The Value of Advice

Putting a price on Financial Advice can be a tricky thing to do accurately and Advice Firms are not always good at articulating the value of their services. In this article I’m going to attempt to outline our take on the benefits of Financial Advice.

There have been a number of studies (see appendix below) on the subject of “Valuing Financial Advice” and interestingly the conclusions they make are very similar, demonstrating that an ongoing relationship with a Financial Advisor adds between 1.59% – 3% p.a.  to returns over the medium to longer term.

Based on a £100,000 invested the excess returns over 10, 15 and 20 years could look like this:

We do many of the things that are highlighted in these studies but at Fathom we believe that we go a little bit further. So how do we at Fathom believe that we add value to our clients:

1/ Understanding your goals and aspirations

Then ensuring that your investment strategy is aligned to meet them over the longer term.

We hear lots of chatter about returns of 10%+ in the financial services industry and although I concede that these double digit returns are achievable, they are certainly not for everyone because with the extra potential return comes additional risks. Our view; only take the investment risk you need to take to achieve your objectives over the medium to longer term.

2/ Is it the right investment and product?

Ensure that the investment and product that we recommend is fit for purpose both at outset (when we initially advise you) and ongoing.

This involves monitoring the fund manager who looks after your money to make sure that they are doing what we have asked them to do. We don’t want any surprises and any unexpected returns (either way) would give us cause for concern. If the returns are significantly higher than we would expect, we investigate! We don’t want unnecessary risk just steady (ex Covid-19) and as far as possible predictable returns.

These are just some of the questions that we ask of fund management groups we work with:

“What is the management style? How do you select managers/stocks? What is your structure? What size are your fund management teams? Who is responsible for what? What processes do you have in place to underpin the delivery of the fund or portfolio performance?”

Our discussions with fund managers follow our “keep it simple” strategy. If we don’t understand what they are investing in and how it’s supposed to work we don’t recommend that you invest with them.

3/ Keeping your costs low

Cheap is not always good but expensive is not always better either. It’s our job to speak with product providers and fund managers to get the best out of them for the lowest cost possible. We continue to review the funds and providers we use and talk to them about cost savings that can be made without compromising quality.

4/ Asset allocation and rebalancing

Making sure that any fund is invested in line with your attitude to investment risk and rebalancing the portfolio as appropriate (either with your permission or through the fund manager) to correct any portfolio imbalances that occur from different assets (usually shares/equities) outperforming the other assets within the fund and changing the general structure and risk of the portfolio.

5/ Steading your nerves

(and our own at times) – when markets are difficult as in March 2020 (or all of 2020), October-December 2018, 2008 and 2009 (Yes some of you have been with us this long!) is when we “earn our stripes”. Our experience tells us that markets overreact and can be irrational. It’s perfectly reasonable to worry when markets fall and it’s our job to let you know that things will recover and your money is safe. We do this in a number of ways, sometimes through a meeting, telephone or zoom call. Sometimes via blogs and newsletters and by monitoring your cash position to ensure that your income can continue without having to sell investments that have fallen in value to meet your day to day needs.

In the UK we’re a funny bunch. Our inclination is to buy at the top of the market and sell at the bottom. It’s our job to help prevent this happening.

6/ Tax and Estate planning

Whether it’s suggesting that you use a part of your spouse’s/civil partner’s unused personal tax allowance (up to £1,250 tax year 2020/2021) or using one of the products available to us to make an immediate reduction in the value of your taxable estate (yes this really is possible!) and helping pass your estate intact to loved ones mitigating against the dreaded Inheritance Tax or cost of care, we’re here to help. We can show you how to invest in the most tax efficient ways whilst also making sure that you understand the risks associated with any of the tax strategies available.

7/ Cashflow Modelling

This is simply modelling your expected income and expenses throughout retirement. Modelling different levels of withdrawals at different times i.e. the impact of withdrawing funds for a new car, wedding, special birthday or taking higher withdrawals in the early years of retirement and then reducing them as state pension and/or other income “kicks in”. Not an exact science but useful to see how likely you are to run out of money in retirement (or not!).

Much of the work we do is in the background, researching funds and fund managers. We’re the Straight-Talking Financial ExpertsMaking sure that they do as we have asked them to do and managing your money in-line with the benchmarks we have set them and mitigating against risk.

Our dedicated customer service and administration teams are here to meet your needs and of course our advisers (supported by our paraplanning team) are always available to talk through your personal situation.