Your Business

Client money mistakes: not investing early

Lessons from a Rising Star March 2017

Erin Truscott learns her clients' wants and educates them so they can be achieved. By Alan Hartstein.

One of the biggest mistakes Erin Truscott sees clients making is simply not starting on their investment journey early enough. Making a concerted start is vital, she says, so “it’s hugely positive in a way that they’ve at least decided to seek advice from a financial planner”.

Truscott devotes much of her time to attracting Millennials, who she says often don’t prioritise saving or have any appreciation of the importance of time and compound growth. This leads to bad cash-flow management and spending beyond their means – another common mistake people make that is not the sole domain of any particular age group, she adds.

“If people get into bad financial habits early they can carry them through their entire lives. This can cause lots of financial stress, especially if you’re trying to sustain an unrealistic lifestyle,” Truscott says. “It’s vital that you make a decision to take control of your finances as early as possible.”

Another big mistake Truscott sees clients make is not putting enough money aside to pay tax if they are in business. “A lot of people are simply not aware of their tax requirements. I’m a financial adviser so I should be aware of it, but others are so focused on running their businesses that they often lose sight of financial basics,” she says.

Education is essential

Truscott places a high priority on educating clients through regular face-to-face meetings and discussions, not only to assist with their financial literacy, but to stop them from making more mistakes. “Good financial advisers are there to make clients understand the short and long-term impacts of their actions, especially concerning spending and debt, and it’s important that they feel comfortable in engaging someone like me to sort out their financial stuff and keep them on track,” Truscott says.

This also makes them more accountable for their financial actions. “If, every time you go to spend money, you know someone is checking in on you every couple of months it kind of shifts your behaviours,” she adds.

Helping to rectify mistakes

It’s important to have empathy with clients, especially when they get side-tracked, Truscott says. “Once you understand why they keep making the same mistakes you can develop a plan to get them back on track. That’s why it’s so important to have regular check-in meetings to review previously agreed on budgets and debt-reduction plans.”

Not all mistakes are so easily fixed, however, so identifying the mistake and its consequences is vital. A good example, Truscott says, are clients who dump large amounts of money into super without discussing it first. Sometimes they can backtrack, but usually their money is locked away where they can’t access it and they may have had better investment options at the time.

Other examples are young people who blow bucket loads on a car or people who buy apartments off the plan where the valuations can be excessively high. “You try and educate them so they don’t do those sorts of things, or at the very least think about it more and talk to us first before doing anything,” she says.

Communicating with the right tools

GCA Financial uses a tool kit that clients complete when they start on their investment journey. “It’s a great tool to show clients their trajectory and how they are moving closer to where they want to be. It also allows us to work with those clients that aren’t on track to quickly identify the gaps in their plans,” Truscott says.

The firm also provides large amounts of information on its website. This includes a blog geared to “making something complex simpler but more relevant to our target audience”, she says.

Truscott is particularly proud of the videos on the GCA Financial site that feature ordinary people talking about how their lifestyle is inextricably linked to their finances. “You seem them in different stages of their lives – architects, vets, a young family who are real estate agents. People see these and understand how their stories relate to them. What we are conveying is that wealth is more than money, it’s about the life that money can create for you and your family.”

Truscott also sends out regular investment updates using online services Advant and MailChimp: “A cool tool you can use to incorporate your own business content into easily; this, along with our regular client newsletters, gives us many touch points throughout the year.”