The true benefits of paying for financial advice

In the world of financial planning, it’s common for clients to ask: “When I pay you a fee to advise me, what am I getting in return?”

Well, to begin with, financial planning is about much more than simply generating returns from an ISA, investment portfolio or retirement pot. While financial performance is obviously important, you should see the fee you pay your financial planner as an investment in your overall financial wellbeing.

A financial planner is a highly-qualified professional – much like a lawyer or accountant. Their expertise allows them to take a long-term view of your finances and set that within the context of your life today, and the one you hope for in the future. They will seek to understand your personal views and preferences (including how much risk you want, and can afford, to take when investing). They’re there to ensure you’re making the most of your money, advise on ways to protect your family if things were to go wrong, and develop a plan that enables you to achieve your longer-term goals.

In some cases, financial planning will involve a straightforward transaction, like topping up your ISA to make use of your annual allowance. But a robust financial plan will involve a long-term relationship with your financial planner. They want to help you stay on track and will offer you regular ‘health checks’ to ensure your financial plan is adjusted as your priorities change, and future goals shift. That way, you can be confident of achieving your goals at any stage in life – be it early retirement, buying a second home, travelling the world, or giving the kids a leg-up on the property ladder. That’s where the value lies.

That said, when looking purely at financial returns, evidence suggests financial advice can have a significant impact. A report from the International Longevity Centre (ILC) compared the financial position of people who took financial advice with those that didn’t. Even the less wealthy savers who took advice found themselves an average of £50,000 better off after ten years, compared to those who didn’t.

Investing in your financial plan gives you peace of mind that your finances are being actively managed, giving you more security and a potentially higher return on your investments. Although, as we know, investments and the income from them can go down as well as up and you may not get back what you put in.

Setting aside the obvious tangible benefits of working with a professional adviser, like developing a tailored investment or retirement strategy to optimise your returns, there are many intangible benefits of working with a financial planner too. These are often overlooked, but can be equally important.

Having a financial planner by your side while you make financial decisions that could significantly impact you and your family’s future can help you avoid making rash or emotionally-led decisions.

Emotion is not an investor’s friend. Every minute of the day, we are bombarded with information about the markets, money and the future, creating anxiety, especially for people approaching retirement.

One of the biggest mistakes people make with their finances is selling investments at the wrong time, or moving all of their money into one specific sector because it seems the ‘hot place’ to be.

A good financial planner will help protect you from yourself and provide clarity amongst all the confusion. If you’re the type of person who occasionally makes decisions based on your emotions, the checks and balances a professional can offer will prove invaluable to your future security.

A financial planner will work with you to build a plan that considers factors you might not have thought about.

For example, your focus might be on what investments to add to your portfolio, which is undoubtedly an important piece of the puzzle. But what about tax planning? Or developing a spending plan to combat inflation during your retirement? What does your plan include for dealing with medical expenses or care in later life?

A financial planner will pull all these pieces together to ensure your overall plan is weighted correctly.

New laws and regulations are passed every year that can impact your plan, plus your goals and priorities will no doubt shift over time. A good financial planner will ensure your plan stays updated and you stay on track to achieve everything you want.

Investing and planning your financial wellbeing for the rest of your life is tricky. There are many risks that could potentially damage your financial security. The market crash of 2007 was a disaster for many people, especially those on the brink of retirement. And once again, we are seeing a dramatic reduction in people’s investments as a result of a global pandemic and the war in Ukraine. None of which the average, or even professional, investor could have predicted.

A financial planner can’t predict the future, but what they can do is build a plan that helps to mitigate the effects of volatile markets and global events. They sit on the same side of the table as you. They know about your family, your job, your hopes and dreams, as well as the anxieties keeping you awake at night. And they are proactively working to bring your goals to fruition, no matter what the world throws at you.

For the same reason people hire personal trainers or business coaches, many people value having a financial expert on hand who’s focused on helping them achieve their objectives.
Paying for financial advice is a fee – but it’s more than that; it’s an investment in your future.

If you’re confused about finding a financial planner who’s right for you, you may be interested in our guide to finding a financial planner you can trust.