Do I really need a financial adviser?

Do I really need a financial adviser?

This is a question asked by many as often it’s difficult to see the value of financial advice, until you’ve experienced this for yourself. 

There’s no doubt in my mind that working with a financial adviser can offer a number of benefits, and there are a number of reasons I can think of where it’s worth considering working with a financial adviser, including:

  1. We don’t always know what we don’t know.
  2.  We are tempted to follow the crowd.
  3. Individual investors historically underperform the indexes and benchmarks because they react emotionally to market events.
  4. It is time-consuming and stressful to manage money on a day-to-day and week to week basis

  1. We don’t always know what we don’t know.

If the Covid-19 pandemic is anything to go by, it goes without saying that some things simply cannot be predicted, by anyone.

To a degree, the same could be said about managing your money due to external factors such as inflation and the stock markets.  However, by working with a financial adviser, they will be able to help you put a plan in place for your money, and work through scenarios that could help insafeguarding your investments to give you that extra layer of protection when you need it most. This is especially true when you are approaching a retirement phase and preservation of assets becomes the main driver.

2. We are tempted to follow the crowd

Financial bubbles often occur in the market because everyone is doing the same thing.

A common thread through these bubbles is greed. The dot-com bubble happened because everyone expected the run to never end.

The housing bubble happened because people were cajoled into thinking their homes could only go up in value.

In both cases the reality check came with a thud.

Where are the masses rushing to next? Cryptocurrencies? Cannabis oils? Take a guess.

One thing you can be sure of is that human nature will not change, people will follow other people, and the majority will get burned. It’s good to seek some contrarian advice now and then.

We are emotionally driven creatures, and behavioural finance demonstrates that these emotions can lead us into poor financial decisions.

3. Individual investors historically underperform the indexes and benchmarks because they react emotionally to market events.

Dalbar has been reporting on this for 25 years and their findings almost always indicate that while individual investors may beat the market in the short run they almost always end up underperforming them in the long run.

The self-directed, do it yourself approaches may be motivated with good intentions, but most of us have neither the expertise nor the time to  successfully manage such a proposition.

Vanguard reports[1] that individuals who use a trusted financial adviser, on average see 3% more returns compared to those who manage their investments alone.

The point is to have as much money as possible available for you to do with what you want. We can be our own worst enemy when it comes to reaching this point.

Consider your ability, availability, and attention span, do you want what is best for you in the long run, and make sure you get help where you need it.

4. It is time-consuming and stressful to manage money on a day-to-day and week to week basis

I see many people who I call ‘hobbyists’.

With the extensive dedication of time to the constant flow of market news, stock and fund prices, following the latest breathless headlines on TV. I rarely see a hobbyist who is not fairly highly strung and experiencing manic periods of financial stress.

There will always be stress around financial decision-making, but you need to choose between the stress of finding the right advice and the stress of advising yourself on a day-to-day basis.

Don’t be saddled with the distractions and anxieties of managing such a plan on your own.

A phenomena I have witnessed with retirees is that the more your portfolio grows, the more you may feel the need to get some help making the right financial decisions.

Some people seem quite content to remain alone as they build up their nest egg, but that mindset is subject to change once the realisation hits that they have reached the stage in life that you don’t have another lifetime to save up for what they now rely on for sustenance.

Ask yourself these two questions;

  1. Do I know everything I need to know about asset allocation, asset protection, tax reduction strategies, risk management, and estate management?
  2. Do I want to invest the time and effort to learn these issues? Do I want to continue to invest the time it takes to keep up with the markets and remain competent as an investment manager?

If you answered yes to these questions and have the time and interest in devoting yourself to building and protecting your assets then you can go it alone.

One caveat, don’t assume you can possibly know all there is to know!

If you are determined to go it alone, at the very least you should arrange a consultation to get some direction from a professional money manager who knows the way round the brambles of managing risk, tax consequences and more.


The Financial Conduct Authority does not regulate taxation and trust advice

The value of your investments can go down as well as up and you may not get back the full amount invested

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