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Jersey Consumer Council

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The importance of taking professional financial advice

August 30, 2017 Consumer Skills, Home life, Money Matters No Comments

 

Your financial circumstances might sometimes mean that you require professional advice to make sure that you make the correct decisions and take the correct actions.

A professional adviser will help you to prioritise your financial goals and give you an understanding of the bigger picture, taking into account other important factors such as any potential tax implications and investment risk. There are thousands of different financial products and investments available and choosing the right one for you can be difficult and at times confusing.

Do you need financial advice?

You may find it helpful to speak to a financial adviser if you are not sure what you need to do or are feeling confused about the options available to you. Financial advisers can help you with a variety of things, such as:

  • Providing an income after you stop work
  • Saving and investing your money
  • Buying and insuring your home
  • Insuring yourself and your family against illness, disability or premature death
  • Passing your assets on to the next generation tax efficiently
  • Changing personal circumstances such as starting a family, redundancy, divorce or bereavement

Once your financial adviser has recommended a plan to help you achieve your financial goals it should generally be reviewed on a regular basis to ensure it remains appropriate to your circumstances and accommodates any changes to your priorities.

What does professional financial advice cost?

Financial advisers usually charge for their services in one of (or a combination of) the following methods:

  • an hourly rate – typically averaging around £150 – £250, but can be higher for specialist advice;
  • a percentage of the money invested – this can vary depending on the size of the initial investment and will typically be 0.5% to 3%. An annual charge for reviewing an investment portfolio is likely to be 0.50%-1%;
  • a fixed project fee – typically £1,000 – £5,000 for a specific piece of research and advice work;
  • some firms may also charge clients a monthly retainer fee of between £50-£100.

Fees vary depending on the experience and qualifications of the adviser and the geographical location of the business.

Advisers are no longer paid commission, except for certain non-investment product recommendations, and they have to explain to you how much the advice will cost you. You will need to agree this and how you will pay for it before any advice is provided.

What should I be looking for when dealing with an adviser?

It is important to understand whether your adviser is regulated to provide investment and financial advice in Jersey.  A regulated advisory business needs to have in place professional indemnity insurance, which would provide their clients with an additional level of security.

A professional regulated adviser will be able to draw your attention to the potential pitfalls of what may seem a fool proof way to get a much better return on your assets. This is becoming more common place because traditional methods of generating returns on your capital such as bank deposits and low risk investments are currently providing little or low returns than in previous times.

The following list is a prompt for some of the questions you can ask your financial adviser.

  • Are you regulated to provide financial advice?
  • What is you experience?
  • What types of clients do you work with?
  • What are your qualifications?
  • Do you offer an area of expertise?
  • How much will the advice cost?
  • What information will you need from me?
  • What are the risks associated with the recommendation?

Financial planning involves revealing detailed personal financial information and can involve divulging information about your goals and ambitions, so you need to be comfortable in the company of an adviser. It is worth meeting a few to determine who you are most comfortable working with in an ongoing professional relationship.

And finally..

There are two great truths when considering investments

  1. If it looks too good to be true it generally is
  2. Don’t put your investment eggs in one basket

 


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