What is the Value of Financial Advice?

It has never been easier to manage your own money. Online platforms and a wealth of information at the touch of a button make investments accessible for everyone.

But investments alone do not make a financial plan. A clear strategy is needed to navigate the options and help make those important decisions. Only when you can link your financial decisions to your values and important goals will the path become clear.

You might need some help getting started and keeping you on track. A good financial adviser will look at your situation holistically and ensure that your goals and objectives are at the centre of any recommendations.

Clear Goals

The first step is to understand exactly what you would like to achieve, for example:

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A comfortable retirement

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A first home or a larger property for a growing family

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The ability to help others

Most people have an idea of their desired lifestyle, but this is often vague and doesn’t correspond to the actions taken.

A tangible goal includes target dates and amounts. It is ideal to write it down. You can change your goals as often as you like and add more as you progress. The important thing is to have something real to aim for. Otherwise, how will you know if things are going to plan?

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Addressing Risks

Once you have your goals laid out, you may be ready to start working towards them. But slow down, as it’s also important to think about everything that could unravel your plan before you really start. No one likes to think about the worst happening, but taking the time to address potential disasters now can save a great deal of hardship and stress later on.

A financial adviser can help you quantify the risks and implement a strategy for dealing with them, for example:

It’s worth dealing with these risks early on in the planning process, as this frees up time and resources later to deal with the more exciting aspects.

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An emergency fund ensures you can cover unexpected bills or short periods out of work without going into debt or dipping into investments. Ideally, this should cover at least 3-6 months’ regular expenditure.

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Income protection and critical illness cover can make life easier if you are unable to work due to illness or disability.

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A Power of Attorney ensures that you have someone you trust ready to make important financial and welfare decisions if you become incapacitated.

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Life cover can pay out a lump sum to your loved ones in the event of your death.

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Writing your Will means that your estate can be distributed according to your wishes if you die.

It’s worth dealing with these risks early on in the planning process, as this frees up time and resources later to deal with the more exciting aspects.

Realistic Assumptions

Now that your goals are clear and risks are mitigated as far as possible, it’s time to start planning.

We cannot predict the future, but we can make some educated guesses to create your cashflow plan. This involves plugging in a series of numbers, some of which are known, for example:

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Income

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Expenditure

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Assets

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Liabilities

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Your age

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Your goals

Other numbers are not yet known, so we need to make assumptions, for example:

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Life expectancy

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Inflation

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Investment returns

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How your income and expenditure will change over your lifetime

It’s best to make conservative assumptions, so if you think you will live until age 85, you should extend your cashflow plan to age 100. If you think you will achieve investment returns of 7%, assume 5%. This means that you are more likely to achieve and even exceed your goals.

A Sensible Investment Plan

While assumptions are useful for planning purposes, your investments are unlikely to achieve the same return every year. Sometimes, they might even lose money.

But investing to achieve your goals can make your decisions much easier. Rather than chasing high returns and following stock tips, you can follow a tried and tested long-term strategy.

A financial adviser can help you create an investment plan which:

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Holds a wide range of assets so that your portfolio is diversified.

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Is aligned with your goals and your ability to take risks.

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Aims to invest for the long-term.

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Is evidence-based and does not attempt to time the market.

This helps to filter out the noise and combat investor biases, to give you the best chance of investing successfully.

Making the Most of Tax Allowances

The main purpose of financial planning is not to save tax. However, there are number of tax allowances and exemptions that can save you money and help to progress your financial plan.

For example:

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Investing tax-free by using your ISA allowance (currently £20,000) every year.

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Using your capital gains exemption (£3,000 for 2024/2025) to avoid investment gains building up and becoming taxable later.

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Structuring your income and assets to maximise the personal allowance, savings allowance, and dividend allowance.

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Undertaking joint planning so that spouses make the most efficient use of these allowances.

A financial adviser will help you to make the most of these advantages in the context of your wider plan.

Value for Money

As well as selecting the most suitable investments and tax wrappers, a financial adviser will also consider the companies you hold your money with.

If you have existing investments, this will involve a thorough review of the features, fund choice and charges.

Sometimes you can save money, simplify your situation, or improve flexibility by moving some of your investments, or consolidating them on one platform.

An adviser will look at all of the options and recommend the most suitable provider for your investments.

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A Strategy for Income

Eventually, you will want to take money out of your investments, whether this is to fund your retirement or achieve one of your other goals.

It is arguably more important than ever to take financial advice at this point in your life.

The benefits of this are:

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The withdrawals can be taken from the most efficient assets first. For example, it is usually better to run down cash (leaving an emergency reserve) before you touch your pension.

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Funds can be sold in plenty of time, avoiding the need to encash assets during a market downturn.Make the most of tax relief, particularly if you are a higher earner.

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You can take withdrawals from multiple sources to make the most of tax allowances.

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You can avoid triggering unexpected tax liabilities.

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Withdrawals can be planned at a sustainable level, to reduce the chances of running out of money.

Leaving a Legacy

Once your own goals are fully funded, you may want to think about what you would like to leave behind for your loved ones.

This must be carefully balanced with maintaining your own lifestyle (including any care costs if required) and avoiding unnecessary tax.

A financial adviser will consider:

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Lifetime gifts (regular and ad hoc)

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Gifts into Trust

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How your Will interacts with your financial plan

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Any charitable aspirations you may have

A strong estate plan ensures that more of your money goes to your intended recipients in line with your wishes.

Staying On Track

As time goes on, things change. Your circumstances will evolve and reality will diverge from the assumptions originally made.

This is why regular reviews are so important. A financial plan is not a single product that you can use as a roadmap for the rest of your life. It is a living entity that needs regular attention, otherwise in five or ten years’ time, it will no longer be relevant.

An ongoing relationship with a financial adviser offers the following benefits:

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Your plan can be adapted as your circumstances change.

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Tax rules and legislation can be taken into account.

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Assumptions can be re-set and adjusted.

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If your plan drifts off-track, catching this early usually means that only small tweaks are needed to correct your course.

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You have someone with whom you can discuss important decisions.

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It can keep you accountable and help maintain good financial habits

Even confident investors with a good understanding of tax can benefit from financial advice, as this can add structure, discipline, and objectivity to your strategy. This means you can focus on the things that are more important to you.

Please don’t hesitate to contact a member of the team to find out more about financial planning.

Speak to a member of our team on 020 7388 7000

Please don’t hesitate to contact a member of the team to find out more about financial planning.