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Financial advice vs 'going it alone'

A growing number of people in the UK rely on expert help with financial decision making, ranging from from one-off decisions about buying a particular product, to navigating more complex issues such as investments, trusts and estate planning.

Around 4.1 million adults in the UK have received financial advice, an increase from 3.1 million in 2017, according to the latest figures from the Financial Conduct Authority (FCA). Its recent review of the advice industry revealed that since 2017, the proportion of consumers who have accessed financial information or guidance in the past 12 months has risen from 26% to 28%.

However, more people could benefit from financial advice, the regulator believes.

For example, many consumers are still holding money in cash that could be invested to provide potentially higher returns, but they have not sought or received advice to help them to make better investment decisions.

Of those with more than £10,000 of investible assets, 37% did not have any investments at all and were holding their assets entirely in cash, and a further 18% were holding more than 75% of their investible assets in cash. Depending on individual circumstances, holding money in cash will see its value eroded by inflation and will miss the historically higher returns available from investing, the FCA explained.

Many people continue to "go it alone" with their financial planning or take guidance from family and friends, says Royal London.

In a recent article, the mutual insurer highlighted some of the key areas where you risk making expensive mistakes if you proceed without an adviser, including:

1. Switching pensions

If you've accumulated several different pensions after changing jobs, it can make sense to consolidate them into one pot to make it easier to keep track of your retirement savings. However, although this can be a good idea, it may leave you open to other issues such as exit penalties or losing valuable benefits.

2. Inheritance tax (IHT) planning and gifting

By supporting family members with a lump sum you could inadvertently foul of IHT gifting rules and leave your family with a substantial bill. An adviser can help you document your gifting history to ensure you stay within the allowed limits while also making sure you don't leave yourself short of money.

3. Wills/probate

Before making a will, it's a good idea to take legal advice to ensure your assets are distributed in line with your wishes on death. It's also important to take financial advice as there may be simple steps that can be taken to minimise IHT payable. Writing life insurance policies into trust also means that payment to beneficiaries will likely be quicker as it doesn't need to go through probate, Royal London noted.

4. Investments

An adviser can assess whether any planned investments meet your appetite for risk and are appropriately priced and sufficiently diverse. They can also help protect you against scammers.

"Our research shows people who speak to a financial adviser regularly feel more in control of their finances with 75% saying they feel more financially secure and stable," said Clare Moffat, head of intermediary development and technical at Royal London.

"Others feel taking advice has helped them understand key aspects more, with non-advised customers three times more likely to say they wouldn't know where to start with things like preparing for retirement or taking out life insurance compared to their advised peers.

"However, many others do not seek advice because of the perceived cost without realising there are hidden pitfalls that can end up costing them and their loved ones money. Speaking to an adviser can help people navigate these areas and other financial risks successfully."

Whether you're looking for advice on investment management, tax planning, financial protection, retirement planning or funding for future care, Fidelius can help you find your way through the financial maze. Contact us today to learn more.

Posted on January 4th 2021

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