Where in life is financial advice needed?
It’s a common misconception that only wealthy people have the need for a financial adviser. It goes without saying the more affluent a person is, the more likely they are to seek financial advice. This isn’t down to an individual having wealth they wish to protect, invariably it’ll have something to do with it, but affluent people are more likely to make better decisions where their money is concerned and that typically involves seeking advice from professionals to make informed decisions.
In truth there are multiple occasions in a person’s life where receiving financial advice will be beneficial. Deemed affluent or not, the life events/journey experienced by people is similar for every human being. Unfortunately, however, many people make the mistake of waiting until much later in life before they seek the help of a professional where their finances are concerned. The main reason being the idea that receiving financial advice is too costly.
Before we begin explaining the multiple life events where a financial adviser can assist you, where you’ll begin to understand where and why you need financial advice and the advantages of receiving financial advice, it makes sense to look at the consequences of not taking advice.
How Financial Advice helps your investments
A financial adviser will do more than simply tell you where to invest your money. Their whole purpose is to help your money work for you to help you achieve your goals. They will look at your circumstances as a whole, from your current situation to your medium and long-term future, to help you decide on the best action to take.
Research undertaken by Vanguard, best known for their index-tracking funds, found that financial advisers can boost investors returns by up to 3% each year. In addition, a report by International Longevity Centre (a think tank) in conjunction with Royal London found that consumers who received financial advice between 2001 and 2007 were £40,000 better off than their unadvised counterparts by 2012-2014.
Of the report’s many findings, perhaps the most of interest is the revelation that the lower income group benefited from financial advice even more than the affluent people did. Following financial advice, the average saver in the lower income group had their pension pot boosted over a decade by 24% (£35,054), compared to savers in the same wealth class who didn’t receive any advice. In the ‘affluent’ group this difference was more modest, though still dramatic –affluent people who took advice had £24,266 more after 10 years than their unadvised counterparts, an 11% boost.
However you read the above, the positives of receiving financial advice are clear.
How Financial Advice protects your wealth
An independent, whole-of-market financial adviser will provide impartial, unrestricted advice that considers every financial product on the relevant market. In short and in comparison to a restricted adviser, they will find the most suitable products for you from all that are available – something no comparison website or restricted adviser can do. Restricted advisers are restricted by the range of products they can recommend. Independent financial advisers will ensure the chosen product is the best possible fit for your particular circumstances.
Making sure you have the right level of cover and for the most suitable timeframe is important for you and your family. By seeking advice you can trust, you can safely navigate this complex marketplace and give yourself peace of mind.
One of the most important aspects of financial planning is ensuring you have made provision for your family and any dependants in the event of serious injury or untimely death. When it comes to family protection you have a wide range of different products to choose from. Protecting your wealth requires maintaining your tax efficiency throughout your life, and keeping up to date with the changes in personal tax allowances and regulatory changes, all of which can be time consuming. This is where a financial adviser is worth their weight in gold.
Where in your life will you need a financial adviser?
Before you read on, if we revisit the beginning of this article where we briefly discussed affluent people and their decision-making skills, think about your own decision making where your finances are concerned. Do you think you would make better decisions if you received financial advice?
Let’s look at where in your life you would benefit from if you sought financial advice.
Your First Job / Rental Property
When you begin looking to live the life you want, have got yourself a job and sufficient income to move out of your parents house, either through renting or buying a property, it is at this time you should look to receive financial advice. You’re probably wondering why, how and where does a financial adviser come into play at such an early stage of your life. Well, simply put, to protect and begin planning the rest of your financial life.
A solicitor will arrange and amend your Will and/or a Power of Attorney (POA) throughout your life and an Accountant will prepare and file your tax returns whilst keeping you tax efficient, a financial adviser on the other hand will look to grow, protect and preserve your wealth throughout your lifetime.
This begins from when you first rent or buy a property. Initially you should consider insurance policies like Income Protection and/or Serious Illness Cover. These can be critical to ensure you can continue to meet your financial needs should you fall on hard financial times as you begin living the life you want. In addition to helping you find the right level of cover, an adviser can help you start to form good habits for the future you by beginning a pension and ISA saving habit.
As your life progresses, you may find love and get married. This can also lead to buying a house if you were previously renting. Again, a solicitor can make the necessary changes needed to your Will at this juncture and provide Conveyance and Spousal Bypass. A financial adviser at this stage in your life will not only continue to check your levels of Protection Cover (income and/or serious illness), they’ll ensure you have sufficient Mortgage Cover.
When and only if the time is right, you and your partner might begin thinking about starting a family, you may actually look to buy a bigger house too. Financial adviser’s will begin talking about Family Protection with you, School/Uni fee planning, tax efficient savings options for children such as Junior ISA’s (JISA) and Stakeholder and not to mention arrange any additional Mortgage cover needed should you move to a bigger property.
Over the past 50 years, exactly one third of marriages have ended in divorce. It goes without saying, a solicitor is much needed during this period of your life to handle the legal implications. You will need an accountant to identify your tax position on the Split of Assets, but there are a plethora of areas where you would benefit from including a financial adviser as part of your professional team throughout divorce.
A financial adviser can look at any pension sharing following the divorce, asses your retirement strategy and work with you to rebuild your asset base and retirement provisions.
Re-Marry or New House?
Roughly 70% of people who get divorced will eventually re-marry again at some point in their life. That said, typically after a divorce and a split of assets, an individual will almost always get a new property for themselves.
A financial adviser in this instance will revise your protection plans, your mortgage cover whilst continuing to assess your retirement strategy/shortfall. A financial adviser will look to ensure you’re making provisions for the future you.
Inheritance or 2nd Home
Financial advisers provide peace of mind to their clients by ensuring they accumulate wealth in the most tax efficient way. This includes planning your estate for when the inevitable happens and you pass away.
They will work with you to ensure you are making best use of the tax reductions/exemptions available to you, such as gifts, trusts, capital gains tax etc. They will without question begin identifying your later life needs and will put in place a financial plan to meet your needs and provide you the best opportunity to achieve your later life financial goals too.
Should you inherit a sum of money or an asset from a family member, your financial adviser will ensure you remain tax efficient throughout the process. If you begin planning for any inheritance you are expecting to receive, your financial adviser can ensure you have very little or no IHT to pay on receiving the inheritance too.
Purchasing a second property has become slightly more complex over the past couple of years with the introduction of new legislation from the government. A financial adviser will show you the most tax efficient way to purchase a second property and ensure you are making best use of the tax allowances and reductions available to you, meaning you’ll receive income from your second property in the most tax efficient way to you.
Now this is where most people start to engage with a financial adviser, either at retirement or 5 years before. In reality this could be too little too late for achieving a retirement pot that sees you live your dream retirement. Following a cash flow analysis and identifying your Income Strategy, an adviser will look at your Pension Options e.g. drawdowns etc.
You may need to consider your Long-Term Care plans too, the cost of care has reached their highest levels in history and should be factored in when planning your retirement. Ultimately, as you enter this stage of your life you should become more familiar with planning for Inheritance Tax (IHT). This is where financial advisers become your expert and deliver a plan that sees your estate pay as minimal IHT as possible when the inevitable catches up with you.
Now it goes without saying, retirement can come around quickly depending on where you currently are in your life cycle, but, like anything, it pays to begin planning for what later life has in store for you earlier than either 5 years prior or actually at retirement.
We all have financial goals, and sure, in our early years we’re all too busy living the life we want at that time to even think about our future financial self. But you really should. The earlier you begin planning and forming good saving habits, the more likely you are to achieve financial peace of mind for the future you.
To add some numbers for proof in the pudding, please look at the below table. From the age of 18 to 45, if you deposited £2,400 of your salary per year or £200 per month, by the time you retire you could be a millionaire in retirement.
This is largely helped by compound interest. The more frequently your money earns interest, the faster and bigger your balance will grow. As interest is added to your account, you earn interest on the original balance, plus the previously earned interest.
The final return on your money is called the Annual Percentage Yield (APY).
When interest is compounded, the amount paid in a year is more than the simple interest rate that is given. Financial institutions show the return as the APY — the actual return on an investment when compound interest is considered.
So, do you really need Financial Advice?
It’s clear from the text above, there are many positives to seeking financial advice throughout your lifetime. One of the main highlights of seeking financial help in our younger years is the ability to have someone else concentrating on your financial wealth, this allows you to focus on the present. In addition to the above examples, seeking financial advice in the following areas may also be beneficial:
- Making a significant career change
- Moving abroad
- Starting or running a business
Financial advisers provide peace of mind, not just for the future you but for the present you too. You have a mechanic you see once a year for your MOT, and if anything were to go wrong with your car before its annual check up, you would take it to the mechanic for fixing. If you chipped a tooth, you’d visit the dentist. Your financial stability is no different in that it requires professional help to provide you with peace of mind.
So, to answer the question, do you need financial advice, the answer is simple…everyone should explore it.
Financial advice is not just about investments or what to do with large sums of money, it is also about financial crisis management – identifying weaknesses in a financial strategy and planning for the worst, in the hope it never happens!
Next time you think to yourself, why get financial advice?
Answer yourself this: why not?
What does Financial Advice cost?
The costs involved with receiving financial advice vary from adviser to adviser, we cannot comment on what other advisory firms charge, but for Fiducia clients, our charges are clear, fair and transparent. The initial or discovery meeting is without cost or obligation and is to enable you to decide if you wish to appoint Fiducia to act on your behalf.
In general terms, we would expect a very simple report to cost from £500, while a highly complicated report is likely to cost from £1,000. This is charged as a fee.
We follow a simple scale in this regard in that we charge up to 2% of the assets being invested.
Our standard annual management charge is 1%, this is subject to a minimum charge of £1,000.
It’s worth noting at this stage that fees, where most advisers are concerned, can and often do come from your investment pots, meaning you do not have to find the money to pay your adviser. Adviser fees are all factored into your overall financial plan, meaning they are catered for in determining a financial plan that’s fit for you.
As has been seen throughout this article, seeking financial advice does nothing but benefit the future you, ensuring you have protection to financially sustain the life you live whilst also adding value to your financial growth plans. With most being too quick to discard receiving financial advice until later in life citing the costs involved as a stumbling block, we think it’s more costly to not receive advice. Couple this with the peace of mind you can achieve by obtaining a financial plan that’s fit for you and one could argue the naivety of falling to seek financial advice sooner rather than later.
The earlier you begin planning for the future the more likely you are to achieve your goals.
Who are Fiducia Wealth Management?
We’re a team of experienced, multi award-winning Chartered Financial Advisers ready to help you get the most from your wealth. A core part of our ethos is to ensure we deliver what our clients want to achieve and what they need…peace of mind and enough money for later life.
We are one of the top independent financial advisers in the country, highly rated on popular search sites for financial advice (Unbiased and Vouched For).
Whilst our clients are located across the whole of the U.K, our head office is in Colchester, Essex. We also have an office in Chelmsford, Essex.
In addition to a holistic financial planning service, we provide financial advice to businesses, individuals and couples in one or more of the following areas:
- Financial Planning
- Investment Management
- Pensions and Retirement Planning
- IHT & Estate Planning
- Later Life Planning
- Protecting Your Family
Financial stability is important not just for monetary reasons, but from a mental health perspective too. We’re here to help you every step of the way to ensure you have enough money to live the life you want, now and in the future.
If you would like to achieve peace of mind and ensure you have enough money for later life, contact us today and let’s see how our experts can help you plan for the future.