When Should You Seek Financial Advice? (And What Happens If You Don’t?)

Getting the right advice at the right time is beneficial in all walks of life. Gaining appropriate direction for your finances gives you the opportunity to avoid making costly mistakes, and the impartial reassurance you are on the right track. But when should you seek advice?

Overcoming inertia

It’s wise to assess whether the cost of financial advice is balanced by the potential benefits. Being wary is understandable, especially if a positive outcome is not immediate.

Yet it is worth noting some relevant research. A 2017 study by the International Longevity Centre found that those who received financial advice in the 2001-2007 period did much better by 2012-14 than an equivalent group who did not receive such advice.

Investors accumulated on average £12,363 (or 17%) more in liquid financial assets than the non-advised group, and £30,882 (or 16%) more in pension wealth – so those who didn’t receive advice were a total of £43,245 worse off in that timeframe alone.

Whether the knowledge of these findings is widespread or not, more people seem to be heeding the value of financial advice. A 2018 report commissioned for the FCA revealed that in the previous 12 months 4.5 million UK adults had received regulated financial advice, up from 3.2 million in the year before.

The figures paint a pretty clear picture of the benefits and trends, so under what conditions should you seek financial advice?

First of all, question if you need advice

Whether you should get financial advice or not is an individual consideration. Many factors will contribute, such as your level of knowledge and experience or the complexity of your requirements.

It may be that you don’t need advice and that with some self-research and guidance from an expert you can keep your financial plans on track. When it comes to things like deciding on whether to invest within an ISA or a General Investment Account (GIA) and selecting your risk level for investment we often cover the important aspects to consider with clients as part of guidance so they can make their own decision. We don’t charge for this but it’s also important to note that as part of guidance we wouldn’t be offering a personal recommendation.

We also think you shouldn’t have to pay just to do the simple things every year. For example, it may be the case that you pay a fee to an IFA for new ISA subscriptions each year. This is advice you probably don’t need, especially when your plans or the composition of your investments haven’t changed. Instead we let you setup an automatic transfer from your taxable investment to an ISA so the funds can move across each year and be tax efficient.

Steps you can take to stay on track

Technology can also help to give you the information you need to make your own decisions and achieve your personal goals. We help you to assess if you are on track for your retirement, for instance, by offering planning tools that model for your planned income needs, inflation, market returns and different levels of risk. This can help you to envisage different scenarios and plan more effectively.

However, retirement is a major life change and a complex financial planning area, so as you get closer to your planned retirement date you may benefit from taking some advice to help you actually draw down and structure your retirement income.

Other situations where advice may be valuable

The trigger for needing advice is often a major life event such as receiving an inheritance or going through a divorce. At times like these you may want to get a check up on your personal situation and recommendations for how to structure things like inheritance tax planning going forwards.

While life events and changes in your circumstances can be the trigger for seeking advice, some clients may also want the ongoing reassurance of regular advice. In this way they know they will get proactive recommendations and regular meetings to make sure they are adjusting their plans as necessary. The key is that it’s your choice so that if you are happy taking guidance and making your own decisions or if you want occasional or regular advice, we can be flexible to meet your needs and make sure you aren’t paying for something you don’t want or need.  

However you choose to proceed, the first step is to think about your goals and current portfolios then get in touch for an initial conversation.

Some areas to be thinking about

Your overall financial situation is likely to fluctuate over time, so it is always worth assessing if you could make any beneficial changes by asking yourself some important questions.

- Are you taking an appropriate level of risk to achieve your goals?

Taking more risk when investing invariably leads to higher returns, but typically over longer timeframes. You should find out whether the risk you are taking now is enough to meet your future goals, or whether you can afford to take less if, say, you are approaching retirement.

- Do you pay too much in fees?

Paying excessive fees when investing or for your pension can have a surprisingly outsized negative outcome. It seems reasonable not to lose too much sleep over an extra 1% in fees a year, but this excess can add up considerably over time.

- Have you enough to retire comfortably?

Optimising your pension planning ensures you don’t just retire, but have enough to retire comfortably. The nature of pensions and effective retirement planning is complex and you should consider numerous factors such as your risk levels, the fees you pay and the impact of inflation on how long your pot could last.

- Have your circumstances meaningfully changed?

Certain events in life such as a divorce or death may require a reassessment of your overall finances. When your circumstances have changed in a big way it is worth finding out if you need to put more aside for the future, how to better manage cash flows or if a planned retirement date needs to change.

- How do you effectively leave money for the next generation?

Many of us want to pass on wealth to our family, but managing the balance between tax efficiency and control while maximising the benefits for the next generation requires careful thought and planning. How much to gift and when? What is the impact on your pension? The right mix of outright gifts and more complex structures will depend on your objectives and in many cases the level of assets you would like to pass on. 

If you are in doubt, find out

Having an objective overview of your finances is a good way to address the challenges we all face. However, in many circumstances you may not need advice, and the right guidance and tools can go a long way towards helping you to stay on track.

To help you decide what is appropriate for you, please talk to one of our advisers about your specific needs whenever it is convenient.

Please note, the value of your investments can go down as well as up.

Netwealth offers advice restricted to the services provided, and does not provide independent advice across the market. Netwealth does not provide tax or legal advice and does not advise on transfers of pensions with safeguarded benefits.