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.

Why Use An ISA Discount Broker?

Everyone can have an Individual Savings Account (ISA).  It’s a tax-efficient savings scheme that allows you to save up to £7,200 each tax year without declaring it for tax.  It’s not an investment in itself – it’s a tax-free wrapper in which you can put different kinds of savings.  You can use all of your £7,200 allowance for shares, unit trusts and investment trusts – this is known as a Shares ISA.

If you are interested in a shares ISA you may be looking at various types of fund to start you off.  Perhaps you feel that unit trusts are a less risky investment method, or you may be interested in a particular fund because someone you know has found it a good investment.  What you may not realise is that you can save money on your ISA investment by going through an ISA discount broker and gaining ISA discounts, rather than buying your fund directly from the fund provider.

In fact, there are quite a number of advantages in using an ISA discount broker. 

• When you buy directly from the fund provider, you will usually pay an initial charge of around 5% of the value of the fund, sometimes up to 5.25% or more.  The ISA discount broker will remit most of this fee – sometimes all of it – which of course means you get a much better return on your fund.  Discount brokers can do this because like Independent Financial Advisers (IFAs) they receive commission on the sale, but unlike IFAs they don’t offer advice, so their costs are much less and they can afford to pass on the commission to you.

• You get much more choice.  When you buy direct from a fund manager, you can usually only put funds from that manager into your ISA.  An ISA discount broker will usually allow you to pick and choose from the fund supermarkets. (A fund supermarket is a web site where you can go to pick from a large selection of popular investment funds.)  You can choose from several funds and put them into your ISA, usually at no extra cost, and this provides a much better spread of risk.

• You can switch funds much more easily.  If you buy the funds in your shares ISA direct from the fund manager, switching can be awkward and can take several days because you have to wait for the money.  With an ISA discount broker, because you are using a fund supermarket you can do it at the click of a button.  Plus of course it’s much cheaper, since with the direct method you would have to pay the full charges on your new fund.

• A good ISA discount broker will provide research information and regular bulletins about fund performance.

With all these advantages, it’s surprising that large numbers of people still go direct to fund managers to buy the funds to put in their ISAs.  Of course, if you really don’t feel confident about choosing funds from a fund supermarket, you probably would be better using an Independent Financial Adviser.  But with the help provided by a good ISA discount broker, plus the ease of switching, you could give it a try – you could learn a lot, develop in confidence, and soon become a seasoned investor!

Discount Broker - Is It Right For You?

If you are a newcomer to investing, you may wonder how you can be sure of getting the best return on your money.  Even if you’ve been investing for some time, you may still feel dissatisfied with the returns you are receiving.  Either way, a useful solution could be to use a discount broker.

A discount broker is a specialist investment company that sells funds and rebates most or all of the charges to the investor.  This means, for instance that you don’t pay the up-front charge – usually about 5% - that you would pay if you purchased directly from the fund provider. 

A discount broker is an “execution only” service.  That is, you don’t receive advice about the best investment – the broker just carries out the transaction.  The broker’s income comes from the ongoing trail commission paid on the annual management fee.

So what are the advantages of using a discount broker?

• Purchasing through a discount broker can save you a considerable amount of money and you can you save on the initial charges for purchasing the fund,
• The advantages are most evident to those using long-term investments.  The saving on the initial charge added to the yearly reduction may look like a small amount individually, but cumulatively can have a major impact on your long-term returns.
• Thanks to discount brokers, investing becomes accessible to small investors.  Using this method, many more people can afford to invest in the market.

However, there are also some disadvantages, so using a discount broker may not be right for everybody.

• A discount broker is a “no frills” service.  You don’t get advice so it may not be suitable for you if you are an inexperienced investor.  Some brokers do provide free guides with analyses of leading funds and recommendations, but of course these aren’t tailored to your personal circumstances.

• Because you make the decision yourself, you are on your own if the fund doesn’t perform well.  You have no recourse for complaint or compensation.

• Orders for purchase can be taken by call-centre staff.  So it can seem quite impersonal compared with using a normal broker.

If you are at all doubtful about your ability to pick the right investment fund, you would be much better advised to use an investment adviser or IFA.  If you make a mistake when picking your fund, it could more than wipe out any savings you might make by using the discount broker service.  But when you have built up experience and a “nose” for investment, you could find that using a discount broker could make a big difference to your investment returns.

Financial Investment Advice - Find the Type That Meets Your Needs

If you need advice on any aspect of your finances, you should look for an independent financial adviser.  However, some advisers provide advice across the whole range of financial matters while others specialise in a particular area such as mortgages, investments, insurance or pensions.  So if it is financial investment advice you need, you should check that the adviser does provide this type of advice.  And if he/she actually specialises in financial investment advice, so much the better.

However, investment itself is a very broad field, and some providers of financial investment advice will specialise in a specific area.  So depending on what you need advice on, it’s a good idea to check that the adviser has some expertise in that particular area.

• If you have money to invest, either as a lump sum or by putting aside a regular amount, there are two main ways you can do it.  You can buy shares in one or more companies, or you can put your money into a pooled or collective investment vehicle such as a unit trust.  This has some advantages over shares in that its performance doesn’t just depend on the fortunes of one company, so the risk is spread.  You really should take financial investment advice to help you decide which product is best for your requirements.

• One very specialised type of investment product is pensions.  You would normally look for financial investment advice if you were considering buying into a personal pension plan.  However it’s also a good idea to seek advice if you are thinking of joining or leaving a company pension scheme.  If you need pension advice, you should ensure the adviser you talk to is qualified at least to AFPC (Advanced Financial Planning Certificate) level (now known as Advanced Diploma in Financial Planning) with the G60 Certificate in Pensions or AF3 Pension Planning (or the equivalent) as a specialisation.

• Another type of product for which you might need financial investment advice is a Self Invested Personal Pension Plan or SIPP. These are based on the rules of a personal pension plan but have wide powers of investment so you could invest in commercial property. You may have no idea what to choose so, again, you will more than likely need financial investment advice. 

Financial investment advice isn’t necessarily just a general product – it can be very specialised into different types of investment.  You shouldn’t automatically assume that the investment adviser will be equally expert in each type of investment. Don’t hesitate to ask an adviser about his/her qualifications and specialisms, as well as length of practice and degree of experience.  A good adviser will be very happy to provide this information before you commit yourself.

Investment Advice In Kent – Why Do You Need It?

What do you want your money to do for you?

Like many people in Kent, you may be feeling that in these difficult times, you want your money to work as hard as possible for you, rather than gathering dust in a savings or deposit account.  You may have chosen a deposit account because it was safe – but if you want a decent return, you really need to think about investment.

But how do you know what investment to choose?  It can be a daunting prospect with the vast numbers of products to choose from.  Not only this, but once you’ve invested, you need to keep an eye on your investments, and this can be extremely time consuming.  If you’re considering getting into the investment game, you will almost certainly decide it makes sense to look for good investment advice in Kent.

But why is it important to take investment advice in Kent, rather than choosing your investments yourself?  There are actually quite a few reasons.

• It’s a fact of investing, that the higher the return, the higher the risk.  If you do make the decision to move from your savings nest-egg to investment in shares, equity or bond markets, it will be because you are interested in a higher return.  But of course with a deposit account, although interest rates may fluctuate, you can be sure your capital will remain intact, whereas with shares and other types of investment there’s a possibility of losing most or all of your money.   If you take investment advice, the adviser will start by assessing your attitude to risk, so that you won’t be taking more risk than you feel comfortable with, and will clarify what level of risk each potential investment involves.

• If you are planning to invest directly in shares, you will probably go through a stockbroker. However, you are more likely to be looking at one of the different types of collective investment vehicles such as unit trusts or OEICs.  An IFA who specialises in investment advice is the best person to advise you which of these is the best one to choose.

• Many fund providers now make it possible to invest directly via their web sites. They make it look very easy and of course it’s accompanied by seductive advertising to convince you that theirs is the best product.  However, they are not likely to tell you about any snags or risks involved in their product.  What’s more, it may not be obvious that the very attractive rate they are offering is actually just an introductory rate.  It wouldn’t be a good idea to invest directly in one of these without obtaining investment advice first.

• You may be one of the increasing number of people who are looking at the attractions of offshore investing.  This offers tax advantages, plus there is a lot less regulation involved which means a much wider range of products available for funds to invest in.  But there are also extra risks, including the unpredictability of exchange rate fluctuations, and plenty of other traps and pitfalls for the unwary.  It’s really important to take specialist investment advice if you are considering going down this road.

• More people nowadays are looking for personal pensions, as there are fewer good company pensions available.  If you are one of these people, you will have found that the variety of pension products to choose from is very confusing.  Making the wrong choice can affect your whole life, so it’s important to take investment advice.  

Investment advice in Kent can make all the difference to the degree to which you can profit – or lose – from your investments.  Trying to go it alone really doesn’t make sense, especially if you’re just starting out.  There are people with skills and knowledge to put at your disposal, so use them from the start before you come to grief.

Investment Advice - Make Sure You Find The Best

Investment advice can be crucial if you are faced with a major investment decision, or if you’re not certain what your next step should be.  For instance, you may have acquired a lump sum which you want to invest; you may need to choose a personal pension; or you may be interested in a pension, life insurance or life assurance product.

With any of these issues, making the wrong decision could be disastrous.  So you need to get the best investment advice – but how can you know for certain that what you are getting IS the best advice?

There are certain things you can look out for that can reassure you that you are getting good investment advice.  For instance:

• Does the investment adviser start by making sure you are clear about your own wishes and your reasons for seeking advice?  The adviser should clarify whether you are looking for long-term investment planning, or seeking help over a single investment.  He/she will also ascertain whether you are interested in speedy returns, or whether you are content to wait for good returns over the long term.  Many people start looking for investment advice without being at all clear what they want, so the first step should be to make sure you know what your requirements are.

• Does the adviser analyse carefully your attitude to risk and how you cope with loss?  You yourself may believe that you want investments with high returns, but you may not have realised fully that the higher the returns, the higher the risk.  A good adviser will ask a range of questions to determine how risk-averse you are.

• Do you get the impression that the adviser has gained a good insight into what sort of person you are, and has the ability to sum you up accurately?  What is good advice for one person isn’t necessarily right for another.  The adviser should be able to tailor his/her investment advice to your specific situation and needs.

• Can the adviser think out of the box when looking for investment products?  It will benefit you if the adviser is able to source overlooked products that are not the same old products that everyone else is investing in.

• Is the adviser able to explain the products, and the advantages and disadvantages of each, in clear, non-technical language?  It is usually true that the better someone is at doing this, the better his or her own understanding of the issues. 

Of course nobody is perfect, but the more of these questions you can answer “yes” to, the more confident you can be that you will be getting the best investment advice.  You should also of course do all you can to find out about the adviser’s track record – both in recommending the right products, and in keeping the funds under constant review in case of changes to the market.  There is plenty of excellent investment advice out there – it’s worth doing your homework to make sure you find the best.

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