Did you know that the average value offered by a financial planner is 3% a year?  This is supported by the Vanguard Adviser Alpha Study.  The following table was extracted from the study. It makes interesting reading, doesn’t it?

 

 

Interestingly a number of the benefits of a financial planner are intangible and there’s the rub.

Most Independent Financial Advisers (IFAs) have a fee charging structure of 1% p.a. of funds under management. On any measure this represents excellent value for money especially when compared to professions such as accountancy and law.  On any objective assessment of value, it is difficult to imagine any other profession offering comparable value for money.

 

 

So why don’t more people seek the advice of an Independent Financial Adviser (IFA) or financial planner in the UK today? Well, the obvious reason is that individuals are unaware of Adviser Alpha. They do not seem to appreciate the value of a financial planner, especially the intangible benefits of using one.

Another big factor in my opinion is that the services of an IFA are mostly voluntary. In other words, you may choose to appoint an IFA or do it yourself. That’s very different to other professionals such as accountants and lawyers. Mostly such services are compulsory to use.  Apart from advice on final salary pension transfers above £30,000 the services of an IFA are not compulsory.

 

 

In recent years there has been far more focus on fees by the media, the regulator and the public.  This means that people tend to concentrate on fees so much they do not necessarily appreciate the value that an IFA can bring.  In our own practice, we assess the value we bring to clients.  It averages 3-4 times the fees they pay.  Often the largest value comes from the tax savings we achieve for them.  Better investment performance is another important factor but it is sometimes difficult to prove.  Probably the greatest benefit to clients is peace of mind.  We take the worry away from them, we give them peace of mind and reassurance to stay on track.  Our lifetime cash flow planning software helps a lot in this regard.   We also act as financial coaches by guiding them the right way by taking into account tax planning, investment risk, cash flow planning using “what ”if scenarios, stopping them making bad decisions, keeping them on track, investment strategy, tax-efficient transfers of wealth to their loved ones etc, etc.  The list of benefits is a long one.

So let’s move the focus away from fees and on to value.  Let’s face it if you had to have a life saving operation you wouldn’t do it yourself, would you?  Alternatively, you wouldn’t look for a cheap surgeon, would you?  So when seeking expert independent financial advice find an expert specialist Independent Financial Adviser, preferably a Chartered Financial Planner, to get the advice you deserve and receive value far greater than any fees you will ever have to pay.  You know it makes sense.*

 

*RISK WARNING

The FCA does not regulate tax planning and cash flow modelling. The value of investments can fall as well as rise. You may not get back what you invest. The information contained within this article is for guidance only and does not constitute advice which should be sought before taking any action or inaction. All information is based on our current understanding of taxation, legislation, regulations and case law in the current tax year. Any levels and bases of relief from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This blog is based on my own observations and opinions.