PLANNING FOR THE FUTURE

I don’t need a financial adviser: I can do it myself.

  • 28 April 2020
  • 10 mins

One of the great joys of the internet is the power it puts at your fingertips. Not only can you watch videos of the eye-watering effects of eating a Scotch bonnet chilli – a cautionary tale for the one in seven of us who would rather munch on one than speak to a financial adviser [1] – you can find out about anything, from fixing a leaky tap or roof to choosing your investments.

But the fact there are online guides to fixing taps and roofs doesn’t mean that DIY is always the best way to go – as many a kitchen-sink drama or badly botched roof has proved.

There are similar risks around DIY investing and financial planning. Making a short-term, or fashionable, DIY investing decision now could have a serious long-term effect on your finances.

According to research, around half of us do not feel the need to take financial advice. But why do people believe this when the research also shows that 64% of us are not confident when opening an ISA online, 72% are not confident taking out a pension online, and 78% are not confident in choosing their own investments [2]? For these people, not taking expert advice seems counter-intuitive, to say the least.

Even for those people who are confident about choosing investments and have chalked up some successful decisions, a series of good decisions is not the same as a long-term financial plan.

For example: Fund performance figures for 2019 show some gold funds delivering a dazzling performance, with some returning over 40 per cent over 12 months. [3] Investors who had a good feeling about gold (or a bad feeling about other assets) in January 2019 may well have celebrated their investment prowess 12 months later.

The figures refer to the past and past performance is not a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and is not guaranteed, and you might not get back your initial investment.

Amid the celebrations, though, they also faced some tricky decisions. Sell now or wait for more growth? Sell and move into what else? What about the rest of the portfolio? Should the balance change between ‘adventurous’ holdings and more cautious holdings?

Even for those happy to make these decisions, it’s important to realise that these are asset-allocation choices, not financial planning. They don’t address the bigger, longer-term questions about why and how you invest and save.

Myth buster: an adviser can help you to make a long-term plan

Are you hoping to buy a holiday house, or to retire in your 50s? Are you trying to make up for the time you lost by starting a pension relatively late in life? Do you expect to get an inheritance, or plan to sell a business? Do you want to make sure your dependants can cope financially if something happens to you tomorrow?

The internet may well tell you the prospects for different assets over the next 12 months, and even for longer-term investment horizons, but general online advice is not tailored to your individual circumstances – such as your likely earning power in two or five years’ time, the age of your dependants, your existing assets or insurance arrangements, your unique tax situation or your appetite for taking financial risks.

This is where a trusted financial adviser can step in. With the experience of putting long-lasting strategies in place for many different clients, an adviser can help you to choose the products that are right for you. Some advisers can also add tailored cash flow modelling – showing you, for example, how large a nest egg you may want in order to retire at 60, how you might be able to save towards your children’s education, or how a pension plus an ISA pot could support your retirement plans.

Read more: How your ISAs could rescue your retirement

An adviser’s task is to help you fit together all the moving pieces – dreams, income, outgoings, and an uncertain economic landscape – to create a cohesive plan that aims to help you achieve your goals.

If you still have a taste for making your own DIY decisions, seeking financial advice doesn’t rule that out. An adviser who understands you, your family, your appetite for risk and your financial life goals can build a plan that takes care of the basics, while allowing you the freedom to pursue a personal investment plan.

Important information

Any views expressed are our in-house views as at the time of publishing.

This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

Sources:

[1] Citizen Me survey of 800 adults across the UK who were asked a number of questions about their finances and lifestyle. Research undertaken exclusively for Schroders Personal Wealth in, September 2019.

[2] Fifty Shades of Advice, Boring Money insights, page 21 June 2019

[3] https://www.ft.com/content/dc045acf-ed61-46d5-840d-5678a44c3c57 January 2020

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