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Managing my investments
Managing my investments

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2.4.8 Do I need financial advice or should I go it alone?

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Figure 15 Getting financial advice can help with your investment plans.

A key decision to take when investing is whether to seek advice from a financial adviser.

What are the pros and cons of this?

The benefit of getting advice is that you should get the products that meet your needs and your risk appetite. To achieve this, advisers should carry out a fact find, where they ask details about your circumstances, goals, time horizons for these goals and your capacity to absorb losses on investments.

Different types of advisers and different types of sales

Note that some advisers are independent, in that they are not tied to a specific set of investment products. Independent advisers can provide guidance on the full range of products you are interested in investing in. By contrast some advisers just offer a ‘restricted’ service linked to a defined range of products and not the full market. Advisers do have to disclose whether they’re ‘restricted’ or not in the guidance they provide.

There is a clear difference between advised and non-advised product sales. Non-advised sales involve being talked through options with the decision about which product to invest in being left with you.

Advised sales point you to particular products. If you end up with an unsuitable product after being recommended it by an adviser then you may have a case for claiming that it has been ‘mis-sold’ to you.

When should I seek advice?

  • For cash savings products it’s easy to make decisions using internet comparison sites. With no risk to the capital sum invested you normally don’t need to receive financial advice.
  • When investing in shares and bonds, either individually (i.e. a specific company’s shares) or in a fund like a unit trust, then it may be prudent to seek advice.
  • If your answer is no to at least one of the following questions then seeking financial advice is prudent. If the answer is no to all three questions, advice is really essential.

    If your answer is yes to all three questions, you can consider yourself able to make your own decisions and to transact without advice using a low cost provider (e.g. an internet platform) of the products you want.

    The key questions to ask yourself are:

    • Am I an experienced investor?
    • Can I afford to lose at least part of the capital sum invested?
    • Have I the time to both put in the research ahead of investing and then monitor the investment after I have acquired it?
  • For pension products advice should be sought. For workplace pensions your employer will either provide advice or access to advice about the scheme(s) on offer and their costs to you. For a private pension it is sensible to seek advice even if you consider yourself to be knowledgeable about investments. The consequences of investing in an inappropriate pension product can be financially devastating. The new rules on access to pension funds, that came into effect in 2015, really make it important that advice is sought, not only in respect of entering into a pension product but also in accessing the funds it generates as you move towards and into retirement.

What do I get charged for advice?

From 2013 advisers have been required to set out explicitly the fees charged for the advice provided. These fees vary from adviser to adviser so don’t just glance at them, look at the fees carefully and check how they compare with those of other advisers.

If you are seeking general financial advice or advice in respect of specific products, advisers will normally charge a fee and be required to advise you of the fees they charge upfront. Some advisers may be prepared to provide an initial consultation free of charge – so why not ask if they do this when arranging an appointment.

Previously, advisers earned their income by receiving commission from the product providers which was then deducted from customers’ initial or ongoing investment. This practice has now been stopped to ensure that there is complete transparency about fees charged.

Do note the difference between the fees charged by advisers and the ongoing management charges applied by product providers, particularly when the investments are ‘managed’ (looked after actively by fund managers) as opposed to being placed passively (and left unmanaged) throughout the life of the investment.

Where do I go to find an adviser if I need one?

There are plenty of ways to locate a financial adviser. Your bank will be able to help and an internet search will too.

Two sources are particularly useful when it comes to locating advisers and obtaining financial advice.

MoneyHelper [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] - the personal financial advice service provided by the government’s Money and Pensions Service (MaPS) - provides detailed guidance on financial advisers.

Additionally provides a list of authorised financial advisers.