Over the years, I have been called-out a few times on my views regarding Financial Advisors. That said, managing your own fiances is an incredibly complicated task that touches on so many areas of your life. Making a mistake in one area, can have large ripple effects in others.
Investing, especially in the early stages when you’re first building your pension fund, is not difficult. With some basic, even the least financially savvy person, can set up an platform, and save monthly. The problems typically arise when you become wealthier, or you want to protect those assets you have in place.
With all of the information available out in the world, it’s important to have all of the facts you need. So, let’s assume you are not a professional – you’re just an ordinary person looking for some advice. Who do you turn to?
Types of Financial Advice
Most people who are looking for Financial Advise, turn to either their friends, or the internet. The Internet has a range of articles and statistics on nearly every subject known to man. Even more importantly, it’s free. But, frankly, the unregulated nature of the internet means a lot of its content is questionable. And there is a lot of content to sift through.
You can also choose to get advice from close friends or family. But that relies on the assumption that they are not only knowledgeable about finances, but will want to return your call for free advice.
This leaves the professional financial adviser. There are two main types. Independent advisers can look at a broad range of products for a particular market. Restricted advisers have a limited number of products that they are able to look at.
The main difference between the two is what they are able to advise on based on regulation. No matter what, they still have to go through the requisite authorization by the Financial Conduct Authority. Using a restricted adviser is not a bad thing, but they should be upfront on what advice they can offer you.
Unlike the internet, having a financial adviser costs money. The trade-off is their level of expertise and the quality of their advice. In the long run, they can help protect you from making decisions that cost you money and time. But why exactly is this the best option?
Benefits of a Financial Adviser
1) Complexity: First of all, finances are extremely complicated. Your finances involve investments, mortgages, pensions, and so much more. Having an adviser who can take everything into account is essential.
2) Research: It’s hard to understand all the choices you have in front of you. The amount of time and intense research needed to suss this out is beyond most people, especially when you’re tacking it onto your own job. An adviser has the experience and research skills to do this for you.
3) Save Money: One of the biggest obstacles people have is the cost. Why pay for something when you can get it via the internet for free? In this instance, paying now can save you money later or even help you gain money.
For example, making the wrong decision on an investment can seriously cost you. Your financial adviser would tell you whether something is a good decision. Even more, they can make other suggestions for you, so you get the full breadth of all of your options.
4) Expertise: Before making decisions on purchasing things like insurance or a mortgage, you can talk to a specialist. This person will try to help you get a better deal on some of these big recurring purchases.
When someone spends most of their energy on a specific area, they bring expert knowledge that others may not have. An adviser might also have access to other tools to help you make good choices.
5) Perspective: There are many areas of life where it’s important to get an outsider’s perspective: haircuts, relationships, and, yes, your investment portfolio. No one likes to think they make decisions based on their feelings and intuitions, but it happens to all of us. And oftentimes those lead us astray.
Getting your advice from a professional can give you the objective guidance that you might not get from yourself or even loved ones who are emotionally invested in these decisions.
6) Training: One of the most obvious advantages is that a financial adviser has special training that you can’t necessarily find online. This person has put the time and money into gaining knowledge and experience, with a degree to show for it. This is something you simply can’t get from a casual relationship with your finances.
7) Hidden Fees: Not all of the costs for a financial product are upfront. Sometimes there are hidden costs or taxes that nullify any gains you might have made. A key part of an adviser’s job is to understand the full scope of what you are paying for and what you potentially stand to lose.
8) Protection: The Financial Services and Markets Act of 2000 gave the Financial Services Authority (FSA) the ability to regulate financial services, including advisers. This gives another layer of protection to clients who want to make sure their adviser has their best interest at heart.
9) Trustworthiness: Everyone knows that the internet is pretty much the modern-day Wild West. While there are some legitimate sources of information, it’s hard to know what to take seriously and what was written by someone with no credentials. Internet advice can be very costly in the end.
Even if you do find something respectable to read, it can’t give you advice on your particular situation. It will only say what is generally true for this topic. A flesh-and-blood adviser can give advice based on your unique situation.
10) Ease of Mind: Finally, and maybe most importantly, seeking out a financial adviser can reduce added stress. Making big decisions on where to invest money or what products to purchase can feel overwhelming. Having to do your own endless research and paperwork is an added burden. It is worth the cost of getting an adviser to put that burden somewhere else.
There are a lot of things to consider when figuring out finances based on your unique situation. While information abounds, the distillation and processing of that information are crucial. This is where you will find the most value from your adviser, and hopefully boost your portfolio in the process.