Money Matters

What price financial advice?

As I sit down to write this article, the FTSE100 is comfortably over the 6000 level, and at its highest for nearly five years. Could it be that the market-makers feel that the woes of the last few years are all behind us? Well, probably not. However, things are looking much better than they did 12 months ago. I guarantee that there will be upsets, but a Fund Manager I spoke with a few days ago told me how he is looking forward to the occasional upsets in the markets nearly as much as the prospect of some decent gains. He says it is like “going to the sales!”

Whilst the troubles in the Eurozone, the US ‘fiscal cliff’ and the slowdown in China haven’t disappeared, the actions by the powers-that-be in those areas have shown that they are willing and able to do whatever is required to facilitate a return to less stormy economic waters. In fact, that same Manager told me that he has not felt as positive about his funds for years. As ever, investments and other financial and insurance plans should be designed around an investor’s personal circumstances, and attitude to risk.

1 January 2013 brought in a completely new environment for financial advice. The myth of free financial advice has been with us since time immemorial, and no matter how much the nice young representative from the Bank tells you that there is no charge for his or her advice, there always has been and always will be a charge – in one way or another. In some cases, up to 10% of an investor’s cash went to the Bank in commission. Not my definition of free advice!

What has happened this year is that all advisors, who are truly independent, will have to charge a fee for their advice. This fee, and the way in which it is paid, must be agreed in advance, and the advisor and client must sign a Service Agreement which gives full details of the rights and obligations of both parties. This fee may be paid by way of an agreed lump sum, a percentage of an amount invested or managed, a regularly recurring charge (monthly, quarterly, half yearly etc.) or a combination of these. Be assured though, if your advisor tells you that there is no charge for advice, then that advisor is either not truly independent, or a charity. Many advisors however, will offer an initial meeting without charge in order for both parties to establish the relevant needs and potential course of action for the future.

In order for advisors to qualify as independent under the new rules, they must not only be fee-based and have attained a much higher level of qualification than previously, but must have access to the whole of the investment market, in terms of providers and product types, whether they are selected or not. In any event, whether you are advised or choose to take your own advice, 2013 looks like it might be a better year for investments than we have seen for some while.

David Foot

Categories: Money Matters

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