Getting Best value Investment Advice

If you are a first-time investor, and you need guidance about building your investment portfolio, it makes sense to look for investment advice.

Obviously, people who provide investment advice do charge a fee.  You may be tempted to avoid paying the fee and make your own decisions.   This isn’t usually a good idea.  However, if you are going to pay for investment advice, you want to be sure you’re getting value for money.

So what can you expect to receive as part of best-value investment advice?

1. Setting goals.  There is very little value in looking for investment advice in a vacuum.  A good adviser will initially spend time assessing your general financial situation, and finding out your goals and aspirations.  You may not actually have thought about setting goals, in which case the adviser may help you to think through what you are looking for – e.g. where do you want to be financially in 10, or 20 years’ time, or in retirement?  More specifically the adviser will look at whether you are interested in investing for capital growth, income, or both.

2. Attitude to risk.  Investors often tell financial advisers that they would like high-returning products, without fully understanding that the higher the return, the higher the risk.  Of course, all investment carries some risk but some products are much more risky than others, and these are usually the ones with the highest potential return.  The adviser should assess whether you are “a bit of a gambler” and enjoy the excitement of risk and reward, or if you are risk-averse and cautious. 

3. Asset classes.  Most investment portfolios are spread across a mix of four asset classes:  cash; fixed interest securities; property; and equities.  Many advisers believe that the way your portfolio is shared among these asset classes is a major determinant of the performance of your investments.  The risk levels of the asset classes vary considerably, so the way your funds are allocated will depend to some extent on your attitude to risk.

4. Choosing your funds.  Good investment advisers maintain constant research into performance of funds.  They also use sophisticated software to arrive at the best possible forecasts of future performance of products, based on current performance and trends.  The adviser should recommend the most suitable products for you in each asset class, based on their performance and on your own profile.

5. Review.  Investment advice should never be a one-off affair.  You should expect to have an ongoing relationship with your adviser, as investment products certainly don’t remain static.  The optimum frequency for a review is probably once a year.  More often than that may not be the best idea – it can be easy to panic if one of your funds is not doing well in the short term, but after a year it’s easier to see the underlying trend.  The review can also look at the asset spread and rebalance your portfolio across the asset classes if necessary.

When you are looking for investment advice, you should visit more than one adviser and discuss all these issues in your free introductory interview.  Don’t feel under any obligation to use the first adviser you go to.  You should have several discussions and you will soon get the feel of who will offer the best-value investment advice for your money.