Updated 03 December 2020
Most of us feel pretty confident in our own financial decisions, and believe that we donât need experts to help us with lifeâs most important events. But is this confidence based on extensive knowledge of finance â or a dangerous lack of it?
When was the last time you sought professional financial advice? Maybe it was when you bought your most recent property, or moved up a tax bracket, or decided to sort out your pension plans. But the answer may well be âneverâ. Our recent survey found that for most of lifeâs key events, from starting a family to starting a business, a majority of people choose not to seek financial advice. And itâs not for the reason youâd expect.
You might think itâs the cost that puts people off. Not so. The survey found that on average less than 10 per cent of respondents were deterred by the expense. Rather, the two main reasons given were, âI donât think it would have made a difference to my decision(s)â and âI was confident that I could make my own financial decisions without seeking professional adviceâ. These two answers, which together account for around 60 per cent of reasons given, carry broadly the same implication. Which is: âA financial adviser canât tell me anything I canât work out for myself.â Really?
Either we are a nation of finance wizards, with a dim view of those who claim to know better, or there is some denial going on here. But now the illusion starts to crumble. The self-assured responses given above were a lot lower for one particular question. We asked one group of people, those who had not sought financial advice when buying a property as an investment, why they hadnât done this. Only 50 per cent said either that the advice wouldnât have made a difference, or that they were sure of their own decisions. Meanwhile a new response came onto the radar: âI forgotâ.
What do you mean, you forgot?
This question was the only place in the survey where the âI forgotâ response was significant (at 12 per cent). Elsewhere, it hovers close to zero. What does this mean?
First, letâs look at what âI forgotâ means. Itâs basically saying, âI didnât do it, but I know I should have.â When we break down the responses, we get an even more interesting picture. Women were almost twice as likely as men to admit they âforgotâ to take financial advice (perhaps upholding the stereotype that men donât like to ask for directions). And for 18-34 year olds this answer clocked a massive 42 per cent, only to plunge to absolute zero for both older age groups. The younger generation is far more ready to admit that not taking financial advice was a mistake.
More people recognised the need for financial advice in this scenario (if only in hindsight), because buying a property for investment is a purely financial transaction. People donât tend to say they âforgotâ to take financial advice when starting their family, because it simply didnât occur to them that they should. And yet events that seem very personal in nature may turn out to be even more costly than the obviously âfinancialâ ones.
The real reason why people donât seek financial advice may be not that they know too much, but that they know too little. If you donât know how much you donât know, then you can be tempted to think you know it all. But as you approach any of lifeâs major events, just an informal chat with a financial adviser can reveal how much more there is to learn.