A good financial adviser is like a good mechanic: you likely will need one at some point in your life, it could save you a sizable chunk of money, and many people have no clue where to start when it comes to finding one. To further complicate matters, our industry uses all sorts of terms to describe advisers – financial planner, money manager, wealth manager, retirement planner, and so on. Regardless of this, I hope by the end of this blog you will be clear on some of the uncertainties in the financial planning world!
Planner, manager, adviser – what’s the difference?
Financial advisers can have multiple specialties and can go by many different names (even more than just the ones above), but the basic idea is that they will help you create and then implement a plan so you can achieve your financial goals. These goals could include retirement, saving for college, minimizing your tax burden, giving to charity, budgeting, debt reduction, or generating income. But it is not just about getting you there, it is about making sure you are doing so in the most tax efficient and cost-effective way.
Many of us are very keen to make sure we are getting the best deals out there, whether that be on our weekly food shop or on our new TV, but what always surprises me is people aren’t looking at getting the best deal for themselves on their finances. Perhaps that is because people don’t know where to start and I suppose that is exactly what a financial adviser does – not only gets your where you want to be but also gets you there the best way according to your goals and circumstances.
Just so you know, the reason True Financial Design, use Financial Planners is because we think it is the most relevant to what we do….at the end of the day we are creating a financial plan for you!
How to invest?
Your financial plan will include an investment strategy in line with your attitude to risk. In plain English that means, your investments will be split into different types of asset classes (such as, cash, property, fixed interest, bonds, gilts and equities) across different geographical locations. The proportion of money invested into each of these geographical locations or asset classes depends on how much risk you are willing to take with that money – known as attitude to risk. This diversification helps reduce the risk that your portfolio will decline in value if one sector of the market sours.
Controlling behavioural risk
While diversifying investments can help reduce risk, not all risk is investment-specific. Some risk is emotional or behavioural. Did you panic during 2008 and sell all of your stocks? Or get overconfident in 2006 and take too much risk leading into the Great Recession? An adviser should counsel you through difficult times and help set expectations for your portfolio, so that you know what risks are involved and what “success” looks like on the upside.
The whole financial picture
While some advisers are entirely investment-focused, many focus on the other aspects of your financial life, like estate or inheritance tax planning, insurance, retirement planning, debt reduction, long term care or tax planning. Many financial advisers have expertise in one or more of these topics, and the scope of services each adviser provides is different – ranging from strictly investment management to holistic financial planning. Every client is unique and has different priorities, so make sure your adviser can help where you need it.
Searching for opportunities
Looking beyond your investments can save you a tremendous amount of money, and a top financial adviser may find other tax or planning opportunities that you weren’t aware of.
Do I need an adviser?
Many individuals, if they have simple financial situations and a sound knowledge of investments, would likely be just fine on their own if they take a simple & low-cost approach.
At True Financial Design, our clients either want someone to hold their hand because they don’t understand the jargon of the financial world, or although they are perfectly capable of managing their own finances, they recognise the value of good financial advice and realise their time is better spent on business or personal endeavours.
An adviser can help avoid mistakes, find opportunities that you miss, help you stick to your plan in times of stress, and manage risk in a tax-smart way to protect and grow your assets.
A Research Report from ILC-UK – “The Value of Financial Advice” (July 2017) stated that:
Those who receive financial advice accumulate more assets and have more retirement income than those who don’t.
If you would like to know more about how a financial adviser could help you, please say hello on social:
Or contact us on 01423 297 077 or firstname.lastname@example.org to have a chat or to book your FREE initial consultation.
The value of investments and income from them can go down. You may not get back the original amount invested.