Sunday, 7th June 2020

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Leaving the fear factor out!

Leaving the fear factor out!

I was asked a question the other day about why so many advertisements by financial firms are based on fear and I had to admit that this does often seem to be the case. By Richard Alexander Dip. PFS

The simple answer is of course that it is all about motivation – what does it take to motivate people to buy financial products?
We are used to seeing this type of advertising by insurance companies because insurance products are typically designed to compensate when loss occurs.

The fear of losing money if you don’t have enough cover in place, in case the roof blows off the house or you need immediate healthcare assistance, which cannot be provided free, is the motivating force at work. Sadly, the same approach has indeed crept in to the financial planning sector but the motivation here should really be very different.

Products sold on fear are all too often mis-sold. We have seen the results of this in the UK with the debacle of payment protection insurance products sold by the banks.

Closer to home in Spain, in recent years, too many people have been frightened into thinking they had an Inheritance Tax problem with them being mis-sold equity release products secured against their property. The result of which has seen many hundreds of people in great financial difficulty as the plans have proven to be severely flawed.

Whilst a certain amount of financial planning should take into account allowance for the unknown or unexpected, there is a lot of scope for a positive approach, which is motivated, not by fear, but by wanting to achieve the best results when mapping out the future.


I would venture to suggest that a real sense of achievement can result from knowing that your investments are producing the best possible return, that they are held in a tax efficient way and that they are specific to your own circumstances and ambitions.

At the very heart of financial planning is the need to identify what it is you are trying to achieve. You should not only think about your immediate needs but also what future things you might like to do that will take some but also what future things you might like to do that will take some funding.

When thinking about the longer term, you may need to consider providing for a dependent or even your own long-term care. For most of us, thoughts about the next generation will also be part of our planning and how much we might eventually be able to pass on. The motivating factor here should be devising a solution to best achieve your goals within the resources that you have available to you and in so doing, you can avoid making knee-jerk decisions about funding for an event which may not even be totally applicable to your own circumstances.

The message here is a straightforward one; let your motivation be driven by positively planning your financial future and then the next time you see an advertisement that is based on fear, you can confidently ignore it knowing that you have your own affairs in order.

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