The real value of a financial adviser is not just to prescribe a course of treatment when you need it, but to help keep you well at every stage of your life.
How do you quantify the value of working with a financial adviser? It would be tempting to think it’s a simple balance of the fees you pay against the performance of the investments you make. But that’s only one aspect of our relationship with you. Ultimately, many people engage a financial adviser because it’s an important part of their financial well-being.
What is financial wellbeing?
According to the Government-backed Money and Pensions Service (MaPS), financial wellbeing is about feeling secure and in control. It’s about making the most of your money from day to day, dealing with the unexpected, and being on track for a healthy financial future. In short, it means being financially resilient, confident and empowered1
People who experience financial wellbeing are less stressed about money. This, in turn, has positive effects on their overall mental and physical health, and on their relationships.
How financial advice can help you feel resilient, confident and empowered
The diagram below explains how our service supports these objectives. Most people first approach a financial adviser with a specific need: maybe you’ve come into some money you’d like to invest, or you want to consolidate your pensions. And of course we can help with that. But the real value is in using those early conversations as a springboard to map out what financial wellbeing looks like for you and how you can achieve it – both in the short- and long-term. Then we target specific areas of your overall financial picture, using our technical, behavioural and product knowledge to turn plans into action. Like this:
Budgeting, Cashflow and Debt Management
These are the most critical components of financial wellbeing. Budgeting ensures efficient allocation of income, cashflow management manages sustainability and debt management* tackles existing obligations. A financial adviser provides personalised guidance, helping you achieve these goals effectively, with minimum risk and maximum stability.
Risk management
Getting the right ‘mix’ of investments is the most important investment decision. How much should you invest in equities, bonds, cash and the like? If you are too cautious, you won’t get the growth you’re looking for. If you’re too bullish, the stress may prove too much. Your financial adviser can help clarify your investment objectives and pinpoint a mix of investments for support them, always balancing risks with returns.
Every so often, your portfolio will need fine tuning – or ‘rebalancing’. This involves selling some of the investments and using the money to top up the others. Left to our own devices, it’s easy to get emotionally attached to certain investments. So, another part of the adviser’s job is to turn an objective eye to review and rebalancing, making sure your portfolio stays on track with the right mix of investments and a level of risk you’re comfortable with.
Tax planning
Looking to the future and how taxes may impact your estate and investments are key element of a financial adviser’s work. It’s not just about today but making medium- and long-term decisions to reduce probable future taxation, such as IHT and CGT, as well as maximising annual tax reliefs and allowances. Good tax planning today is essential for the best overall financial outcomes.
Product selection
Selecting the right product or ‘tax wrapper’ is just as important as selecting the right investment strategy. A financial adviser will help you work out which accounts are right for you based on your tax position. They will consider the tax rate you pay now and consider the tax implications when you come to withdraw the money.
Behavioural coaching
We’re only human and investing is fraught with emotion. When the arrow heads downwards, we panic and sell. When it heads for the sky, we’re giddy with excitement and buy, buy, buy! Such emotion-driven decisions are often costly mistakes. Your adviser is there to act as a voice of reason, provide sound, objective advice and help you stick to the plan.
Income Planning
When it’s time to take money out of your investments, the way you withdraw it can have a big impact on your overall return. Which investments should you withdraw from? How long will you need it to last? Will you need less income over time or more? By creating a well thought out withdrawal strategy, your adviser can help you access income as tax-efficient as possible, without taking on too much risk or running out of cash too soon.
Prevention not cure
As you can see, a lot of the hard work goes in at the front end, shaping objectives and creating a personalised wellbeing plan. But regular check-ups are equally important. An on-going service plan is the financial equivalent to an annual medical. It’s a thorough check to see that everything is working as it should, nip any problems in the bud and find opportunities for improvement to head off trouble in the future. As with our physical wellbeing, our financial wellbeing is an on-going commitment and prevention is always better than cure. So, the real value of a financial adviser is not just to prescribe a course of treatment when you need it, but to help keep you well at every stage of your life.
If you’d like to take steps towards financial wellbeing, please do get in touch.
By Daren Wallbank
1What is financial wellbeing? | Money and Pensions Service (maps.org.uk)
*For specific Debt management advice please contact StepChange
Tax treatment varies according to individual circumstances and is subject to change.
Tax planning is not regulated by the Financial Conduct Authority.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited. 27/03/2024
