B
etween 2009 and the end of 2013, the number of
financial advisers in the UK fell by 15%, according to
research from theAssociation of Professional Financial
Advisers.That reduction reflects the drive to greater
professionalism in the industry by regulators through the
Retail Distribution Review, which introduced new rules on the training
and competence of advisers, and the way they are paid by clients.
Yet the need for impartial, professional financial advice has never
been greater. Mis-selling scandals, the increasing complexity of
financial products and the growing imperative for us all to save more
for our retirement means that even the most
informed of investors will be in need of expert
guidance.The government recognises this
through initiatives such as the free pensions
guidance to be offered through organisations
including CitizensAdvice andThe Pensions
Advisory Service. Guidance is a good start,
but advice will be vital, and not just to ensure
people make the right retirement decisions.
The regulatory changes have also spawned a
wave of internet services, including fund supermarkets and companies
claiming to be able to build investment portfolios based on little more
than a lifestyle questionnaire.While these services, whether from the
government or private companies,may be able to guide investors on the
options available, they cannot, and do not claim to, offer tailored advice
based on an individual’s circumstances, goals and financial position.
Adrian Batchelor, director of theAcademy – the training college
for St. James’s Place Partners – says:‘The financial world is becoming
ever more complex.We have specialists whose sole purpose is to pore
over legislative changes, over every page of the Budget, to work out the
implications for our clients and to keep our Partners up to date. I don’t
know how people without access to that kind of information are meant to
cope. It’s very difficult without that knowledge.’
Batchelor points out that in real life
people rarely have just one financial need
in isolation.‘You might start by thinking
you need to sort out your pension, but the
ensuing conversation with your adviser
could reveal that there are other gaps in your
financial planning,’ he says.
Some financial decisions, such as opening
bank accounts or sorting out home insurance,
can easily be done independently. For the
bigger issues, particularly those which require
some forward planning, good financial
advice is vital.Without advice, it can be hard
to see the big picture: to appreciate how
all the products and investments interact
and combine; to assess where the gaps and
imbalances are; and to define what needs to
be done so you can achieve your goals.
There is growing evidence of the tangible benefits that professional
advice can bring. Research conducted by insurance company Standard
Life in 2014 shows how financial advice can fill in those gaps in an
investor’s knowledge.The survey found that consumers who have
taken pension advice during their working lives have a more realistic
view of how much they need to save to produce sufficient retirement
income.As a result, they end up with pension funds twice the size of
those who did not seek advice, at an average of £74,554 compared to
£37,277 for those going it alone.
There is a detailed process that a financial adviser goes through
to ensure a client’s financial plan is correct
for the client at the outset, backed by regular
reviews to ensure that the plan remains
appropriate and is on course to achieve the
goals – something that DIY investors will
often neglect.
One action that is easily overlooked by
people doing their own financial planning is
risk assessment. Investors should be familiar
and comfortable with the concept of having
their attitude to risk assessed as it should be one of the first activities
undertaken with their financial adviser. It is, however, too easy to
forget about risk after the initial assessment and to concentrate on
performance instead. Indeed, assessing the risk and volatility of
different investment vehicles is something that an ordinary investor
would find very hard to do alone.
Also, investors should adjust their portfolios over time, for
example, as they approach retirement or as circumstances change.
Without an adviser, will the right choices be made?
A good financial adviser will want to review attitudes to risk
at regular intervals to ensure that your financial plan and
investment portfolio are still true reflections of your attitude
and aspirations.
Even when you believe you have done
everything you possibly could to anticipate
changes in your own circumstances, the
government may introduce legislation,
change rules or develop new products that
make a review of your finances essential.
There is evidence that the financial
service industry is now adapting well to the
rigours of the Retail Distribution Review,
with the number of advisers now showing
a slight increase and evidence of growing
professionalism across the industry.That
is welcome in an industry so vital for
everyone’s financial future.
IN YOUR INTEREST
THE INVESTOR
|
19
Balance sheet
Careful planning and good advice can
make those important life decisions easier to cope with
– and professional financial advice can help to fill in any
gaps in an investor’s knowledge.
It is also easy to
overlook the fact that
attitudes towards risk
change over time
PERFECT PARTNERS
Training was a core part of the Retail Distribution
Review, both for new advisers and the continuing
professional development of existing advisers.
St. James’s Place Partners are qualified to give
advice covering all aspects of their clients’
financial needs. Of those who enter through the
St. James’s Place Academy, many have opted
to retrain from a previous career, often in law,
accountancy or the City.
After graduating from their two-year
accreditation and training programme, Partners
join regional offices where they continue to be
mentored and monitored.
Partners develop strong relationships with
their clients. This means that when a Partner
makes a recommendation, they are doing so on
the basis of a deep and thorough knowledge
of that client’s situation, including family, work,
hobbies, history and plans for the future.
