£47,000 benefit of financial advice
10 February, 2020
With the ever changing political, fiscal and economic tides, how on earth can a person wade through those financial changes and the impact on their life goals, especially given that only a minority seek financial advice?
Is it really worth having a financial adviser to do that?
Few of us are aware of what we don’t know, and that is where most mistakes can be made. A qualified financial adviser’s job is to understand each and every problem, pitfall and the solution that comes with it, so they can guide you from above through that financial maze.
The government tracked the wealth of thousands of people over variable periods of time since 2004. They concluded that those who received financial advice were £47,000 better off. The greatest uplift in financial wealth was actually in the non-affluent group of people, particularly on pensions, were the figures more than double between the two groups.
The biggest uplift however was a comparison between those who just took advice at the beginning of their pension pot and those who took advice all the way through. Staggeringly, those having advice all the way through had a pension pot 50% greater.
It is unclear exactly why people do not take advice, but apprehension of cost is clearly one of them.
There are two basic types of financial advisers: Those who are restricted in the products they can sell you and don’t have the whole of market available to them, and those who have to offer the whole of market, or Independent Financial Advisers.
The Independent financial adviser is also able to review and research other companies’ products that a restricted adviser would be able to do.
It is unclear to me why any adviser would restrict themselves to such a miniature range of financial solutions for their customers when there is a vast array of preferable options they are clearly restricting their customers from.
St James Place is an example of a restricted financial adviser. Astonishingly, when their new director joined them at the beginning of the year, she openly admitted she could not understand the company’s fees to their customers, and that was after having them explained to her.
Helena Morrissey has over thirty years’ experience in financial services and was head of personal investing at Legal & General in 2019 which had over £1 Trillion in assets, so she does know a thing or two about financial advice. I wonder how many of their customers understand their fees.
That is why it is vital to take Independent Financial Advice and leave all the calculations of fees, performance analysis as well as product choices to an Independent Financial Adviser who will stand by that advice and keep it on track throughout the life of your financial plan.
When you meet an Independent Financial Planner, they will simply explain their fees and you can make your choice if you wish to avail of that service. Their fees are open and transparent.
As this column has pointed out over the last 18 years, there are countless pitfalls to avoid: The difference in pension fund performance, over just twenty years between the best and the worst meant an income difference of £316 per week; how to pay 1.49% on your debt rather than 25%; how £109 Billion of your money was in overcharging investment funds; how there was over 7% per year difference in income returns for investors; the 49% difference in the cost of your life insurance by dealing with it in the wrong way; avoiding crazed ‘coin’ scams; the hidden 7% costs of using a credit card to buy a flight.
The list could go on for a very long time, but in its simplest terms however, the greatest benefit is the chance to relax, switch off that financial headspace, safe in the knowledge that whatever headwinds and gusts might arrive, that your financial plan will be kept on target by your Independent Financial Adviser.
Peter McGahan is Chief Executive of Independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority.
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