One of the common things I see in my work as a financial adviser is that for many going through this process, it’s the first time they have either had to manage money, especially larger sums, or consider investing.  

But it also presents an opportunity to take control of your finances and invest for your future which can be a life-changing opportunity. It’s a chance to develop your own knowledge, skills and confidence to look after yourself and, in the case of an inheritance, to honour the legacy that has been left to you. 

Here are some things to consider:

1. Give yourself time

Don’t feel like you have to rush to make big financial decisions, particularly if you have never invested before. You may not have even thought about investing until now, worked out why you would consider it or how you should go about it. 
 

2. Get your house in order first

Do you have debts such as credit cards or non-deductible loans that you should consider paying off first? Investing is for the long-term, so before you start, review your broad financial situation and get these debts paid off.
 

3. Future-proofing 

Take this opportunity to set aside a kitty for an emergency and hold these funds in liquid assets like cash, term deposits or a mortgage offset account. The same applies for possible tax liabilities, if known. 

4. What are your life goals 

The way you think about these may have shift with this significant change in your circumstances. Or you may be able to bring forward some of these goals, like retiring earlier. Think about whether your goals require you to have an income stream now or later. Or are you working and wanting to invest for your future retirement? Setting goals will help determine not only what to invest in but how you invest, in your own name, in a super or a trust. 

5. Gather your team 

Given this change in your situation, several issues may need to be considered.  Your life insurance may have changed significantly. The same could be true with your own estate planning, especially in the case of a divorce or the death of a partner. You may also need to engage an accountant if your financial situation has become complex as a result of these funds. 

6. Consider adding a financial adviser to your team 

A financial adviser for a first-time investor, particularly in a situation where your financial fortunes have suddenly and significantly changed, is worth every cent, in my opinion. Many clients do not understand how much money they need to achieve their goals or can fathom how investing can support these.  An adviser can help you with some of the common first-time investing knowledge you may need to understand very quickly, and guide you through the journey. A great adviser empowers you with knowledge and educates you over time so that you feel comfortable and can make informed decisions about your financial future.  

Some of the things a financial adviser could help you with include:

Understanding your investment goals

This includes why you are investing and what is the best investment structure to invest in – personal, superannuation or a family trust. Also, the advantages and disadvantages of each structure.  

Understanding your tolerance to risk 

This involves assessing the amount of money you have, the timeframe for investing, your needs, and assessing your ability to be able to cope with the ups and downs of investing. Based on this information, your adviser will be able to tell you what you should expect in terms of returns and the volatility of these returns. 

Defining and helping you formulate an investment strategy

This is like a mini rule book to keep you on track, spelling out how much you should invest in each asset class based on your risk tolerance, and to outline any preferences you have, for example an interest in technology or a desire to avoid gambling. A strategy could help you stick to your plan and ensure you diversify adequately and invest across the major asset classes like shares, property and income securities in line with your risk tolerance. 

Coaching you to stay the course without getting distracted 

Sometimes, the fickle ups and downs of the market can lead to rash investment decisions. Some of the greatest wealth-destroying damage can be done while panicking – an experienced adviser will have seen this many times in their professional career and can help you keep your emotions in check. They will also be across investment opportunities that DIY investors may miss or not have access to; one or two good investment decisions can pay any advisory fees many times over.   

Review your portfolio regularly 

An adviser will do this in conjunction with the prevailing economic outlook and recommend changes to further enhance your portfolio. Like life, things change. Sometimes the changes in the economy may negatively impact a business, or businesses which were once successful may change their business strategy and that results in a change in the thesis for investing. An investment adviser can identify these changes and recommend whether to stay invested or sell – sometimes we need to be prepared to move on and make more productive use of our funds.  
 

Conclusion

I hope this short guide helps first-time investors on a sometimes-unexpected financial journey.  To find a qualified adviser, visit the Choosing a Financial Adviser page on the Moneysmart website which can guide you on choosing the right financial adviser for you.