Increasingly financial adviser charges are the topic for conversation in the financial pages as RDR imbeds into financial adviser firms and the FCA review the way financial advisers have adapted and interpreted the changes.
Many articles focus on the cost of the advice rather than the benefits of using a financial adviser which I believe is a concern. If the press and public believe that through researching the internet, asking friends and using execution only platforms they can perform the operations of a financial adviser I strongly think they are going to come unstuck and make life changing decisions without the proper knowledge.
Your friend down the pub or website review may have (if lucky) made the correct decision for their circumstances and be very happy with the outcome. Do they know if a better outcome existed? Is the solution for your friend the best solution for you? Have regulations changed since your friend took out their policy, how do you know?
A financial adviser has been studying all their careers and keeping up to date with regulatory changes, they provide advice on the plans or policies that suit your circumstances and should tell you about the plans and policies that don’t suit your circumstances but have also been considered. Considering this, do you value their position to provide the most suitable advice? Therefore would you pay a fee for this service rather than do it yourself?
Also consider this, it is not only the cost at outset that can affect you. It is the cost of making a mistake which can often far exceed any financial advisers charges.
You are approaching retirement and your pension provider writes to you to take an annuity so you can withdraw benefits. You have been with your pension company for years and performance was good so you tick the box and your income is paid. You didn’t take advice but are happy you will start to receive your income at retirement.
Did you consider all the options that are available for an annuity, guarantees, spouse’s benefits, etc?
Did you know that you did not have to take the annuity offered by your pension company and could look at other annuity providers which may be paying more income?
Did you consider that if you have suffered ill health recently you may benefit from an enhanced annuity which would pay an even greater income?
Did you know you don’t actually need to take an annuity to provide income and if suitable could remain invested in the market but still take your pension commencement lump sum or tax free cash and an income?
If you ticked the box and took the first annuity rate that was offered you may well be happy but was it best advice? If you could have had an enhanced annuity or a better annuity rate elsewhere, the cost of taking that financial advice could be insignificant to the increased income you would now be receiving.
In addition to advice at outset, most good financial advisers will offer an ongoing service where appropriate to make sure your investments or pensions stay on target to meet your goals. They will make sure you understand the investment risk within your portfolio and make changes to keep your risk aligned to your views.
What you don’t know doesn’t hurt you, but if you find out through a friend or reading on a website after the event that you could of got a better deal, well that can certainly hurt your pocket, quality of life and pride.
The press should not be focusing on the charges of a financial adviser. Like any industry financial advice is a competitive market and if someone is charging too much they will not get any business. The public will simply try the next financial adviser on the list. What they should be focusing on is the cost of not taking advice and making sure the public get the best deal they can for their circumstances and can consider all of the available options. That is what a financial adviser does.