Dr. Chris D’Souza
Financial advice is often sought to help investors have a clear vision, consider future growth, and help them navigate towards their desired financial outcomes with clarity and purpose. Financial advisors are therefore consulted to craft a roadmap to success and ensure that each step on a financial journey aligns with the client’s vision
Many investors want to save for retirement, a house down payment, university education, children’s school fees or other financial goals, but they are unsure how to start. Even those who have been saving for a while do not know if they are doing it correctly. The good news is that Financial Wisdom does not have to cost a lot of money.
Educating oneself on financial matters before taking the plunge and following the advice given by a financial planner helps one to:
- Avoid pitfalls: by avoiding high-interest debt, poor investments, and inadequate savings.
- Plan for retirement: by accessing retirement savings and generating income from them.
- Tax planning: by avoiding unnecessary taxes and making finances more tax efficient.
- Save money: by saving money and growing financial and physical assets.
- Set goals: by setting realistic financial goals and creating a plan to achieve them.
- Protect income: by protecting income and ensuring the family is looked after.
Please remember that there is no such thing as a ‘free lunch’ and any free advice may come with hidden costs such as commissions, trailing fees, spotter’s fees, etc. The information given below is not meant to be financial advice but an indication of where one can gain financial wisdom at a low cost so that investors can differentiate between good and bad financial advice.
Here are some of the resources that can help to educate potential investors at almost no cost.
- Online Brokers
Online brokers make it affordable for the average investor to buy stocks, bonds, mutual funds, and other investments. Many online brokers offer discounted or free commissions without requiring a large investment balance. While investors will not have a dedicated investment advisor, these sites typically have free financial lessons to help customers to become better investors.
Many online brokerage platforms allow customers to buy stocks, mutual funds, and ETFs. Customers can also trade options, futures, and cryptocurrency. Some feature a trading simulator where would be investors can learn and test out investing strategies in real time or by using historical data without risking a single dollar. Such platforms also offer powerful tools, market research, and advanced educational resources to improve investor trading skills and grow investor portfolios.
In Australia, it may be worthwhile checking out Sharesies and Interactive Brokers.
- Investment advisors
Investment advisors recommend investments that match an investor’s financial goals. They typically charge commissions or advisory fees in exchange for their services. As part of these services, investors can ask them questions about investments, retirement plans, and other related topics.
Whilst the ICMA does not want to endorse any firm, a quick search on Google will list well-known names in the financial services industry operating in a country. Such advisors not only provide Financial Wisdom; many are linked to a full-service bank to handle all of a customer’s banking, borrowing, and investing needs. It may be also worthwhile to check out the Financial Wisdom Association Australia (FAAA) which is a professional community of financial planners.
If investors are unsure of where to find a financial advisor, there are ‘Smart Advisor’ websites that help match investors with advisors. Some of these websites earn ‘commissions’ for directing traffic to investment advisors, so it is best to be careful and study independent reviews on social media. Additionally, investors can learn about almost any investing topic, including what advisors do and how much they cost. Other educational topics highlight how to improve an investor’s portfolio, how investors stack up against other investors, and retirement-planning guides.
- Budgeting and financial planning apps
Mobile apps for budgeting and financial planning allow savers to manage their finances from their phones, tablets, and web browsers. These apps tend to offer personal finance lessons for free to their users to help them reach their goals. Some offer personalised guidance based on an investor’s answers to quick surveys or selected goals. Some of the better-known apps are: Simplifi by Quicken and Rocket Money.
Pocketbook is a free budgeting app designed especially for Australians. MoneyBrilliant and Goodbudget are also worth looking into.
With these financial planning apps, investors can track all of the investor’s account balances, transactions, and investments in one place. It also makes it easy to collaborate with an investor’s partner to get a shared view of what’s happening with their money. Users can customise dashboards and charts while tracking progress toward their goals.
- Robo-advisors
Robo-advisors are investing apps that offer predetermined portfolios based on an investor’s financial goals. Some robo-advisors enable investors to create personalised portfolios based on industry sectors, geography, company size, and other metrics. As part of their services, robo-advisors typically offer financial tools and personal-finance education lessons to customers.
Robinhood, frequently ranked as one of the best online brokers, is seemingly perfect for those looking to trade stocks, ETFs, and crypto, all on one platform. It has an easy-to-use mobile app and fee-free service. Some robo-advisors in Australia include StockSpot, Raiz, Six Park, and eToro.
- Banks or credit unions
Banks and credit unions typically offer more than just deposit and loan products. Many also sell investments to customers through branch employees or financial advisors, although this activity has been curtailed after the Royal Commission on the Banking industry in Australia (Ratnatunga, 2018). Today, banks and credit unions in Australia are allowed to sell investments, but they are regulated by a combination of laws and regulations.
The Australian Prudential Regulation Authority (APRA) regulates authorized deposit-taking institutions (ADIs), which include banks and credit unions, in relation to investments. The Australian Securities and Investments Commission (ASIC) regulates financial institutions that are not ADIs, such as mortgage trust trustees and issuers of financial products.
- Consumer Protection
The Australian Financial Complaints Authority (AFCA) is an independent ombudsman service that helps consumers and small businesses resolve complaints about financial firms. AFCA provides a free and fair process for resolving complaints and helps resolve complaints about financial products and issues. It can make determinations that are binding on financial firms.
- Online resources
Countless websites offer free Financial Wisdom on topics ranging from debt payoff to investing to earning extra money through side hustles. With so many voices online, investors should find someone who speaks to investors, as it’s easier to follow expert advice if investors can relate to the author. Their information is available through a variety of platforms, including blogs, social media, YouTube, and podcasts. This allows investors to choose whichever method works best for them.
Free online courses are available on numerous online portals, such as Udemy Personal Finance 101 and the Khan Academy. Many public and private universities in the USA, such as Brigham Young University’s Personal Finance, University of Illinois Urbana-Champaign’s Financial Planning for Young Adults, MIT Open Courseware, and Duke University’s Behavioral Finance Course, also offer free personal finance courses. Whilst these are USA centric, those in other countries can also benefit from the free knowledge imparted.
- Financial Planning Association (FPA)
The Financial Planning Association (FPA) in Australia has a pro bono program that connects financial planners with people in need. The program provides free financial advice to individuals, families, and communities. FPA members and chapters volunteer their time and experience to provide one-on-one financial planning advice. Individuals, families, and communities in need of financial planning advice and people affected by natural disasters or other events have obtained access to the pro-bono program.
Other organizations that offer financial assistance are local libraries that may offer free Financial Wisdom and government agencies that may offer free financial consultations
Warning on getting mislead by finfluencers and social media posts
The social media landscape is awash with finfluencers – amateur ‘financial advisers’. While some are helping to improve financial literacy, it is an area fraught with danger for consumers. Back in 2022, Kardashian was fined $US1.26 million ($1.93 million) for crossing over into ‘finfluencer’ territory, touting financial products on social media, in this case cryptocurrencies, without making it clear she was paid for the post. With earnings said to be in the order of $US2 million ($3 million) per post, Kardashian can probably afford to drop a couple of million on a fine. The trouble is that she is far from alone (Field, 2024).
So, the last place one should look for financial wisdom is, in my opinion, on social media platforms like Instagram and Facebook. Facts do not matter on such platforms and if a potential investor believes anything on social media without fact checking, then they do so at their own peril.
Summary
Financial wisdom is essential at all stages of our lives from birth to death – from starting a family, to education, when getting one’s first job to being retrenched, when planning for retirement, when managing an inheritance, to planning what happens to an investors hard earned wealth after he or she is dead and gone.
As discussed above there are resources available to help investors to educate themselves and gain financial wisdom at all stages and in all circumstances of their life. Even when one has to go to a specialist financial advisor, having gained financial wisdom can help one to differentiate between good and bad advice.
Financial wisdom is critical for not just financial success but also to mitigate the difficulties and sometimes unforeseen disasters that life throws at us. Money may not buy happiness, but financial wisdom could help investors to lead a better and more relaxed life in today’s world. There is a saying that:
‘Money is like oxygen; you do not realise how important it is till you don’t have enough of it’
Gaining financial wisdom gained by educating ourselves using some of the resources listed above can assist investors in having at least enough financial oxygen to lead a comfortable life.
Dr Chris D’Souza is Deputy CEO of ICMA Australia
REFERENCES
Field, Nicola (2024), “The rise of finfluencers – what you need to know”, Money Magazine, May 24. https://www.moneymag.com.au/the-rise-of-finfluencers-what-investorsj-need-to-know
Ratnatunga, Janek (2018), “The Key Findings of Australian Banking Royal Commission Interim Report: A Summary and Critique”, On Target, September. https://ontarget.cmaaustralia.edu.au/the-key-findings-of-australian-banking-royal-commission-interim-report-a-summary-and-critique/