Financial advisers have copped a lot of flak lately, mainly because of a few bad eggs taking advantage of their clients when the industry was in it’s cowboy phase. Unfortunately, this has caused lots of young people to shy away from seeking advice, even though the benefits of good guidance are huge.
A recent study from the Financial Services Council and MetLife found that only 38 per cent of Australians have ever seen a financial adviser, falling to just 16 per cent in the last year.
This is a real worry because getting good financial advice when you’re young can have a huge impact on long term wealth. Here’s how.
Early retirement, anyone?
The government is raising the official retirement age to 70, but lots of us would like to clock off a few years before that.
Unfortunately the ever-increasing life expectancy in Australia means this goal might not be realistic, as more time in retirement means more money is needed to fund our lifestyle as we age.
Research from the Financial Services Council shows a 30 year old who seeks professional financial advice could conservatively save an additional $91,000 by age 65 compared to someone who does not, which could make all the difference to when you hang up the boots.
For someone who starts at 45 the benefit falls to $80,000, while a person who’s 60 would only be $29,000 better off.
So for people looking to retire comfortably and without worry – maybe even a few years early – advice could make all the difference.
Time’s on your side
Young people are in the best possible position to benefit from compounding returns on their investments, which over time can really add up.
According to asset management company Fidelity, over the last 30 years the Australian stock market has returned on average 11.1 per cent a year with dividends reinvested. This means a $10,000 investment in the index in December 1983 would have grown to $235,490 by December 2013 – not a bad little nest egg.
A financial adviser can help young people make the most of this opportunity by putting a long term investment plan in place.
Young people have more spare cash
Young adults generally have fewer financial commitments than those struggling to bring up kids, pay the mortgage and keep up with the Joneses.
According to the Australian Bureau of Statistics, the average disposable after tax income for single people under 35 is $895 a week, whereas a couple with a dependent child aged 15-24 only have $873 a week between them.
And young couples without children under the age of 35 – DINKs as they’re known, or Double Income No Kids – have the highest, at $1,352 per week.
It makes sense to be saving and investing as much as possible at this stage, before all of those pesky and expensive commitments become a reality.
It’s never too early to start planning
When you’re young, there’s a lot of big picture stuff going on. From finding ‘the one’ to building a career and travelling the world, it can be rollercoaster ride.
So it’s understandable to not spend too much time thinking about things like investing, retirement or insurance.
But life moves pretty quickly, and no one knows what’s around the corner, so it’s never to early to put a plan in place for the future.
Seeing a financial adviser can get all of that boring but important stuff out of the way and let you focus on the more pressing, exciting and equally important life stuff.
So if you’re at this stage of life, or any other for that matter, set the tarnished reputation of shonky advisers aside and find a trusted and reputable source of advice to get the ball rolling today.
You’ll thank yourself later.