By Nick Birtle, financial planning consultant
Many people might speculate about the value of independent financial advice, and while the advice everyone receives will be different and dependent on their individual circumstances, it will always be one thing – in their very best interest.
Why did I become an independent financial adviser?
I became an independent financial adviser because I wanted to help local people and businesses thrive.
After graduating from Imperial College London with a degree in geophysics, I decided to take a different path into the world of finance. I initially qualified as a charted accountant (ACA) with a Big Four firm in Manchester. It was fast-paced, exciting and a very good experience.
We sold large companies, helped business owners face strategic challenges and produced sophisticated financial models.
Being able to help businesses operate more efficiently alongside helping owners develop an exit plan is great, but I couldn’t offer the next stage of help in the form of pension and investment advice.
I am very proud to be Cumbrian, and even though working in the City was enjoyable, I knew I had to follow my true calling. That’s why I chose to qualify as an independent financial adviser and now work for Armstrong Watson in the Penrith office.
Independent or restricted adviser?
There are two types of financial advisers; independent and restricted. An IFA can select the best option for you across the whole of market, without bias or prejudice.
They are not limited to the number of products they can recommend or ones that are provided by the firm themselves or related parties. Restricted advice is where the definition of independent advice is not achieved.
Being a chartered accountant, I could only ever work in a role where I knew the client’s needs were being prioritised. Unfortunately, that is not always the case across our industry.
If you are speaking to an adviser, the first question on your lips should be: Are you independent?
Why use a financial adviser?
Vanguard Asset Management estimates the value of using a financial adviser to be approximately three per cent of additional gains per year, far outweighing the standard ongoing review charge of 0.75 per cent.
Similarly, research by the International Longevity Centre, supported by Royal London, put this in monetary terms and concluded that those who work with an adviser become approximately £47,000 better off over a 10-year period compared with those who do not.
Interestingly, the research also claims the beneficial impact was greater for those ‘just getting by’ (24 per cent boost to pension value) than for higher earners (11 pe cent boost to pension value).
In my opinion, the main reasons driving the upside of working with a financial adviser are twofold – tax planning and psychology.
How financial advisers help with tax planning
Maximising allowances, choosing appropriate tax wrappers and knowing which schemes are available to clients can have a substantial impact on their wealth over time.
However, knowing what path to take and being able to execute that plan during times of volatility are not one in the same. JP Morgan calculated that the average annual return of equity markets between 2001-2020 was approximately eight per cent, whereas the average investor made just 2.9 per cent per year.
This can be explained by the poor tendencies of human nature. We buy assets when prices are surging and our friends are telling us to invest, and sell at the worst time possible when people get fearful. Working with a financial adviser provides the education and confidence required to avoid falling into this trap.
Psychological benefits of financial advice
The benefits of independent financial advice reach beyond your finances. Studies have also shown a general improvement in clients’ financial literacy, self-confidence, peace of mind and security whilst working with an adviser.
Financial advisers have extensive knowledge and expertise in financial planning, investment management and tax planning. We can help you achieve your financial goals whilst taking into account your risk tolerance.
If you would like advice and support with your financial planning please get in touch. Call me on 01768222080 or email nick.birtle@armstrongwatson.co.uk
