Investment can be complicated and many people have limited time and financial experience. In addition to unravelling the jargon, what are the deeper benefits of seeking independent financial advice?
If there’s one thing that’s certain when it comes to the financial markets, it’s that they will change – and so will your financial situation. And whether you started investing 30 years ago or 10 years ago, market gains and losses can unbalance a portfolio. Add to that new products, changes in tax implications, more advanced regulations and changes to needs, preferences and priorities, and you can see why solid financial advice is simply good sense.
Professional advice is important for many reasons:
An advisor will help you make sense of complex information.
Too many people don’t do the very basics such as getting a will in place and ensuring appropriate life, critical illness and disability cover, never mind ensuring they have a well-considered financial plan. A good financial advisor forces this issue to make sure time is allocated to getting these basic planning principles completed.
There are often different ways of tackling a financial requirement which you may not have considered.
What you do in one area of financial planning often affects another.
Making mistakes can be costly.
Many financial planning steps are covered by regulatory controls, which means you will have a more protection if you enter into a transaction or take advice through certain channels. This brings us to the question:
What are the benefits of working with an independent financial advisor?
An independent financial advisor (IFA) is like a tailor who makes bespoke solutions for their clients. There is not an ‘off the shelf’ option as they are not limited to one service provider and are not tied to any particular family of funds or investment products. An IFA has no restrictions in terms of how they can advise you and what they can recommend. However, as IFAs operate in a fiduciary capacity, they are held to the highest standards and are required to act in the best interests of their clients at all times. For many investors, the fact that their money is held by an independent custodian, not by the same person who advises them how to invest it, is reassuring as it comes with a system of checks and balances.
Typically an IFA will conduct a detailed audit of the client’s financial position, their objectives and their financial and lifestyle goals, and will do the legwork and recommend appropriate solutions (platforms, products and funds) from the whole of the market to match those needs. Some advisors are specialists in investment strategies. Others can assist on other matters including insurance, retirement and estate planning, wealth legacies, protection, loans, and even tax and legal matters.
Almost all investors understand the need to diversify their investment portfolio. Diversification is never going to completely eliminate risk but asset allocation can help you manage it. Asset allocation is a process of selecting a mix of asset classes to help mitigate some of the risk of any one asset class. In the past, many brokers didn’t spend much time worrying about asset allocation because they were focused on selling products. However, this is a critical part of constructing portfolios and generating returns so it’s key that investors have access to the right asset allocations, without restrictions. Generally an IFA charges a fee based on the percentage of funds managed, which also gives them an incentive to help grow your assets.
What should you expect from your IFA?
- Personal attention
- Customised guidance
- Impartial advice
- Regular interaction
- A high level of expertise
- Regular portfolio review
- A simple and transparent fee structure
- Quality investment options and quality service providers
- Your IFA should be regulated in the country in which you reside. It makes them accountable and you have the protection of the national regulatory agency.
The relationship between you and your advisor should be a long-term commitment. You need to like and trust each other. And if advice is being shared over a long period of time on things that impact every facet of your life, personal financial planning ultimately becomes more personal than financial. As Anthony Palmer, Group Commercial Director at Carrick, summarises:
“We believe in good, old-fashioned manners, face to face meetings with clients and in fostering great relationships.”