haven’t always been a ‘pay an expert’ kind of person, but I’ve been party to too many DIY disasters and fallen foul of too many ‘false economies’ to not defer to an expert where it matters, so it frustrated me earlier this month to read yet another report that says an increasing number of people are doing without professional financial advice, preferring instead to turn to friends and family members for financial advice.
In a world of DIY enthusiasts, and with the help of Google, suddenly you can become an ‘expert’ in almost anything in minutes. There’s a how-to video for every conceivable task on YouTube, which is fine if you’re trying to ‘poach the perfect egg’, but there are some things that really do benefit from being handed to an expert.
Remember, wherever Financial advice is concerned, you’ll always see the caveat “past performance is not an indicator of future results” and yet, this is almost always exactly what the majority of friends and family are basing their advice on – their own ‘past’ experiences. Whilst, well-meaning, advice from friends and family may not be right for your circumstances and may have no bearing on future financial performance. Plus, if you do get bad financial advice from friends and family, there’s no recourse for action. Dealing with a professional has distinct advantages for a number of reasons…
Here are our 5 top reasons why you need a financial adviser…
A good financial adviser will have years of experience under their belt. They’ll have undertaken years of study, sat numerous exams and will be fastidious in improving their knowledge through ongoing professional development. They’ll network with the top economic brains and industry thought leaders and keep abreast of market trends and current world economics.
What can seem complex to a layperson and end up in sleepless nights, is a normal day in the office to an expert. What might seem confusing and take hours of internet research for you, could be resolved in one conversation with a professional? Down the tools and put your energy into more rewarding activity.
Aside from anything else, an accredited financial adviser is governed by a strict code of conduct and stringent rules by the Financial Conduct Authority and is accountable to the Financial Ombudsman, which affords you, as the customer, protection from rogue traders. They must adhere to processes designed to stop reckless behaviour and high-risk gambling. They are also legally obliged to let you know if there are any areas that they are not authorised to advise you on – so be sure to ask.
3) Market Knowledge
Independent financial advisers have access to a whole marketplace of products, not just the limited few that you might find at one organisation. They’ll also be able to compare the performance of these different products/investments to provide you with a balanced and fair view and match you to the best product for your needs.
The Finance Industry is an ever evolving one, where rules, regulations and taxation are constantly changing and can have a direct effect on your money. Having someone looking after you to ensure that you are aware of these changes keeps you on top of things.
4) Holistic money planning
At 2020 Financial, we like to take a holistic view of our customer’s finances and see everything as part of our customer’s wider financial plan. We’ve seen successful business owners come to us with impressive portfolios and bulging pension pots but with no life insurance or legacy planning in place, an oversight that could cost their family dearly should the worst happen. Fortunately, things like this are quick to remedy and once it’s done, we can keep an eye on it and tweak things if their circumstances change.
5) Detailed analysis
The devil is in the detail as they say and there’s nothing worse than finding out too late that something doesn’t deliver what you thought it would. Pensions and life and critical illness insurance, in particular, can come with a complex set of terms and conditions, so be careful if you’re looking to set this up on your own. It’s always worth speaking to a professional to get the best advice on these things, if for nothing else, then the protection it affords you through the Financial Conduct Association.
People who receive financial advice are on average £40,000 better off than their unadvised peers
Research by International Longevity Centre-UK (ILC-UK), 2017
Still not convinced? Here are 9 more reasons you need a Financial Adviser
6) To protect your family
There are a lot of people trying to sell you insurance of one type or another but a financial adviser can tell you which ones are actually worth buying. They will assess your position and guide you through the best options to protect yourself and your family – whether you are single or married, have a young family, or are approaching retirement. Whatever your needs, a financial adviser can help ensure personal tragedy does not turn into a financial crisis.
7) To help plan your spending and saving
To secure your long-term future, you need to build some assets – initially to get you through the rainy days and then to pay for holidays and luxuries. Step one is to plan your spending so that you begin to save, and step two is to plan that saving so that you can build your wealth as efficiently as possible. Regardless of whether you begin with £10 or £10,000, a financial adviser can look at your situation and find the best starting point for you.
8) To help you plan for retirement
Once you have sorted out your short-term saving needs, you can then start thinking about the long-term – and most people these days realise that they cannot rely on the state for more than the absolute basics. However, planning for retirement is a complex business and there are many different options available. Pensions have come a long way in terms of flexibility and transparency in recent years and now offer a wide range of investment choices. A financial adviser will not only help sift through the many rules and product options but will also help construct a portfolio to maximise your long-term prospects.
9) To help meet your investment goals
As you progress through life, you begin to build your assets and your income begins to increase. You can then start considering how you can enhance your position rather than simply consolidate it. This could mean anything from looking to retire early to paying private school fees or investing in overseas property. However your dreams evolve, a financial adviser can help assess what is realistically possible and put in place the best plan to help you achieve it.
10) To find the right combination of assets
Investment is as much about protecting against potential downsides as it is about targeting maximum growth. High returns are often associated with high risk, and not everyone is comfortable with the idea that their investment might fall by a third or more overnight. A financial adviser will make a detailed assessment of your attitude to risk before making any recommendations. They will also ensure you do not put all your eggs in one basket by helping you diversify not only across asset classes but also across accounts, individual funds, and product providers.
11) To obtain an objective assessment
Every new investment opportunity or product is likely to be accompanied by a certain amount of hype, but that does not necessarily mean it is right for you. Investors have been – and will continue to be – caught out by market bubbles or high charges because they do not take a step back. A financial adviser knows how products and assets work in different markets and can outline the possible downsides for you as well as the potential benefits. Between you, you can then make a more informed decision about what you can believe, and what you really should avoid.
12) To save money
Once your risk and investment assessments are complete, the next step is to look at tax, and even the most basic overview of your position could help. It may simply mean using Individual Savings Accounts (ISAs) or a pension plan to benefit from government incentives or it could mean choosing growth-focused assets over income in order to make use of capital gains allowances rather than pay income tax. Alternatively, for more complicated arrangements, it might mean moving assets to your spouse or children to make full use of their personal allowances. A financial adviser will always have your tax position in mind when making recommendations and can help point you in the right direction, even in complicated situations.
13) To keep you on track
Even when your investments have been put in place and are running to plan, someone needs to keep an eye on them in case market developments or abnormal events push them off course. You can ask a financial adviser to undertake this monitoring work for you. They can assess the performance of individual investments against their peers, ensure that your asset allocation does not become distorted as markets fluctuate, and help you consolidate gains as the deadlines for your ultimate goals move closer.
14) For peace of mind
Money is a complicated subject and there are many things you need to consider in order to protect it and make the most of it. Markets are volatile and the media are prone to exaggerate the risks and the rewards. Employing a good financial adviser can remove the pressure from you and place the job in the hands of an expert. Whether you need general, practical advice or a specialist with dedicated expertise, you could find that, in the long term, the money you invest in expert advice will be paid back many times over.
When it comes to money matters, shouldn’t we all be seeking the best advice we can find? After all, if you get what you pay for when it comes to financial advice, shouldn’t we all be seeking out the best?