The role of financial advisers in wealth management: Choosing the right partner

It’s not always easy to find the right expert, who you can trust will listen to your needs, provide good value in meeting those needs, and join you on your journey through life. And, in something as complicated as wealth management, it can seem doubly hard. That’s why is vital to think about what you need and where you want to go.

We all know what financial advisers and wealth managers do, don’t we?

Well, when 30% of people would get financial advice from a money website and 26% from a bank or building society^[i], perhaps it’s worth recapping.

What do financial advisers and wealth managers do?

The UK’s Citizens Advice service is often a good place to start. They define independent financial advisers as experts who, “… look at your personal circumstances and your financial plans and recommend products to help you meet your needs [giving] unbiased advice about the whole range of financial products from all the different companies available.”[ii]

You can also get financial advisers who aren’t independent – they’ll work for banks and building societies, and also insurance companies – but they’re essentially salespeople, because they’ve only got access to a limited range of products, sometimes from just their employer. In some respects, it’s a bit like walking into a Land Rover dealership. You’ll come out with a Land Rover or nothing, and you won’t have been asked about your unique circumstances.

Why financial advice is valuable

When people seek professional advice, it’s most likely triggered by receiving a lump sum of money, like an inheritance; tax and estate planning; or preparing for retirement[iii].

But what do they get?

Financial advisers help you save money. And they do it in three ways.

When they have established your specific needs, and your goals for both your money and life in general, they will propose investment, pension, savings, mortgage, and life insurance products that are very likely to have lower fees than those you may have found yourself.

The products are likely to be more effective in, say, building your wealth than those you may have chosen directly. For example, at First Wealth, we use something called evidence-based investing that incontrovertibly shows that passive investments perform better over time than active ones.

Advisers can also help you steer clear of mistakes that may cost you. Such mistakes include inappropriately risky products, poor timing or even becoming a victim of fraud.

If you google “is financial advice valuable” you find a report[iv] by an independent organisation called the International Longevity Centre – one of those reassuringly boring think tanks – that shows:

• People who take financial advice are significantly more likely to save and invest than people who don’t.
• They end up with more assets (some £13,000) and bigger pensions (by almost £28,000) than those who don’t take advice.
• They’re also likely to have a bigger pension income (on average £880 more a year), again compared to the unadvised.

How financial advice slots into wealth management

A simple way of thinking about what you get from a good quality wealth manager – and how their different services fit together – is as follows:

• Financial advice: we meet you, go through all the facts, listen to your needs, map out your goals, and create a plan that is bespoke to you.
• Wealth management: this is where you fund your plan. We help you by using some pretty powerful analytical tools to work out the optimal asset allocation for your money, and we use cashflow modelling tools to determine how much money you need to take out now and in the future. Then we review it all at least once a year.
• Financial wellbeing: This is about being and feeling financially secure. Its how you feel about your money and how confident you are that it’s on the right track. Financial wellbeing is a crucial component of happiness and positive mental and physical health.

It seems to us that many advisers stop before the financial wellbeing part of your journey. But we think it’s probably the most important component.

It means that we, as your advisers, get measures on more than just financial metrics. So, yes, we absolutely want to be sure you meet your goals – but we also judge our success on whether your money has contributed to your sense of happiness.

More specifically, we look at the clarity of your path towards your goals, the degree of control you have over the journey along that path, your likely resilience in the face of money shocks, whether you have a sufficient range of options, and how secure you feel.

In our view that’s proper advice.

Finding the right person to help

Lets take a look at the way in which you assess whether an adviser is right for you:

A client recently came to me with a complex asset allocation, and some convoluted tax arrangements. In some respects, there wasn’t a lot technically wrong with the arrangements she’d been advised to create.

But it was hard to see how they related to her life goals – and it was easy to see her sense of financial wellbeing was being depleted by their complexity.

We did some work to recap on her goals, because buying a new home was high on the list, and it wasn’t clear how the levels of complexity would help with this specific goal. We also disentangled some of the asset allocation.

She now has a three-year financial journey that ends at the front door of her future home. Of equal importance is the sense of control she feels over that journey.

She clearly found the fight financial partner here – because of our holistic focus on advice, wealth management and financial wellbeing. Others have too.

[i] https://www.fscs.org.uk/globalassets/industry-resources/research/fscs-consumer-research-attitudes-towards-financial-advice-jan-2023.pdf (Figure 6)

[ii] https://www.citizensadvice.org.uk/debt-and-money/getting-financial-advice/#:~:text=Financial%20advisers%20look%20at%20your,all%20the%20different%20companies%20available

[iii] https://www.fscs.org.uk/globalassets/industry-resources/research/fscs-consumer-research-attitudes-towards-financial-advice-jan-2023.pdf (Figure 4)

[iv] https://ilcuk.org.uk/wp-content/uploads/2018/10/ILC-UK-The-Value-of-Financial-Advice.pdf

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.