‘F’ is for…Financial adviser? Yes, BUT ‘F’ is also for Future, Freedom, Forward-Thinking, Fear, Focus and Family. These are all things we discuss with our clients. Not just finance. That’s why we’re not fans of the term ‘Financial Adviser’, because we explore more than just finance with our clients. So instead of being ‘financial advisers’, we’ll call them ‘F’ advisers for the purposes of finding the value of them.
You’re more than familiar I’m sure - advisers are the people managing your money, your assets, what you should and should not do with what you have. It’s easy to forget that they are meant to add ‘value’. So, our question is, do they? Do we?
As a financial adviser myself, I believe there is definitely an element of unseen value in a 'good' adviser, which can go easily unnoticed in this relationship. For example, we perform the extensive due diligence on investment portfolio/managers, so that you are confident your portfolios are fit for purpose to what you are trying to achieve. This has come very much into spotlight over the last year when we look at what happened within the Neil Woodford Funds where investors were exposed to high risk, illiquid investments. The result? Significant capital loses for those who were invested when the funds failed. This is why the unseen due diligence is so important in making sure each decision we make with our clients, is right for them.
We always talk about value, especially value for money. Think about how many times you’ve tried to wear that designer jacket or run the miles on your SUV, just so you get your ‘value for money’. After all, it stems from wanting to make sure every penny we spend, is well spent. Understandably this is no different when it comes to receiving financial advice and having a ‘f’ adviser. We don't really favour this term, mainly because the nature of what we do surpasses that (and also because the term sounds too boring for parties and we host super cool rooftop parties). But people often ask, why should I let someone else manage my finances or even my lifestyle when I could just ‘do it myself’?
Whether you have a ‘f’ adviser or not, have a read at how we have tried to evaluate the potential value they could add.
It is at least 4.4% apparently.
You're right, it is arguably difficult to monetise this figure. That’s why we wanted to explore the 5 key value-add elements that have been identified in a recent report. Let’s find out what makes up the 4.4%.
The key formula consists of 5 elements contributing to the fee for advice. This is what the breakdown looks like:
Image Credits: The Value of an Adviser by Russell Investments
What is annual rebalancing? Great question. Like with anything in life, now and then, it’s crucial to check if we are still on track and to adjust based on what is happening around us. Your ‘portfolio’ (of things that matter to you financially in your life) is just like anything else. It is subject to constant external, environmental and market influences. The value of anything could change off the back of an event, anywhere in the world.
An ‘F’ adviser takes care of the annual rebalancing which should retrospectively help to stop this from happening.
Why do you need them for this? One main reason is that it’s easy to forget to do this or think that you ‘need to’. With an adviser, you won’t need to worry about having to adjust it when the market changes, and there is less pressure knowing that someone you trust is looking after your portfolio. I mean, you would probably feel uneasy leaving your cat or dog in the house for 2 weeks whilst you're on holiday. Behold the pet-sitters!
This is probably one of the less spoken-about aspects of expertise from a ‘F’ adviser. However behavioural coaching is a huge part of what we and advisers use to help assess financial decisions.
As humans, the way we make decisions is often based on our upbringing, our values, education and experiences. There’s no right or wrong to these, but it turns out there is more psychology in it than there is numbers!
Be-IQ Limited, the UK-based Behavioural Insights fintech, recently announced the launch of the world’s first behavioural measurement app, MyBe.
Through a series of short, simple, but engaging games, MyBe enables people to explore, measure and understand the behavioural biases that drive the financial decisions they make. This means that people will be able to see the strength of their behavioural biases, and how they play a role in decision making. But why does this matter?
Image Credits: Screenshots of the MYBE app, Apple Store
Is your instinct telling you to buy low, sell high? Are the headlines saying now is the best time to invest?
One of the biases discussed in the game is ‘Applying your judgement’. If for example, you have a strong tendency to ‘Trust’ your judgement, it means that you won’t necessarily be easily influenced by the headlines or what others are doing. On the other hand, if you tend to ‘Question’ your judgement, then you could opt to make financial decisions without fully considering the counter evidence.
An ‘F’ adviser is almost the personal trainer you refer to when building the training plan for your marathon (or just 5K). It is their job to help you make the right decisions by being unbiased and assessing the long-term impact of your decision. They should be helping you get the most value back in the future.
Does your risk profile match your expectations of return? By this we mean, are you [analogy] It is understandable to think that you would be spending less on fees if you don’t have a ‘F’ adviser. However, let’s take a minute to think about the long-term. You pay for a personal trainer even though you know you could do the routines by yourself at the gym. But the chances are, if you just started lifting weights, are you holding the right posture?
When we talk about retirement, succession planning and exit strategies, we are essentially thinking about the future - the long-term. The fees for a ‘F’ adviser help you plan and be prepared for this future, a cost of what might potentially be returned in greater value.
A ‘F’ adviser is there to help you combine the best strategy of three factors: risk level, your objectives, and your expectations.
Does your risk level equal your objectives and your expectations?
The role of a ‘F’ adviser goes beyond being an ‘investment manager’. As mentioned, there is a huge element of behavioural coaching involved to help make the right decisions for the client. In addition to this, they bring value in helping you build a personalised financial and even lifestyle plan whilst supporting other services including tax and estate planning.
If you dislike the thought of spending time figuring out tax, estate planning, and financial protection, then a ‘F’ adviser would be something to consider to help you take that burden away.
Tax does not always have to be disheartening (unbelievably). When we make an investment into anything, whether it be money, time or even people, we always focus on the return. But how often do we think about what we get to keep from it?
Tax is the same as many other things that we set aside money for. A ‘F’ adviser thinks about the returns you get after tax (AKA tax-returns), not just how much you need to put towards it. We often use the technical knowledge we have, to help clients and to avoid ‘tax-surprises’. Whilst the most dubious expense claims on tax returns apparently include family holidays to Nigeria or music subscriptions ‘for work’, adviser add value in identifying the things that can be claimed. Our job is to help you with the technical expertise we have, in a way that works best for your lifestyle financial plan.
At the end of the day, a ‘F’ adviser is there to play multiple roles. See them as something to a financial lifestyle consultant. We advise after fully understanding your needs, we keep you on track with your goals, and we help you deliver your objectives with the knowledge and skills we have across the industry. Essentially, it means you can focus on heading towards the life you want, not the one you perceive you can have (that’s our line).
We will be releasing more tips of managing your lifestyle and financial plan this year. Make sure you sign up to our social media channels and newsletter to get the latest updates and guidance on your value for money. Alternatively, get in touch to discuss your goals with us today and make sure you’re not financially squatting in a way that will for your future!
Getting to know our Commercial Director John Moran
A Chartered Accountant by trade, John Moran joins us as our new Commercial Director, looking after our finance and working on areas of our business development too. CEO Adrian Murphy and Marketing Manager Letitia Lam sat down with John, in each of their homes over Zoom, to ask him some questions.Read more