The abundance of online investment information and robo-advisers has many of us questioning if we really need a financial planner. This guide will show you the lifelong value of engaging with a financial planner, and why you can leave robo-advice behind you for good.
Take the case of a recent enquiry about Capital’s financial planning services. A 30-something tech start-up owner had done well managing his own finances. He had an ISA, a pension, and was using a popular robo-adviser app to invest. Arguably, he had set up a good foundation for his financial future. However, following the sale of his business, the complexity in his life meant he was out of his depth now that his wealth had grown. He saw value in having a financial planner for the following six reasons.
1. Financial benefits
The most obvious reason people seek financial advice is for the financial benefits.
DIY and robo-adviser apps can seem like attractive options when comparing costs. Robo-adviser costs tend to be lower than a Chartered Financial Planner. However, when considering the bottom line, research by Vanguard shows on average investors who have a financial planner achieve better outcomes. Of course, returns vary on the performance of the invested funds and are never guaranteed, whichever way you choose to invest.
The financial benefits of a financial planner don’t end at investment returns. Planners have an extensive knowledge of pensions, ISAs, shares, and personal portfolios. This means they can advise you on the best ways to maximise the benefits of these and minimise costs.
A financial planner works to integrate your finances, taxes and estate plans to help you achieve your personal goals. Financial planning can be seen as an investment, as a good financial planner is likely to make you more money over the long-term than going it alone.
2. Investing can be taxing
The UK tax system can be complex to navigate and a small error could cost you thousands of pounds in unnecessary tax.
How and where your money is invested, and in whose name it is held, can have dramatically different outcomes if not done well. Most people want the best after-tax outcome that they can get without breaking the law or hiding money in the Cayman Islands or the British Virgin Islands. Not only do you need to invest your wealth in the most appropriate tax ‘wrappers’ but later in life how you withdraw your money, and in what sequence, is also of high importance.
Don’t leave this to chance or you could be left with an unexpected tax liability. A Chartered Financial Planner will advise you on how to invest in a tax-efficient manner, making your money work as hard as it can for you. This means leaving enough on the tax table for society while also doing the best for your family.
3. Security and protection
In life sometimes the unexpected happens and things go wrong. All investments are subject to some risk, and returns are not always guaranteed. Nevertheless, having a financial planner in your corner can put the odds in your favour.
Financial planners are regulated by the Financial Conduct Authority which helps to protect consumers from the harm that can be caused by misconduct in the financial services profession.
If your financial planner gives you misleading or poor advice that causes you monetary loss, you should be protected. The financial planning firm you use should have professional indemnity insurance. You can refer your complaint to the Financial Ombudsman Service, which has the legal power to award compensation. If the financial planning business fails, then the Financial Services Compensation Scheme steps in.
Before investing your money, Capital will always measure your risk appetite. Aligning you to a risk category will determine which level of portfolio you invest in. This means that you should feel comfortable with the level of risk you are taking.
Simply put, having a financial planner gives you peace of mind.
4. Having a clear plan
Taking time out of your hectic life to think hard about what you want to achieve from your money can be invaluable. Your financial planner will discuss with you what your life goals are, how you see your future lifestyle, and how you want to be able to help your family. A financial planner will look at your overall goals and help you devise a realistic, achievable plan to turn them into a reality.
A Capital financial planner can use modelling to test how robust your financial life plan is and if your money will last until age 100. In addition, we will conduct reviews with you to check how your finances are doing and the progress toward your goals. This keeps things moving and means you can make any modifications as your situation changes.
5. The art of delegation
Life is busy, and time is short. Managing your own finances can be time-consuming and robo-advisers and online tools can only do so much. The world of finance is full of paperwork, statements, charts and reports. What do you keep and where do you store it? What should you read and what’s to ignore?
A great financial planner is someone that you can delegate your heavy lifting to, so that you can free up time to do things that you are passionate about. Capital pride ourselves on taking the hassle out of our clients’ lives. We liaise with your accountants, lawyers or bank so you have a fully coordinated service. What’s more, we rebalance portfolios, create cash-flow models, and manage all your saving pots.
This saves you time, so you can focus on doing what you love.
6. Your personal sounding board
Human nature causes us to act irrationally at times. When stock markets drop we feel an urge to take our money out and run. When cryptocurrencies rise we are tempted to put our savings into Bitcoin.
It’s never wise to gamble with your life savings and investments to get spontaneous thrills and kicks on the latest get-rich-quick scheme. A financial planner is a rational sounding board for all your ideas and helps you evaluate them to make an educated rational decision.
According to a 2017 study by BDO, the accounting firm, the value of fraud in the UK financial services sector was £899,700,000. The FCA and ActionFraud found that 250 people a day are sending money to fraudsters with an average loss of £32,000. Your financial planner will advise you to step away and not get involved, no matter how enticing the offers are. In the long run, you will look back and thank them from the bottom of your heart.
This tech entrepreneur is now a happy client of Capital and is enjoying the benefits of working with a good Chartered Financial Planner.
Reputable robo-adviser apps can be an easy and affordable way to start building your savings pot and track your expenditure. When life is less complex this can be a brilliant resource to use, for instance, if you have:
- total investable assets under £500,000
- no properties
- no complexities, such as children’s school fees to plan for
- no immediate retirement planning needed
- no business(es)
- no complex tax situations
When your finances get more complex, you will benefit from a financial planner. A financial planner will work with you on a personal level to integrate all aspects of your life and finances. They will grow and preserve your hard-earned money, helping you achieve the life you want. Most importantly, your financial planner will help to give you peace of mind and financial security.
Financial planners have a diverse skill set to help with many aspects of life beyond just your finances. Capital’s planners are experienced in working with business owners at the point of sale, and have skills in helping clients with practical issues, legalities and the emotional side of selling a business.
At Capital, our Chartered Financial Planners develop deep relationships lasting for decades with clients and their families, to the extent that they become trusted advisers. Try doing that with a robot.
Whether you have just sold your business or are building your retirement fund, or simply need help planning your children’s education, seeking a financial planner can have a significantly positive impact on your finances and your overall quality of life. If you would like to speak to us about working with one of our experienced Chartered financial planners then please click here to contact us.