Are People Over-Complicating Financial Advice?

Shortly8 on 06/04/2025 - 22:12

There are whole guides on financial advice filled with convoluted diagrams and jargon. However, would it not be prudent to keep it simple, for example, it is common sense that one needs to prioritise either acquiring high interest earnings or paying off high interest debts (whichever interest is higher and attainable quicker). Is this just not all financial advice in a nutshell, a.k.a, basic maths?

Kind of related, why do people use transaction accounts with a different bank account compared to their savings account? Me personally I have all my accounts with one provider, my transaction account is set to $0 by default and I only put money there when I need it (seems safer this way as well). On this note why do people also have separate emergency accounts, would it not be better to maximise interest on savings accounts, and what are the odds the bank shut down, whilst others do not, because I assume they share a lot of infrastructure with one another.

Lastly, does anyone know about any card virtualisation services (basically a service that can create fake temporary cards with money on them for private online payments) that work in Australia?

I encourage any further questions/discussion.

Financial

Comments

  • simplystu on 06/04/2025 - 22:18
    -2

    One would consult a financial advisor not OZB.

    As to your latter Q … Virtual CC'S? (there are afew around - have used in past, but not recently).

    Why not a AU CC with 0.00 O/S fees?

    Not only AU call centre +++ easy to to do a chargeback if issues.

    • Shortly8 on 06/04/2025 - 22:24

      Thanks for the advice I didn't know that was an option to be frank. Heard of privacy heads using virtual cards for convenience and security, it appears your method is even more secure albeit less convenient and possibly private?

    • WoodYouLikeSomeCash on 06/04/2025 - 23:59
      -2

      Financial advisor’s are a scam considering you can utilise AI which can tailor advise for you and build charts and projections in seconds.

  • Naigrabzo on 06/04/2025 - 23:26

    financial advice needs to tailored for each individual though. Some will need big diagrams. Sounds like you only need a couple of words. All good.

  • ihbh on 07/04/2025 - 06:48
    -4

    financial advice filled with convoluted diagrams and jargon

    Unfortunately if you can't comprehend diagrams/jargon, which for a sophisticated investor is like bread and butter, you pay the price of having to work for most of your life. That is, it will be very hard to become a sophisticated/successful investor.

    I'll give you an example. See page 4 of the pdf below.

    You mention your investment strategy is bank accounts, etc. The closest representation of this is cash - they grey line (2nd from bottom) - if you had invested 10k around 30 years ago, it would turn into 34.7k. A sophisticated investor with a long horizon might have invested in Aus shares and turned the 10k into $138.7k. Note that's a log graph so the larger numbers have been compressed so you can see the smaller numbers.

    https://aemdam.assets.vgdynamic.info/assets/intl/australia/s…

    Later on when you've progressed beyond bank account investing, there's risk, return (the first two encompass asset allocation, portfolio diversification, etc.), tax, insurance and other considerations.

    PS: A sophisticated investor doesn't necessarily need financial advice, but will learn (which means making many mistakes a long the journey), read, think a lot to get there. Classic is Buffett's quip - Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway. But until you build up your knowledge/experience, one way is to speak to many different "experts", hopefully at not too much cost, and synthesize the information and work out what you need to drill down into in more depth.

    • Shortly8 on 07/04/2025 - 13:36
      +2

      In my opinion anyone can comprehend jargon and synonyms, the fact you spend extra time and go through the tedious process of acquiring buzzwords does not make you inherently more intelligent than the next person. Regardless, I get whatcha trying to say and I appreciate the advice.

  • mrtin on 07/04/2025 - 07:40
    -1

    Financial success, whatever that means to you, can be seen as putting together a big jigsaw puzzle. Super, tax, debt repayment, education cost, retirement income, estate planning, etc and doing all this whilst having enough to live on. A change here, can change an outcome there. What I think ppl may have difficulty with is looking at the big picture and understanding how everything works together.

    Sure, you and everyone, can give it a crack and diy.

    What a financial adviser should do, in my opinion, is look at the big picture and crunch the numbers and do the research for the client. Then, in simple terms, just advise you on what you should do. Do x, do u, do z, here are the reasons and costs,review regularly for changes in situation and rules.

    So, a financial planner should make it less complicated for clients, but know behind the scenes it is complicated.

  • Downvoter on 07/04/2025 - 08:08

    Righto barefoot investor

  • Foggy Fluoride Stare on 07/04/2025 - 08:16
    +1

    Yep, most people are also complicating the natural instincts to protect your capital.

    People consistently tell people to buy the dip and get rekt.

    Catching a falling knife. Animal spirits are fizzling away.

    If most OzBargainers cannot simplify advice for a bank account, how do they expect to position their investments properly? KISS

    • mskeggs on 07/04/2025 - 11:30
      +3

      Would you recommend selling the dip and buying high as a surefire way not to get "rekt"?

  • wannagrababargain on 07/04/2025 - 08:25
    +2

    What you say is common sense is not that common, or maybe it is common but it just gets ignored because real life takes over. What you are talking about mainly is financial literacy.

    Financial advice is advice that provides a strategic allocation and optimisation of finances based on financial goals and risk appetite of the individual(s). It's not as simple as a math equation that debt = bad, savings = good. The most important thing that starts off the whole process is the financial goals of the human in the loop. Debt is a wonderful thing and is not universally 'bad'. It has the ability to bring forward future consumption to the now. With the right strategy and clear vision of all goals in mind, debt is just another financial tool in the box. Maybe we can agree that carrying credit card debt is generally bad however credit cards themselves can still be powerful tools for short term financing.

    With regard to Emergency account I think you may misunderstand the purpose. It's not to keep a separate account in case of a bank collapse - it's a rainy day fund in case of unexpected one off costs regardless of what form you choose to keep that fund in. The reason to keep it as separate account is purely psychological. Most banks will let you open multiple savings (or offset) accounts so that lets one create an account and nickname it "Emergency." That puts up a virtual barrier to say "This money is off limits in case of an emergency." It's useful psychologically for some people to have these buckets of money named and tracked.

    Revolut lets you create as many virtual cards as you want. There's referrals off the wiki page on this website.

  • parsimonious one on 07/04/2025 - 08:45
    +5

    I know a couple of financial advisors and according to them the majority of people get the same largely generic approach

    1. Get adequate insurance
    2. Put extra into super due to tax advantages
    3. Consider tax deductible investments (eg investment property)
    4. Diversified portfolio (ie not just asx based shares)
    5. Pay down non- deductible debt

    YMMV

    Some will try and suggest particular investments but the reality is none of them have a crystal ball

    • Hangryuman on 08/04/2025 - 20:20
      +1

      you missed out 'make a will'

  • CaptainJack on 07/04/2025 - 08:58
    +3

    In my experience financial advisors do tend to over-complicate things as it keeps them in a job I suppose.

    They maybe have their place if you really have a lot of money that gives you more options and complexity, or perhaps if you aren't financially minded but somehow have enough money to make the fees worthwhile.

    • hoey888 on 07/04/2025 - 09:51

      Technically untrue.

      Its the government that over complicates it meaning the typical house doesn't understand it. Would have been easier if your tax accountant was legally able to suggest financial investments…. but wait; government says a registered financial adviser needs to provide 'advice' before recommendation.

      The government is unfortunately in the business of over complicating things. The reality is it keeps politicians in a job.

      • Duckie2hh on 07/04/2025 - 09:55
        +1

        Would have been easier if your tax accountant was legally able to suggest financial investments

        Yes the person looking after your tax return will suggest investment advice without training. What could go wrong?

        https://suburbanite.com.au/crackdown-property-kickbacks-welc…

        • surfingedge on 07/04/2025 - 10:50

          Maybe they could be trained in both fields and only those dual qualified can do both?

        • greatlamp on 08/04/2025 - 10:06
          +1

          My tax accountant recommended paying down my HECS debt to lower my tax bill…

          That isn't investment advice so wasn't illegal, but it shows how incredibly inept some supposedly educated people can be

      • Shortly8 on 07/04/2025 - 13:42

        I have a science background and it seems like this tendency to over-complicate has extended towards society as a whole. In my field maybe it is for the same reason you mention to keep jobs and make people feel more exclusive and elite (at least partly I think this is the case), of course jargon can have utility in some cases, however, in a lot of cases simple English would make the process a lot more efficient and accessible for others (e.g., most scientists don't understand each others' work in conferences).

        • Duckie2hh on 08/04/2025 - 10:11
          +2

          simple English would make the process a lot more efficient

          I guess the basic "spend less than you earn", needs to be formally documented by a financial adviser in a statement of advice costing ~$5K.

  • JimmyF on 07/04/2025 - 09:03

    it is common sense that one needs to prioritise either acquiring high interest earnings or paying off high interest debts

    Oh dude…. common sense doesn't exist anymore. Its a sh!tshow out there and they all walk among us!

  • cauilfield on 07/04/2025 - 09:37
    +2

    Not sure of what you just mentioned is even classified as financial advice this is more like general knowledge innit

  • dust on 07/04/2025 - 09:38
    +1

    Step 1. Get high yield investment luxury vehicle
    Step 2. ???
    Step 3. Profit!

    • Duckie2hh on 07/04/2025 - 09:52

      No no no. Everybody knows the secret is:

      Step 1. Buy a Rolex
      Step 2. ???
      Step 3. Profit!

  • Duckie2hh on 07/04/2025 - 09:51
    +1

    it is common sense

    Not a lot of that going around.

  • mskeggs on 07/04/2025 - 11:36
    +3

    I don't place a lot of stock in financial advisors for most PAYG workers, as the advice is buy income insurance, leverage into negative geared property for the tax savings and add extra super.
    But for some situations, financial advisors can be very helpful - for example 5 years before a self funded retiree might need aged care, or if a small business owner wants to structure their business to sell in a few years.
    These kind of situations can see 10s or 100s of thousands of dollars better outcomes with good advice.

    Unfortunately, many people leave getting the advice until it is time to sell, or time for the nursing home, and fewer options remain.

    • tenpercent on 07/04/2025 - 11:59
      +3

      FWIW you can negatively gear other investments too, it's just banks don't tend to lend as much against them or they charge higher interest rate.

  • Crow K on 07/04/2025 - 14:44

    Suggesting financial advisors are overly complex in their levels of detail or what they offer when it's really just about how much interest your cash accounts get is basically the same as saying the liquor industry is overly convoluted because everyone knows wines are either white or red.

  • Trying2SaveABuck on 07/04/2025 - 19:24
    +2

    it depends on your situation - it depends on the investor - dont underestimate the psychology of money/investing

    You jump on reddit 3 months Ausfinance ago everyone would of said (assuming you were under 40 y.o) Put you super or investments into 'high growth' or DHHF- as you have time to ride out the volitility and get 'good returns'

    the last 2 trading days we have seen GFC level volitility and the amount of people panic selling or saying they are cutting and running on their 'long term ETF strategy' shows they were NEVER cut out for investing

    it is 'easy' to invest when your sitting on >10% gains p.a it is difficult af to invest when the world markets are all going to s—t.

    Anyway, my point is financial advice is 'very' difficult being a financial advisor right now would be 100s of phone calls of investors calling up panicking and a GOOD financial advisor would be able to 'talk' investors off the ledge. Money is emotional and no one should underesitatement the PSYCHOLOGY of money

    You ask why some people have different accounts because it repersents a visal different ie account 1- daily expenses, Account 2- emergency cash 3 - cash that can be spent on leisure

    If you are a visual person this can 'help' you budget - i got nothing against it (i personally do not do it but i know people who do)

    whatever tools help people manage their money better im all for it but factually 'speaking' investing is super complex it has so many moving parts and you only have 'hindsight' to tell you if you got the right calls

  • serpserpserp on 08/04/2025 - 09:06

    convoluted diagrams

    Please share

  • Some Guy on 08/04/2025 - 18:35
    -1

    "why do people use transaction accounts with a different bank account compared to their savings account?"

    Because they read The Barefoot Investor too literally.

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