Today, you
will have access to more investment information than ever before. Not
necessarily jargon free, might I add. I guess it can never be jargon free, as
we as a specie create words to deal with different complexities. Of course
there are some useless words, which I won’t mention here, but essentially we do
need to upskill the public in understanding more of the financial and
investment vocabulary.
I do
however, like the consumer directed Money Advice Service website which can be
accessed here (https://www.moneyadviceservice.org.uk/en)
which provides a basic level of information and guidance to the public.
These days,
technology has allowed the investor to enjoy great perks, such as being able to
buy or sell securities at low cost, diversify on mutual funds and
exchange-traded funds in a variety of markets, and take advantage of more online
tools and articles than you will likely need. I do strongly think DIY investing
without a strategy is nothing other than gambling!
Anyway, you
still may think due to the plethora of information out there you wouldn’t need
a financial adviser, but I think the world has become a lot more complicated
and so here are 4 reasons why you should have an adviser by your side in the
area of your wealth management:
ü They can
help you determine if you are saving enough money.
By the time
you hit the better part of 55, retirement will become your main focus as you
realise that you only have a few years before you stop working. This will obviously have an impact on your expected standard of living. You are
unlikely to have much information on your expected retirement income and how
long it's likely to last you as we live longer due to better diet and medical care.
A financial
adviser can be crucial in determining how much you need to put away each month
to reach your retirement income goals and particularly when advising you on the best way to extract those funds
tax efficiently.
ü They can
help you know how much exactly you should pay for your investments.
The cost of
your investment is crucial. It can be more important than the investment returns
itself as it needn’t matter what the investment returns are if a significant
chunk of it is being wiped out in fees. There are lots of costly old investment
and pension policies that need to be reviewed. You may have one of them. You
also need to factor in the service you get with your annual overall management
costs, sometimes a higher fee is definitely worth it, but too many a time…it
isn’t! As a rule if you are paying more than 2.2% per annum in costs, get a
review.
ü They can
help you identify ways to become more tax efficient
This
applies to individual investors and particularly businesses with surplus cash
holdings. A financial adviser can provide regulated advice which will allow
those interested in investing in quality smaller companies to
invest directly in order to achieve potentially higher levels of growth that small companies may enjoy. This would most certainly be classed as a higher risk investment but potential losses mitigated by benefiting from things
like immediate tax relief of upto 50% on an investment of £100,000 which in
turn has only really costed £50,000, whilst also benefiting from tax free
growth and tax free dividends.
They can also advise you on how to mitigate the effects of inheritance tax using similar investments for tax planning.
ü They can
create a good strategy for down markets.
Do you
remember the tech and the housing bubbles of 2000 and 2008? You only really
lost if your entire investment stock was obliterated due to all the 'companies it
owned' essentially going bankrupt, defaulted or you as the investor panicked and
divested.
If you do
not need the money in poor market conditions, provided the fund or funds you
are in is open for business i.e. allowing investors to continue to invest, and
the fund management team is credible in identifying new investment
opportunities HOLD FIRE, the market will pick up!
While we
have learnt more about diversification, small time or part investors who
prefer to go it alone carry the greatest risk as they do not have access to the
research resources of professional managers, and typically they only look at past
performance to build an investment portfolio. This is wrong, plain wrong, just
wrong, wrong, wrong!
Why? To give one example asset classes can correlate one another, so DIY investors could be investing, paying higher fees for one stock unnecessarily, as having invested in another cheaper stock which would have moved in the same direction as the more expensive one.
A good
adviser should ascertain your attitude to risk, look at your capacity to take
risk, your need for that level risk before advising on how and where to invest. As an investor you benefit from lower management fees due to the fact that you are sharing your costs with many other investors.
You adviser should have an ongoing relationship with you where they advise you throughout your life as you enter into different income zones thus having evolving needs from saving for a house deposit, investing for school fees, that
expensive holiday, structuring your business, extracting profits and putting money
aside for retirement.
With more specialist advisers they can protect your wealth post-death by keeping it within your bloodline, or even from having it whittled away by unruly children!
If you'd like to have a friendly conversation about your affairs - no time limit and no charge, send a request through via the 'Post Me Your Problem' enquiry box above and a regulated, friendly financial adviser will get in touch usually within 24-48 hours.
