Choosing a financial advisor can seem like a daunting prospect. In fact, many people avoid looking for a financial advisor because they don’t know what to expect and they’re worried they don’t have the knowledge to ask the advisor the right questions. But finding a financial advisor you can trust – someone who will save you money and help you grow the money you already have – is more than worth all the initial effort or discomfort. If you want your savings and investments to work for you in the most effective ways possible, you need an expert financial advisor at your side.
So, when you’re choosing a financial advisor, what are the details you should consider? What questions should you ask them? And what level of service should you anticipate in return?
IFAs & RFAs
There are two types of financial advisor – ‘Independent’ and ‘Restricted’.
Moyes Investments is an independent financial advisor (IFA), which means we offer a wide range of retail investment products and give our clients unbiased and unrestricted advice. Alternatively, a restricted advisor is limited by what they can offer so their clients may not get all the choices they need. For the purposes of the rest of this article, we’ll tell you what to expect from an IFA.
What do you want your financial advisor to do?
Before you sit down with a financial advisor, be clear about your objectives and know what you want your money to achieve. Do you have a pension you want your financial advisor to look at? Or do you have some cash in the bank you’d like to invest so it will give you a better return?
Once you’ve established your needs and expectations, the IFA can advise you about the best ‘tax wrapper’ (i.e. tax breaks, like an ISA or a pension) to shelter your investment. When you’ve agreed the tax wrapper (which is where most, if not all, IFA’s are the same) it’s time to find out what kind of service the IFA offers.
Remember, not all IFA’s are created equal. You don’t only need to find an IFA you can gel with, you need to know how often your investments will be checked and what you’ll be paying for them.
How often will the IFA check your investments?
Some advisors will visit their client (or the client will visit the advisor) once a year to look over their investments. An annual check can be questionable because sometimes the advisor can be so busy they forget to set up the review and, in turn, the client can be so busy they forget to chase them (or incorrectly assume that if the review hasn’t happened it must mean everything is okay.) The result? Investments that are unchecked could subsequently underperform without you knowing about it and then the capital you’ve put in could reduce, leaving you with a loss.
Losses and gains will always occur – that’s part of the ups and downs of the market – but leaving the investments unchecked just makes a poor outcome more likely.
A managed portfolio works better than an annual check because it’s an automated process that groups tens or hundreds of clients together according to their investment risk. If the investments are not performing, all those clients will be contacted individually and asked for permission to move their money. This is much more reactive than an annual check because it can be automated for multiple times per year (normally quarterly.) However, if the IFA has a lot of clients to notify it can take anywhere between several days to several weeks to receive their permissions and make the necessary changes. This isn’t ideal, especially considering the volatility of the current market.
Discretionary Fund Management
This is seen as a very attractive option by those who use it. Discretionary Fund Management permits the movement of clients’ money much more quickly without having to seek the client’s permission first. It’s the most agile kind of financial management because it means the IFA can take immediate advantage of changes within the marketplace, instantly maximising opportunities on their client’s behalf. The client not only has peace of mind that their investments are being monitored, managed and adjusted whenever necessary, they are always informed of the IFA’s actions immediately after the action has been taken. The IFA obviously takes a substantial amount of time to analyse and select new funds but this is within their own control and never intrudes upon the client.
Discretionary Fund Management is a service only a small number of IFA’s currently offer because the qualifications and permissions required to launch a Discretionary Fund Management programme are incredibly demanding and take approximately three years to achieve. As of October 2018, there are only around 400 out of 10,000 firms with discretionary capability in the UK.
The good news is, Moyes is one of them. Our DFM status gives us far greater capability to take advantage of changes in the marketplace on behalf of our clients, and that’s a significant benefit most of our competitors can’t offer.
Once you’ve established the kind of service and attention you require, it’s time to ask this question:
How much does the Financial Advisor charge?
A financial advisor must tell you how much they charge before they take you on as a client. That’s one of the rules all advisors (independent and restricted) must adhere to.
Naturally, the fees you’ll incur depend upon the level of service you’re looking for. You should also remember that some costs involved with investments are mandatory and without them you wouldn’t have the investment, whereas other costs are a choice. The mandatory costs are for a provider and the investment itself.
Provider (Mandatory) – As far as providers are concerned, there can be anywhere between twenty or thirty providers to choose from depending upon what you want your IFA to do. The provider’s role is to hold your money NOT GIVE ADVICE. Your IFA will be looking for service and functionality in making this decision.
Investment (Mandatory) – To some degree this is what you are paying your advisor for and they will explain the investment to you. There is a cost involved here depending upon what investment you choose.
Advisor (Choice) – Once you have paid for the initial advice to put the work together the ongoing management will normally measure in percentages according to the service choices you’ve made.
Discretionary Management (Choice) – These are also normally measured in percentages
Several factors could affect how much an advisor charges, and some IFA’s might charge by the hour whereas others might charge a fixed fee or a percentage of the value of your investment pot. The IFA will be able to explain all this to you at your initial meeting and they must give you a copy of their charging structure before providing any services.
Make sure the relationship works for you
The initial meeting is important, because it gives both the client and the IFA an opportunity to find out how comfortable they are with each other. Does the IFA provide the services you’re looking for? Do their qualifications satisfy you? Do you trust their judgement, and are you reassured they’ll look after your investments and your portfolio as professionally, expertly and astutely as possible?
At Moyes, we pride ourselves on our high standard of client care. We never forget the trust and responsibility our clients place in us, and the duty we have to keep their investments as secure as possible. No IFA can guarantee the future but we do everything we can to minimise our client’s risk and maximise their return, holding their hand every step of the way. And, when our clients need us, we are always here to help. Whichever financial advisor you choose, be as sure as possible they can do the same for you.
If you’re looking for a financial advisor, or if you’d like to discuss the many ways we could help make your financial future brighter, don’t hesitate to get in touch on 01638 429975 or firstname.lastname@example.org.