Investment Advice

Investment Advice

Investment advice for Investing in today’s uncertain world and maximising returns without taking too much risk is a real challenge

Choosing the right type of assets to invest in and achieving the right blend between those asset classes is vital in order to spread risk and maximize returns. Therefore, getting investment advice from a professional has become increasingly important.

However, there are other factors to consider and that’s where using the services of an independent professional investment adviser can provide you with greater peace of mind.

Why do you need professional investment advice?

 

Restricted versus Independent Advice

It is very easy to get bad or inappropriate advice from someone acting as if they know what they’re talking about. We have seen many examples of inappropriate advice coming from organizations and companies where they have a hidden agenda, i.e. they offer restricted advice or are promoting their own range of products. The Financial Conduct Authority (FCA) calls this “shoe-horning” and despite their efforts to drive this out of the advice sector it is still happening every day. Therefore, it is very important to seek out independent advice from an adviser who is properly qualified and not restricted. A simple tip would be to ask the question – is your advice restricted or whole of market?

 

Charges

There’s a saying when it comes to investing “it’s impossible to control investment returns but it is possible to control costs”. We regularly come across clients paying more than 2% per annum in costs despite being told a much lower headline figure. For example, an investment manager may say they only charge 0.75% (+VAT) plus dealing costs for managing your investment portfolio. It would be easy not to give that a second thought and think that the dealing costs can’t be much when they are in a throw away line like that. However, dealing costs can in some cases quite literally double the cost of the manager’s annual management fee and if they invest in active funds like mutual funds, OEICS and unit trusts they too have their own charges, typically between 0.75% and 1%. Add all these costs together and you could be paying between 2% and 3% in total costs each year. Getting value for money means you should be looking to keep your total costs to 1.5% or less.

 

Taxes

Tax on your investments and the income from them is effectively another cost and something that can reduce further you investment returns. The obvious taxes are income tax and capital gains tax. However, there are other less obvious taxes including stamp duty, VAT and inheritance tax to consider. Further, there are many tax advantaged schemes that are approved by HMRC and designed to minimize the affect of taxation and or even achieve tax-free profits in return for investing in businesses and, therefore, helping the wider economy. There are also more widely used tax advantaged schemes like Individual Savings Accounts (ISAs) and personal pension schemes which attract tax relief on the contributions. An independent professionally qualified adviser will help you understand how best to navigate the tax maze to both minimize tax and take advantage of the personal tax allowances available.

 

Risk

Not all investors are the same. Some will have a higher tolerance to risk than others. Therefore, it is important to understand what your own tolerance for risk is and what your capacity for loss might be. In simple language your capacity for loss means how much money you could afford to lose without it affecting your standard of living. One of the first things a professional adviser will do is discuss this with you and using risk and capacity for loss questionnaires help you understand how much risk would be appropriate for your personal circumstances, aims and objectives. Once your risk tolerance and capacity for loss have been identified, discussed and understood only then can you investment with realistic expectations and understand the relationship between risk and return.

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