Do I Need a Financial Advisor?

This question was recently posed to me by a participant in one of my workshops on financial well-being. The workshop explored our relationship with money from the perspective of what kind emotions it triggers.

A group of ten women from the finance industry, all in middle management positions, had assembled via zoom and I had asked them how they FELT about money. One participant approached me afterwards and asked whether I could recommend her a financial advisor. She especially wanted to explore how she should start investing. She did not feel comfortable with her first encounter with an advisor that had approached her. She felt talked down to and treated like some wayward child that would not heed advice. Her valid questions remained unanswered.

From my experience in individual discussions or in my workshops I sense the topic is fraught with emotions such as fear, anxiety, helplessness and lack of trust in one’s own capability. Talking about money seems to be the last taboo. I often hear things like: “I don’t know where to start, it is just overwhelming”, “I delegate this to my husband as I am not good with figures”, “I am aware that I should deal with it but I don’t know whom I can trust for the discussion” or simply the statement of a German proverb (freely translated): “It is not appropriate to talk about money”.

But yet, women would benefit from a more frank and transparent dialogue as they are more likely to be affected by the so-called pension gap. This is not surprising, as they still often work on lower salaries even if they have the same qualifications as their male counterparts (aka the pay-gap), they are less likely to get promotions, are not asking for pay raises, are more often in part-time jobs or take time off as family carers. Divorce or death of a spouse often have devastating financial implications for women.

Here are three of the more recent studies that discuss the topic:

So when the request for a recommendation arose, I paused and considered it further. Financial matters are indeed quite complex and very personal. Everyone brings a different experience to the topic, so we have to approach each situation in a unique way. This also means getting any feelings of anxiety and fear out of the way before we can tackle the topic. This is what I address in my workshops first and afterwards we define questions and follow up with actions.

Here are the things I asked her to consider first before engaging in further conversations with anyone who would manage her assets:

What is the amount you take home after all the deductions including tax? Do you fully understand your payslip? Mandatory contributions will impact your ability to save extra money. Do you have a good overall view of your current financial situation? What are your fixed expenditures, which are discretionary and what can you save?

Once we have answered these questions, we have a starting point. From there, I recommend using the tax season for the purpose of getting an overview of your assets – savings accounts, share or fund holdings and liabilities like mortgage payments or other kinds of debts. This also has the great side effect of getting your tax return out of the way and provides this dreaded exercise with a wider meaning.

It also opens up the opportunity to discuss the matter with your partner. Often I hear that finances are not being discussed in partnerships and women sometimes delegate the topic to their male counterparts. This puzzles me. Where does this reliance come from? Are they all in relationships with men in the finance sector?

Once you have invested time to understand your own financial situation, thinking about saving can start. Depending on the volume, you may devise a savings plan. A good start is a continuous savings plan within a cost efficient scheme. Traditional savings accounts have the huge disadvantage that they hardly pay any interest anymore. Putting money into a fund will let you participate in the development of stocks and other instruments. For smaller amounts, an online trading account may be a good start. In both cases, however, regular payments are key and procrastination is your biggest enemy and you need to be in for the long haul. Some people doubt that starting small is worth the effort. If you want to see the effect of small amounts, put a small figure into an online calculation tools to see how it grows over time. Even small amounts matter in the long run.

Costs take us back to the original problem of choosing an advisor and understanding the fee system they operate on. Does it depend on the assets you have, is it an all-in fee or are we talking about additional fees on top? Do not hesitate consulting different options from various providers. I would start with your local bank that you have probably banked with for years. Ask if they have an open platform or do they only sell their own products? Can you hold funds in a separate trading account?

After answering the above questions you may feel comfortable to engage with an advisor to start your journey of investing. But make sure you do your homework first. You may also chose to start small and become more confident over time and do this yourself. Exchange your experience with your friends and family.

The one thing you should do in light of the pressing evidence I mentioned earlier: Take action! Procrastination and inertia are your worst enemies. Women are usually quite good taken care of their physical and mental health. Why not apply this skill set also to your financial health?

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