Time is money: Can doing your research first cut your advice bill by 50%?
A majority of British adults are falling through an ‘advice gap’ by not making use of financial advisers, research from unbiased.co.uk and MetLife shows.
The reasons could be due to the cost factor (usually between £500 and £3,500 depending on individual circumstances) or because you’re intimidated in disclosing all your financial matters to a complete stranger.
But as unbiased.co.uk’s latest ‘Value of Advice’ report shows those who’ve taken advice saved £71 per month on average compared with non-advised savers. Meanwhile those who’ve taken retirement advice at the age of 25 could receive nearly 6,000% return on the initial cost of advice, it could be time to take the plunge.
For those who cite the costs as a reason why they’ve not taken financial advice, Karen Barrett, chief executive of unbiased.co.uk, says doing your research first can save you between 30% and 50% of the expected fees. This is because advisers are doing their job in advising you, rather than spending time educating you.
Speed up the process and cut your bill dramatically
Barrett says: “There’s a rule of thumb to bear in mind when hiring any professional: if you can make their job easier, the bill may end up smaller. Time is money, so the less time a financial adviser has to spend on information gathering and discussing options with you, the lower their fee may be.
She adds that before you engage an adviser, you should think about what you can do yourself. “Ensure you have all your financial information to hand – income, outgoings, savings, mortgage, pension, everything. Then do your research. If you are planning your retirement, for instance, read up on your options under pension freedoms. You don’t need to make any decisions yet, just understand the available choices. This will significantly speed up the advice process and could cut your bill dramatically.”
However she warns that even if you do have a good idea of what you want to do, it’s still best to consult a professional adviser as they can confirm your decision is right for you or point out potential problems with it, giving you added security.
“They can also source the best products for you from the whole of the market, which can generate significant savings over time. Finally, they will handle all the administrative side of things, to ensure that everything will happen as planned.”
‘An experienced adviser would welcome this approach’
Raj Shah, a director at Blue Wealth Capital Ltd, says a client coming in knowing where they require advice is great because it shows they are receptive to the idea of a third party assisting them with their financial planning.
Shah says: “An experienced adviser should/would welcome this with open arms. If they are a product centred adviser this should make their job a lot easier and as a result the charges could be lower.”
He says the common areas he would hope prospective clients research prior to an appointment are retirement and pension options, monthly expenditure and information on what products they currently hold.
But he says that while an adviser will take this into account, they’ll most likely have their own process to ensure they maintain a compliant approach.
And if a client approaches him with a product or path they’re adamant in taking after conducting their own research, Shah says all the related parties would need to sign a letter to ensure they understand exactly what’s involved.
He gives the example of a 45% income tax payer wanting to encash their pension in full, therefore suffering the highest rate of tax in doing so. Furthermore, many people gravitate to the internet to do their research and that can lead to confusion and articles with information on a vested interest basis, he adds.
‘Some homework before you start will ensure the best outcome’
Hayley North, a chartered financial planner at Rose and North, says some research and preparation is key but it’s likely to simply speed up the time to getting answers rather than save money.
“That said, we really struggle when a client doesn’t know what they want to get out of the process so the clearer you are about what you want, the more likely you are to get value from the meeting,” she says.
North warns there are risks to the research method. This is because you could get into too much technical detail which will lead to more confusion, and it could take your adviser down the wrong path to start with or take them some time to explain why certain routes or strategies aren’t suitable for you.
As an analogy, if you go to the doctor with lots of information about your symptoms and how you feel compared with how you want to feel, he can then accurately and swiftly diagnose the problem. However if you research all manner of potential illnesses before you go and bombard them with what you think you need, or are suffering from, then (unless you really know your stuff) you are likely to slow the process down and cause frustration all round.
She adds that as advisers, it is their job to ensure the advice is suitable and in the client’s best interests which might not always be what the client wants.
What should clients do before seeing a financial adviser?
North says individuals should have a clear idea on the following:
- What type of adviser you want (small and personable, large and corporate, local, national for example). She recommends talking to two-three advisers so you can get a feel for the type of approach you like.
- What you want to get out of the process such as answers to specific questions, or a certain ‘result’.
- What you have – finding old pensions and investments, checking bank account balances, thinking about the monthly budget.
- How much you want to pay – this might take talking to a few advisers first so you get an idea of the going rates but it is important to know what you are prepared to pay so you can choose the most suitable service.