Financial Advisor Article

Should you use a Financial Advisor and are they worth it?

The need to take advice is greater then ever now. Factors such as Life Time Allowance planning, EIS, DB Pensions and IHT have arguably more of an impact now then ever before.

There are numerous examples over the last year where people who have attempted to do a lot of this themselves, such as LTA planning, and have got it very wrong; as a result will have incurred tax charges.

What our Wealth manager says; "Compare the Accountancy industry for instance. You do not even need a single accountancy qualification to call yourself an accountant. The amount of poor advice from these types of operators I have come across in areas such as North London, where shady establishments are handing out terrible advice without even a qualification, but they do charge incredibly 'cheap' fees".

Most IFAs today will have at least the basic certificate in financial planning, although even this is very out of date. You are now legally required to have, as a minimum, a diploma.

For more complex or high-risk areas, it is better to trust someone who has had years of technical training and experience in financial planning and advice in specific areas.

e.g. just in terms of choosing a pension provider as an example, it will be hard to truly know the relative merits of pension products, just by doing a bit of your own research. You certainly wont be able to negotiate institutional terms that often more than make up for advice fees, on your own.

Here are some Frequently Asked Questions:

Debt Management

What’s the best way to pay off debt? Two popular methods are the debt snowball (paying off smallest debts first) and the debt avalanche (paying off highest interest debts first)

How can I improve my credit score? Pay your bills on time, reduce your debt, and avoid opening too many new credit accounts at once.

Investing

How should I start investing? Begin with understanding your risk tolerance and financial goals. Consider starting with low-cost index funds or ETFs (Electronically Traded Funds).

What’s the difference between stocks and bonds? Stocks represent ownership in a company and can offer high returns but come with higher risk. Bonds are loans to a company or government and are generally safer but offer lower returns.

Retirement Planning

How much do I need to save for retirement? This depends on your desired retirement lifestyle, but a common rule of thumb is to aim for 70-80% of your pre-retirement income.

What are the best retirement accounts? In the UK, consider options like a personal pension, workplace pension, or an ISA (Individual Savings Account)

Insurance

Do I need life insurance? If you have dependents or significant debts, life insurance can provide financial security for your loved ones.

What types of insurance should I have? Essential types include health insurance, home insurance, and car insurance. Depending on your situation, you might also consider life and disability insurance.

Emergency Fund Allocation

How much should I have in my emergency fund? Aim for 4-7 months’ worth of living expenses, but some experts now recommend 6-15 months.

These questions cover a broad range of finance topics and can help you build solid financial foundations.