The pros and cons of using a financial advisor

Everyone wants to get the most from their money, but many of us aren’t sure of the best ways to do it.

Seeking help from a financial advisor is an option many people use to stay on top of their personal finances. From investing to retirement planning, appointing an advisor can be a worthwhile move, but how do you know if you should be seeking that sort of help?

Here are the pros and cons of using a financial advisor.

The pros

Expert knowledge

Starting with the obvious, a financial advisor can offer you expert insight into how best to manage your money. If you’re unfamiliar with financial markets and planning, a deeper knowledge can be invaluable in getting the most from your investments.

A financial advisor can build a credible investment portfolio for you, or help you with a properly structured plan for your savings and retirement.

A time saver

As well as needing the knowledge to create and run a successful investment portfolio, you also need the time.

The process of planning your financial future or developing and maintaining good investments can be incredibly time consuming. Using a financial advisor takes these matters off your hands, meaning you can focus on other areas of life.

If you have a busy schedule, an advisor gives you the opportunity to make financial moves you wouldn’t otherwise have the time to make.

Value for money

Especially if you’re trying to manage a lot of money, a good financial advisor’s advice will be worth its weight in gold (quite literally).

Combine a large amount of money with a personal lack of knowledge or time and utilising professional help really starts to make sense.

The cons

In your best interests?

In the main, there are two different types of investment advisors in the UK: independent and restricted. Before seeking financial advice, you should understand that not every advisor will have your best interests at heart.

Independent financial advisors (IFAs) provide investment advice across the entire market and have to offer unbiased and unrestricted advice. Restricted advisors can only recommend certain investment areas, either because they represent one or several firms, or have chosen to focus on a particular market. Restricted advisors therefore may push your money in the direction of a product that isn’t best suited to your portfolio.

Before settling on an advisor, be clear on what type of advice they will offer and whether that makes sense for you.

Fee v investment

If you’re not looking to invest very much money, a financial advisor makes less sense. With lower potential returns, an advisor’s fee, particularly if it’s a set amount, represents significantly worse value than if you were moving larger amounts of money.

Also, be aware of recruiting a poor-quality advisor. The fee may be cheaper, but the advice you receive could end up being virtually worthless.

Could you go DIY?

Of course, if you don’t have the time or knowledge, a financial advisor makes sense. But if you do understand a bit about the relevant markets, or are willing to learn, do you really need a financial advisor?

Whether you’re looking to invest money, sort out your pension or prepare for retirement, there’s plenty of advice available online. If you have confidence in what you’re doing, it might be better to avoid paying a fee for something you feel you can do yourself.

So, a financial advisor can represent great value: it just depends on your needs. When it comes down to it, the amount of time and money you have to invest, alongside your financial knowledge, should dictate whether you should seek out professional help or not.

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