Misconceptions: Value of Financial Advice

In the two years that I’ve been working towards becoming a financial adviser, the disparity between what people think financial advice is versus what financial advice actually is... well stark.

The most common misconceptions:

1. A financial adviser is there to pick the best funds/ stocks to maximise my returns.
2. If I work with an adviser, I’ll lose control of my finances and lose the autonomy to manage my own financial affairs.
3. To work with a financial adviser, I must have “loads” of money.

These three areas need further context and I want to give a quick explanation on where the true value of financial advice lies.

1. In the 80’s and 90’s it was probably fair to say that many advisers did focus on performance and funds. However, most of the industry has moved on since then. The way your money is invested is an important pillar to your plan, but it should not be the centrepiece in working with an adviser.?
2. A great financial adviser will work with you, arming you with all the information you need to make great financial decisions. It is a partnership not a dictatorship.
3. There is an element of truth in the commerciality point. Due to regulatory requirements, there are certain commercial thresholds where a financial adviser may not be able to cover their costs in engaging with you. This has been reinforced further with the introduction of the Consumer Duty. Every adviser is different and it’s worth reaching out to see if help is viable. If you don’t reach out, you don’t know what you’re missing.

Where the Value of Advice Lies

Vanguard conducted a fascinating study into the Value of Financial Advice in 2015. The study is looked identify the value proposition of financial advice i.e. how is a financial adviser able to help you make good decisions with your money.?

In spite of the above, some people do like to manage their finances themselves. This it totally possible (and totally fine). It’s a case of weighing up your own personal circumstances and making that decision yourself.

If you have the time and knowledge to manage your finances yourself, it will be cheaper than paying a financial adviser to help you. That should come as no surprise.

If you decide to go to your local gym, you can either go to the gym and exercise yourself or pay to train with a personal trainer. The latter option will cost more, given you have got someone working with you toward your health goals. It is the exact same principle with an adviser but with your financial goals.

It is at this point, along with acknowledging the role that advisers actually help you (as detailed above), that reaching out to an adviser may (or may not!) be the best for you.