26 November 2014

Financial Advice ... But it's not as bad as some think!

My previous post bemoaned the complexity that clients are faced with when trying to understand the fees and charges presented to them by financial advisers. I concluded that there was room for improvement - especially where standard forms and letters are used without trying to fit to a particular client's situation.

But I'd have to disagree with some commentators (who ought to know better or to do proper research) who find the need to say how bad financial advisers are (money-grabbing at the expense of their clients, and deliberately obscuring key information - is the impression you get of their views).

Two examples are Investors' Chronicle and Which? who complained that financial advisers refused to disclose their fees up front and work in a "murky" world of hidden fees. My response is that they should try phoning Sainsbury's and asking how much their weekly shop is going to cost! The point is, there is nothing to disclose until the adviser and client have agreed what work is going to be done. After that the fees are there for all to see before any commitment is made.

Investors' Chronicle (no doubt with their self-interest in mind) advise* readers to invest in an index fund rather than pay an adviser! Except in specific circumstances that is likely to give a worse result, and almost certainly doesn't match an investor's willingness and ability to take financial risk.

It is always worth checking that a fee to an adviser is worth paying - either because it has a good chance of leaving you better off financially within a reasonable length of time, or because it achieves some other benefit (a mortgage to buy a property, peace of mind and security for your family with life insurance, or saving tax for your estate, for example). But I'd have to say that with so much scope for getting important things wrong, advice is generally worth it.

*unqualified journalists are allowed to give financial advice

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