FINANCIAL MATTERS WITH MITCH HOPKINSON: The importance of consulting a financial adviser to construct a sound financial plan for the future

Mitch Hopkinson
Mitch Hopkinson

This month, our personal finance columnist, Mitch Hopkinson, focuses on the importance of consulting a financial adviser in order to construct a sound financial plan to provide protection for you and your family, make you better prepared for life’s eventualities and help you reach your financial objectives.

I have recently completed four half marathons in just over two months. For the last of the four, I wanted to beat my personal best. I could have carried on with the training programme that I had downloaded from an App, but I decided to turn to a personal trainer.

A great financial adviser provides peace of mind by ensuring your best odds of permanent wealth and comfort

Mitch Hopkinson

You see, I recognised that I needed something more than I could achieve on my own with an App. I can say that as soon as I spoke with my personal trainer, I could sense that my effort and chances of success would improve, just because of the programme he ran through and the extra level of effort that would be required in order for me to succeed.

From my perspective this made me think why someone would consider using a financial adviser, so with this in mind I have taken some time to look at these reasons and relate them to using a coach to achieve your fitness goals, because, for me the two are inextricably linked. My hope is that the analogy will bring this whole process to life and encourage you to take more action either in the area of getting healthier or wealthier. Or perhaps both.

Let’s start with a question. How much can you improve your financial situation? You might be thinking, “I have a good salary, I pay my bills on time, I know how to do my taxes, I have insurance, I’m handling my finances pretty well; spending time and money on financial planning is not worth it for me.”

Many people think this way, but often it is because of a lack of awareness of financial opportunities and best practices. This is akin to a personal trainer, having access to better training methods, understanding the diet that needs to be implemented. Having the professional experience to stand back and assess quickly what needs to be done to help a client to get fitter quicker and more importantly without any injuries.

Similarly the time you spend building a sound financial plan, personally tailored to you with a highly skilled financial planner, will help you to achieve the following benefits;

- Adequate protection for you and your family should some terrible disaster befall you

- More money for you and your family

- Better preparation and flexibility for life changes

A great financial adviser provides peace of mind by ensuring your best odds of permanent wealth and comfort.

This planned approach to success is the result of a multi-step process, it is what a personal trainer would do when assessing your requirements for your tailored fitness regime. Just like getting fitter, or more accomplished in a particular sport, you need to;

- Set achievable financial and personal goals - just like you would when you set your fitness goals.

- Assess your current financial health by examining your assets, liabilities, income, insurance, taxes, investments and estate plan – a personal trainer will usually get you to do a fitness test, and have a health check.

- Develop a realistic, comprehensive plan to meet your financial goals by addressing financial weaknesses and building on financial strengths. In the same vein a good fitness coach will give you a programme to follow.

- Put your plan into action and monitor its progress. You will be kept on track by training regularly with your trainer, just like your adviser should meet with you and ensure you stay on track to achieve your goals.

- Revise your plan to accommodate changing goals, changing personal circumstances, changing financial opportunities, and changing market and tax laws. Your fitness plan might need to be altered depending upon how your body reacts to the training regime.

- The planning process requires skill, knowledge, diligence, and discipline, but great reward makes it well worth the time and effort. You should achieve a much better outcome with a personal fitness coach. One of the main reasons is the sense of personal accountability that comes with having a coach to report to. A financial adviser will also expect these same levels of accountability.

Should I do it on my own?

The question is, do you need professional help in order to design and stick to an effective financial plan? To some degree, this depends on your unique situation, but most will find that they are better off seeking the information, expertise, experience, and discipline provided by a financial adviser. Just like most would have a better fitness outcome by working closely with a good trainer.

Making quality financial decisions requires an ample commitment to learn and research, in the same way that developing a successful fitness regime requires a high degree of knowledge.

While the internet is an easy way to access information to make it feasible for individuals to independently manage their finances, the magnitude of investment skills and information that you need can be overwhelming.

The financial world is filled with foreign concepts, esoteric language, legal rules, and difficult methodologies. Whether you want to develop a portfolio, plan for retirement, pay for school fees, or reach any other major financial goal, there are professionals who have spent their careers serving people with the same concern, and it is a good idea to take advantage of their experience.

The same can be said for developing your fitness or sport to an advanced level, it is better to get the help and advice from an expert. Aside from better results, avoiding injury along the way is important too.

What will I get when I work with my financial adviser?

Professional financial help goes far beyond selecting shares. In fact, it has absolutely nothing to do with this. Working with an adviser arms you with expertise and resources with which to approach planning your financial future. Their coaching and support can help you to smoothly endure and make the most of the circumstances in your life - career, marriage, children, assets, mortgage and loans and estate planning.

Specifically, financial professionals can help to:

- Avoid costly mistakes, manage risk, save your own time, and improve your overall investment results.

- Guide you through the maze of retirement options; this is particularly important now that the pension rules have provided much more choice at retirement thus ensuring you are on course to have the type of retirement you’ve always dreamed of.

- Decrease your inheritance tax liability, thereby aiding the financial stability of your loved ones.

- Reach your investment goals such as university fee funding.

- Determine the type and amount of insurance you need to protect yourself, your family, and your assets.

- Minimise your taxes, help with your tax returns, and plan to reduce future impact of tax.

- If you own a business, develop a strategy to manage your business finances, including cash management, financing, employee benefits, and corporation taxes.

Furthermore, a great financial adviser will provide you with the emotional discipline required to make sure plans are acted upon. They will provide guidance, reassurance, support and stability to help you stay on course and reach your long-term goals.

Okay, so I’d benefit from an adviser - what now?

Choosing an adviser is very much the same as selecting your personal trainer. It is a crucial aspect of planning your financial future, or similarly getting fitter.

Hiring an adviser that is not well-suited to your needs is a danger that must be avoided through sound research. One of the best ways to find an adviser is by being referred by a friend or work colleague.

All advisers will offer an initial meeting/consultation where you will have the chance to find out more about them and their experience, as well as getting to see if there is any chemistry and ultimately whether you can work with them.

What to expect from an initial consultation

Many financial advisers will offer an initial meeting free of charge. This isn’t designed to give you specific advice about your situation; rather it’s a chance to ask the adviser how they work, how much they charge and to get a sense of whether or not you feel you can work together and feel comfortable with them.

Read more in the following link: ‘Key questions to ask your financial adviser’. These come from the money advice website that provides good information on most financial topics.

How you may be able to pay

You may be asked to pay for the advice upfront or to pay part of the fee upfront and the rest when the work has been finished.

If you are buying an investment you may be able to have the fee deducted from the investment rather than paying it as a separate amount. If you want ongoing advice, you will probably be asked to enter in to a retainer programme.

Remember a world class coach will give you world class results, expect to pay for expertise, both in the fitness world and the financial world.

What’s included in the price? How often will you see your adviser?

Before you agree to use a financial adviser, ask the adviser to tell you exactly what you’ll get for the fee or charge. Make sure they confirm this in writing. It is the same with a personal coach, make sure you understand how many times the coach will be there to train with you.

What can affect a financial adviser’s charges?

The fees that financial advisers charge may vary widely. There are several factors that could affect how much an adviser charges:

- Location: Some advisers may be based in a more expensive part of the UK, which means their office costs will be much higher.

- How the service is delivered: Some firms now offer advice by phone or even online which can mean the cost of the advice is cheaper as they have lower overheads. However, if you are receiving advice this way, make sure that it comes with a recommendation that is specific to you so you are fully protected.

- Who does the work: Some financial advice firms will use a highly-qualified adviser for all the work, whereas another firm may use support staff to do some of the work (signed off by an adviser) which will cost you less.

- How well qualified an adviser is: The more qualifications and experience an adviser has, the higher their fees may be. Depending on the type of advice you’re looking for, you may feel that paying for an adviser who is highly qualified is worthwhile.

- How complex your situation is: If there is a lot of sorting out to do, this can take time, and time is money. You can help by being very clear about the type of advice you need and having your papers in good order. Any sorting out you can do in your own time you won’t have to pay for. Only use your adviser to do the things that you can’t do yourself and to provide the expert advice.

So, I am sure you are wondering if I managed to achieve my personal best. The answer is of course I did, but there is room for improvement, and as I get older I want to get fitter. I urge you to do the same, and also take the time to get your financial health fitter too.

Mitch Hopkinson is a managing partner of deVere United Kingdom, part of the deVere Group, one of the world’s largest independent advisers of specialist global financial solutions to international, local mass affluent, and high-net-worth clients, through a network of 71 offices across the world and more than 1,000 staff. It has in excess of 80,000 clients and $10bn under advisement.