress of sifting through the competing advice and still getting it wrong is why we pay qualified experts to tell us what to do and how to fix it.
[ Irish workers are less optimistic about financial ability to retire, survey findsOpens in new window ]
We pay dietitians to tell us what to eat to feel our best, personal trainers to make exercise plans to get us back into shape, accountants on how to get the most from our tax return, sleep advisers to get babies to sleep through the night and sometimes hairdressers to tell us that we wouldn’t suit a fringe despite our delusions.
There’s no end to the issues people will outsource to professionals which is why we have the baby name consultant, psychic animal communicator and paid but fake bridesmaid industries.
‘We all came out of the Irish education system knowing lots about geography but nothing about how we put our lives together financially’
— Mark Hedderman
While getting a personal trainer to help you #shred for summer feels commonplace, when it comes to managing our money, the thing we use everyday, we appear to be more hesitant to get an outsider involved
According to a survey conducted by Brokers Ireland earlier this year, only 38 per cent of people had used financial advice, with retired adults much more likely to consult an adviser than people who are still working.
The survey found that those who used an adviser had savings and investments that were worth 60 per cent more than those who didn’t.
This might not be down to financial planning alone, of course. It could be a reflection of high-income earners and other demographics who may traditionally be more likely to access financial advice.
That might hint at why the majority of people seem reluctant to seek out a professional financial adviser or planner – it has the same vibe as sailing, eating caviar or doing the big shop every week in M&S. It sounds nice but it’s something we mentally file as “things only rich people do”.
But that’s not true, stresses Mark Hedderman, a certified financial planner with Hedderman Financial Solutions.
“There isn’t anybody in Ireland who doesn’t need one; every single person is going to need advice at some point,” he says. “We all came out of the Irish education system knowing lots about geography but nothing about how we put our lives together financially.”
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According to Hedderman, the life path of most people will see them buy (or attempt to buy) a house, get married, have children, inherit money and retire from work.
“Every event of your life will trigger a financial ripple but many of us don’t have the knowledge or capabilities to deal with it,” he says. “There’s a significant advice gap.”
That can leave people susceptible to what Hedderman calls “pub talk” – the kind of financial advice dispensed by an uncle after he’s had a few at a family wedding or an old work colleague who swore investing in unregulated wind farms made his brother’s sister-in-law’s cousin’s babysitter a millionaire overnight.
“We saw a lot of that during Covid… stories of people buying Porches out of their bitcoin wallets,” he says.
“We have massive fomo [fear of missing out] in Ireland and we have that contrarian view that we like to see others do well but not better than us so there’s a need to get in and get what we see others are having.”
This kind of “herd mentality” means people can easily get swept up in volatile events like the GameStop short squeeze and crypto asset “pump and dumps” without understanding the level risk they are exposing their hard earned savings to.
“So much info is bombarded at people from their phones and social media, with every second person saying here’s how you can beat the markets,” says Hedderman.
In comparison to social media “money gurus”, a qualified financial planner or adviser dealing in regulated products won’t be issuing promises to double your money in 90 days. In fact, Hedderman says, if his clients get “too excited” by an investment “then we have an issue”.
[ International Monetary Fund urges central banks to remain firm on inflationOpens in new window ]
“This should be vanilla and boring and safe. But it’s like a snowball going downhill, gathering momentum. It will do it quietly until one day you might have a chunk of money” he says.
So what does a financial planner/adviser actually do? The first thing to understand is the difference between the two.
A financial adviser generally helps clients pick a certain product, like the right pension for them.
They can help those who know what they want and help them put a straightforward plan in action – eg a client has €10,000 from an inheritance and wants to invest it in an active fund so the adviser shows them what options are on the market and what the risk and returns might look like.
A financial planner might start off a bit earlier in the journey by looking at the current finances of a client – their income, their debt, any assets, tax, their spending and saving habits etc. Then they will make a plan which supports the dreams or priorities of the client, whether that is a secure retirement, paying for their children’s education or having enough capital to start their own business in the next 10 years.
That can involve investing in certain long-term products or putting savings into shorter fixed-term deposits. Sometimes they can help just by taking on the dirty work of going through all your statements to see where your money is really going.
Clíodhna Hughes, a certified financial planner and director of operations with MGM Financial Services, says clients get a sense of relief after having their finances “spring cleaned” by a professional instead of feeling overwhelmed and putting it off.
“We had a client who had two full shopping bags of correspondence and documents. We told her to bring them in and we would scan or keep what we needed and shred the rest,” she says. “I sent her home with two pieces of paper and she said this is brilliant!”
‘Inflation has helped people focus on the long term. It makes it easier to understand why you need to take more risk’
— Clíodhna Hughes
For those of us whose teeth itch at the thought of a financial expert looking over our frivolous purchase history or who worry about being put on a spending ban, Hughes has reassuring news.
“No financial planner is going to say you should save every single penny; that’s not going to work.
“Realistically we might see you have a few bob on deposit and it’s earning nearly nothing. We might look at that and even though it might be only €5,000, €5,000 in a savings account earning 3 per cent is better than €5k earning 0.25 per cent.”
Right now, inflation and the cost of living crisis make it harder to get to the end of the month with any money left over. That could mean most of us placing financial planning way down our priority list as we try to find ways to cover our everyday expenses. But Hughes says with everything costing more and existing savings able to buy less, this is precisely the time for consumers to weigh up investment risk and look for ways to beat inflation.
[ Ireland’s pension system ranks 13th on global indexOpens in new window ]
“Savings in the bank might get 3 per cent interest but when I ask people if the rest of their costs this year increased by 3 per cent – they haven’t,” she says. “Every cloud has a silver lining and inflation has helped people focus on the long term. It makes it easier to understand why you need to take more risk to get that reward to protect against inflation.”
However, not all risks yield reward every time and consumers need to choose their financial planner with care.
To start, you can check if a financial service provider is regulated by the Central Bank in five seconds thanks to an easy to use search on its website.
Getting involved with unregulated providers and products could mean consumers lose access to redress like compensation schemes or an Financial Services and Pensions Ombudsman investigation if it all goes wrong.
It’s also very important to get a transparent understanding of the fee structure. Does the financial planner bill hourly? Do they take commission from certain products? Or do they take a cut of your investments?
“The key first question should be ‘how do you get paid?’,” says Hedderman.
Hedderman and Hughes are both members and executives with the industry body Financial Planners of Ireland. Both emphasised that consumers should always know what costs or fees they are liable for upfront and in black and white.
But should clients be wary of advice from those who have commission-based fee structures which are dependent on recommending certain products?
Not necessarily, says Hughes. “For those just starting out in the world with less money to pay fees – a commission-based fee structure might be better.”
But clients need to be aware of what that commission is. Hedderman says he has seen commissions ranging up to 12-14 per cent on regulated products which eventually collapsed, something he described as “almost evil”.
Fees will usually be based on the individual and the complexity of their needs. For Hedderman, this could range between “€750-€5,000″ depending on the circumstances.
Whether the end goal is paying for a wedding or having enough money to go to the next Rugby World Cup, calling in a professional can help but only if you do your homework on them and understand the risks first.
