"Wealth is not his that has it, but his that enjoys it"

-Benjamin Franklin

"Wealth consists not in having great possessions, but in having few wants"

-Epictetus

"Time is the most valuable thing a man can spend"

- Laertius Diogenes

"The glow of one warm thought is to be worth than money."

-Thomas Jefferson

"I don't care too much for money for money can't buy me love"

- The Beatles

"Simple, genuine goodness is the best capital to found the business of this life upon. It lasts when fame and money fail, and it is the only riches we can take out this world with us."

-Louisa May Alcott, Little Men

"And though I have the gift of prophecy, and understand all mysteries, and all knowledge, and though I have all faith, so that I could remove mountains, and have not charity, I am nothing."

-St. Paul

"Not he who has much is rich but he who gives much"

-Erich Fromm

"Life is what happens to you while you are busy making other plans"

-John Lennon

"I pity that man who wants a coat so cheap that the man or woman who produces the cloth shall starve in the process"

-Benjamin Harrison

A Guide to the Benefits of an Independent Financial Adviser

man enjoying life goals

Contents:

  • It makes perfect sense
  • Professional advice
  • DIY financial planning
  • Hidden value
  • Independent vs. restricted advice
  • Practical & Real Benefits
  • Retail investment products
  • The whole package

It makes perfect sense

If you are looking for help with your money or for financial advice or financial planning – you will be faced with a number of choices about how to access this advice or help.

You can possibly use the internet, use a telephone led service, do-it-yourself or you can engage a financial adviser/financial planner. There are two reasons why someone may prefer a direct option or a do-it-yourself approach to using a financial adviser:

 

  • They do not want to pay the costs involved with the financial planning service provided by the financial adviser, believing they will save money by NOT using the services.
  • They think that they can get a better outcome by doing things themselves, for example they may believe that they can achieve higher or better returns on their invested money.

 

There is a trend in the medical market which suggests that over 80% of people will now seek their first line of help from the internet; before they approach their doctor or other medical practitioner. This sort of trend – where the internet is the start point for information and service provision - is now common-place in industries across the whole of the business spectrum. However, returning to the medical example, although most people now click onto Google to start with when they first have a medical concern, the number of people visiting their doctor has not gone down. The professional medical support and advice that can be accessed face to face, in the real world, remains as important as ever. The benefit of using a professional and qualified expert is undiminished by the explosion in online information and services. So it is within the financial services market. There is real value in seeking out professional advice.

80% OF PEOPLE SEEK HELP FROM THE INTERNET FIRST

Why professional advice is important

The requirement for good financial planning support arises from a variety of reasons:

  1. Financial matters are often complex.
  2. There are often many different ways of tackling a financial requirement.
  3. Most financial planning is ‘holistic’ i.e. what you do in one area of financial planning will affect another (this is the ‘hip bone is connected to the thigh bone’ idea).
  4. The costs of many financial products are sometimes unclear and there can be hidden costs.
  5. Making mistakes can be costly, avoiding mistakes is highly beneficial.
  6. Regulation is rife: this means that many financial planning steps are covered by regulatory controls, which in turn means you will have a high level of protection if you enter into a financial transaction or take financial advice through certain channels and in certain areas (but note – not in others).
  7. Many financial decisions are subjective – for example relying on future (unknown) investment returns to support the value of the decisions or steps taken.

In overall terms – financial planning is often difficult, convoluted and is easier to handle with an expert involved. It is not something to be taken lightly and is always better for a concentrated approach.

Some areas of financial planning are almost impossible to undertake on a DIY basis

DIY investing is described as a position where an individual makes their own arrangements for themselves. However, there are many areas of financial planning where advice should always be taken and, in many cases, in reality it is almost impossible to pursue a DIY approach. For example it would be very difficult for an individual to arrange and map out their own phased retirement plan (if this is their best option) when they come to retire? Or for an individual to put in place the right (and best and most appropriate) trust wording to protect their assets from Inheritance Tax? If someone chooses to take out critical illness cover do they know which policies have the best definitions and terms (as this is not a product to judge solely on the premium rate)? Specialist advice is just that: specialised! And because so much of the financial planning requirement is connected or inter-connected then the advice required and by definition the steps one needs to take in one area could knock onto another. In this respect good financial advice is often described as holistic.

The hidden value of getting good advice?

There is one subtle area of getting advice from a professional adviser which may not - at first - be apparent. Good financial planning involves a large amount of legwork. This may not be a word that is often touted by financial advisers as a benefit of their work – however it should be! Legwork is a way of describing the large amount of research, dissemination of information and paperwork that needs to be done and the time that this requires. To get great financial planning results there is a requirement to work with the right information and to keep records and to review matters regularly (which involves keeping up to date with all related matters, many of which change regularly). Your financial planner can do all of this for you.

In terms of the changing landscape and the need to keep on top of matters, a good example, in recent times, is the introduction of various new types of ISA, accompanied by different allowances and limits. This changes the options available to investors. A good financial planner can bring this to their client’s attention, highlight whether this makes a difference and analyse the new options. This is why the term ‘Financial Planning’ may sometimes help describe the process better than ‘Financial Advice’. Yes, much of the work involves providing advice on suitable companies, products, plans, funds, on the risk position, on asset allocation, but, in addition, there will be much of the work which is about hard graft and keeping on top of everything that surrounds the advice provided.

Independent Financial Advice vs. Restricted Advice

balanced-advice

At the heart of the financial planning market lies the Independent Financial Adviser. The easiest way to describe an Independent Adviser is to state that they are unrestricted in how they can advise you and any adviser that is not independent will be restricted to some degree or extent. The current regulatory environment has provided a distinct line between advisers that are Independent and those that are Restricted. Using the definition and explanation provided by the Regulator (the Financial Conduct Authority – FCA, see www.fca.org.uk) their wording includes:

“In order to call yourself an independent financial adviser, you need to provide unbiased and unrestricted advice based on a comprehensive and fair analysis of the market.”

“Genuinely independent advice is free from any restrictions that could affect advisers’ ability to recommend what is best for the customer.”

All advisers have to make it very clear to you what status they have. The importance of this distinction is further highlighted by the Citizen’s Advice Bureau (www.adviceguide.org.uk) – their web site supports the value of the Independent Adviser over other options you may have.

The practical and real benefits of Independent Financial Advice

The distinction as set out by the regulations is one thing, but how does this translate into the day to day work and the overall service/advice that you can expect? To highlight the benefits in this way there are a number of common areas of financial planning that can be shown as examples:

Appropriate solutions: products, companies, funds

Whatever your current position you will need to use financial ‘products’ to help you along your financial pathway. These could include pensions, tax wrappers such as ISAs, savings accounts, life assurance products and annuities. These products will be available to you from many different companies (the ‘product providers’), they will have costs, they will in many cases have underlying funds that you need to choose, terms and conditions that will apply amongst many other factors. The best companies for one person may be very different from the best companies for another. An Independent Adviser will be able to match the right products, companies and funds to meet the solutions required by each individual client. A Restricted Adviser will have to fit their client’s requirement into the available (restricted) range of products and solutions they have available. The best analogy in this regard is to think of tailoring. An Independent Adviser is able to create and manage a bespoke solution for their client, the equivalent of a tailor-made fit; a Restricted Adviser has to offer an ‘off-the-peg’ solution, they have to find something from their ‘railings’. All advisers must provide suitable advice, so the main distinction comes from the available financial products different adviser types have at their disposal.

Asset allocation

Where investment advice is required the most common method of finding the right mix of investments is via an asset allocation model. This is where the investor’s requirement is aligned to a carefully selected asset split, which will be married to the investor’s risk tolerance.

Over many years considerable research has been undertaken into the best way of constructing portfolios and generating returns within given risk parameters; time after time the results from the research show that asset allocation is the key determinant of future returns. The asset allocation decision is the key influencer. An Independent Financial Adviser can construct an asset allocation approach without any restrictions on which companies or funds are used.

Specialised Areas

There are specialised areas of advice where the distinctions between an independent approach and a restricted approach become more apparent. Take the position where an individual comes up to retirement. They may have a pension fund which needs converting into income. In this instance there may be numerous options: annuities, drawdown, phased retirement options and other products, sometimes known as ‘third way’ products. It seems logical to state that at this critical point in time, all individuals should have all options available to them. Another example is in the area of tax planning: where individuals are looking to put in place provision against Inheritance Tax (IHT). There are many possible ways of planning to mitigate IHT which can include, for example, the use of allowances, trusts and IHT exempt investments, such as an Enterprise Investment Scheme (EIS).

Retail Investment Products (RIPs)

The whole package

As stated early on in this guide: dealing with financial matters can be complicated and can involve a variety of overlapping and possibly competing requirements. There is very limited financial education provided to people through their school years and this leads to a situation where the average person has to learn as they move through their working years and into retirement. The financial world that exists today is very different to the world that existed twenty years ago. The level of interest rates is different, the costs of financial products are different, the options at retirement at different, the tax schemes available are different, the regulations and financial protection schemes are different. No doubt most of this will be different again in another twenty years. Getting advice to help with all your requirements in these areas makes good sense. Your adviser, however, will be more than just an adviser, they will be a provider of news and information, they will have access to systems and software and they will be able to help you with much of the paperwork that goes with entering into financial arrangements. Crucially they will be able to help you disseminate information, of which there is a great deal and help you make sense of this.

Making Your Choices

The outcome from the statements above is that the relationship between an adviser and their client is a long way from just being that of an adviser. This is, in fact, just one part of a much bigger package of services and it is this overall aspect of what a good adviser can and should do for you that makes using an adviser a compelling argument. Once beyond this point then Independent Financial Advice provides for an unrestricted advice experience. The advantage of having access to all avenues and all Retail Investment Products is potentially a key factor.

Receive the Full Guide and Subscribe to our Newsletter

You can unsubscribe at any time

Getting Help And Support

The outcome from the statements above is that the relationship between an adviser and their client is a long way from just being that of an adviser. This is, in fact, just one part of a much bigger package of services and it is this overall aspect of what a good adviser can and should do for you that makes using an adviser a compelling argument. Once beyond this point then Independent Financial Advice provides for an unrestricted advice experience. The advantage of having access to all avenues and all Retail Investment Products is potentially a key factor.

Please enter your name.
Please enter a message.

Readers should not rely on, or take any action or steps, based on anything written in this guide without first taking appropriate advice. Interface Financial Planning Ltd cannot be held responsible for any decisions based on the wording in this guide where such advice has not been sought or taken. The information contained in this guide is based on legislation as of the date of preparation and this may be subject to change.