- Financial planning
- 4 minute read
With the rise of financial blogs and robo-advisers, it can be tempting to try to manage your finances on your own. The number of places you can pick up financial planning advice has never been greater. However, there comes a time when seeking advice from an experienced financial adviser is a sensible idea. Here’s a look at seven scenarios in which speaking to a financial adviser could be a shrewd move.
1. You’ve never received professional financial advice before
One of the main benefits of working with a financial adviser is that they will be able to provide you with an objective view of your portfolio. If you’ve never received professional advice in relation to your portfolio before, there may be risks that you are neglecting.
Investment decisions require rational and logical thinking, however as humans, we are all subject to cognitive biases at times and this can result in illogical or irrational decisions. A prime example of this is what’s known as ‘confirmation bias.’ This is the tendency to seek out information that reinforces an existing belief, and it is dangerous in investing because it can result in overconfidence.
A financial adviser will be able to provide an independent review of your financial situation and ensure there are no obvious risks that you are ignoring.
2. You’d like help achieving certain financial goals
A financial adviser can also be beneficial if you have specific goals that you’re looking to achieve. Whatever your aspirations, you need an investment strategy that can help you achieve that goal.
A comfortable retirement is an example of a common financial goal for many of our clients. When planning for retirement, we now have more choices than ever before, and whilst there are opportunities that come with that choice, there are inevitably complexities and pitfalls.
Utilising pension allowances and making sure you’re saving as tax-efficiently as possible are all crucial in ensuring you achieve the retirement you desire. A financial adviser will be able to examine your situation and put together a strategy that is designed specifically for your financial goals.
3. Your current portfolio is a mess
It’s important to know what assets you hold within your investment portfolio and have a clear strategy, however, over time portfolios can become quite messy if not regularly cleaned up. For example, you may have investment portfolios with several different providers. You may own many different funds which overlap. You may even own funds that are no longer suited to your goals.
In these kinds of situations, it can be beneficial to bring all your investments together and streamline your portfolio, and a financial adviser will be able to help you do this. A specialist will be able to help you construct a simplified portfolio that has a clear strategy, and is suited to your requirements and risk tolerance.
4. You’d like to reduce your tax
While you’re probably aware of basic tax-minimisation strategies, such as investing within an ISA, there may be more sophisticated strategies that could help you reduce your taxes further. Tax planning is an essential part of wealth building and preservation so it’s important to ensure that you’re taking advantage of all the tax breaks that are available to you.
5. You’re missing out on investment opportunities
When managing their own portfolios, investors often tend to exhibit ‘home bias.’ This is the tendency to over-invest in domestic stocks and ignore international stocks, and it can have a negative impact on overall portfolio returns.
A good financial adviser will be able to help you leverage the entire investment universe in order to maximise the potential for good returns within your risk appetite.
6. You’ve just come into a large amount of money
Another situation in which a financial adviser can be extremely beneficial is when you have just received a windfall. You may have inherited a large sum of money from relatives, or sold a business or asset.
In this situation, you’re likely to have a number of questions. Is it best to invest the money or pay off your mortgage? Should the money be invested all at once or over a number of years? Are there tax implications? These are the kinds of complex questions that a financial advice specialist will be able to help answer.
7. You require help with complex issues such as the Lifetime Allowance
Finally, an adviser can be very helpful when it comes to dealing with complex financial issues.
The Lifetime Allowance (LTA) is a good example of one such issue. This is the total amount of money that you can build up in your pension accounts without paying excess tax. If you go over the LTA, you will pay a tax charge on the excess.
The LTA threshold has been reduced significantly since its introduction, meaning it is now a real issue for many investors. Planning for it, with the help of a financial expert, is a sensible move.
In summary, there are many ways in which a financial adviser can add value. They can explain what makes the values of investments go up and down and the risks of getting back less than you invest, as well as clarify how your individual circumstances and tax rules changes can affect any tax strategies and benefits in the future.
Whether you need help with portfolio construction, tax planning, or complex issues such as the Lifetime Allowance, a financial adviser will be able to assist you.
To find out more or if you have any questions about financial planning, contact us to find out how we can help.
Capital at risk. Any tax benefits will depend on your personal tax position and rules are subject to change.