Let’s assume for a moment that you’re in the happy position of having £100,000 to invest. What would you do? Play absolutely safe and put the money on deposit? Or go all out for capital growth and put your windfall into a fund that could give you a sky-high return – but that carries an equally high degree of risk?
The answer for the great majority of people is ‘somewhere in the middle.’ But just whereabouts in the middle depends on your attitude to risk – a combination of factors including your age, employment status, income, family circumstances and bluntly, your basic human nature. Some people are inherently cautious; some are more adventurous.
So why not just go ahead and invest the windfall yourself? Why bother with independent financial advice?
There are probably five good reasons why it makes sense to consult a Financial Planner – and to work with him or her over the long term.
1. Firstly, your Financial Planner is an expert. This means that he not only knows all the various investment products that are available to you, he knows the markets as well. He’ll have an appreciation for which stock markets are doing well, which are doing badly and he’ll be kept regularly up to date on this by all the investment companies that he deals with.
2. He’s experienced. World stock markets are just emerging from a very difficult couple of years – for many Financial Planners, this will be the second, third or fourth “very difficult” period that they’ve seen. Always remember that ‘markets can fall as well as rise’ means exactly what it says – no investment graph has ever risen in a continuous straight line – so it helps to be working with someone who has long term experience.
3. A competent Financial Planner understands how to diversify an investment portfolio to minimise risk – or as your grandmother might have said, he’ll make sure you don’t have ‘all your eggs in one basket.’ Many of our clients have seen significant gains over the past few years by investing in the emerging economies of Latin America, Eastern Europe and the Far East. But for all but the most adventurous, investments in countries like these need to be balanced by other, more cautious investments. By combining investments in this way, your Financial Planner will be able to make sure that your portfolio exactly matches your attitude to risk – and gives you the best possible chance of capital growth.
4. None of us like paying tax, and a Financial Planner should ensure that your investment portfolio is arranged as tax efficiently as possible. Whether your portfolio is designed to give you income or capital growth, he’ll make use of all your tax allowances and do his best to ensure that you pay as little tax as possible – whether it is on income that you are receiving, or on an eventual capital gain.
5. Finally, your Financial Planner will keep in touch with you. Every investment portfolio needs reviewing on a regular basis, both to check the performance of the portfolio and to make sure that it is still meeting the original aims of the investor. A Financial Planner will make sure that you receive regular updates and valuations, and will always be available to answer your questions. Investing money is a medium to long term consideration: your Financial Planner will work with you consistently to make sure that your investment runs as smoothly as possible and that you receive the best possible returns.
We are always here to answer your questions about investments – whether it is an existing investment portfolio or whether it’s something you’re planning for the future. If you’d like to learn more about our approach to investing please feel free to click here.