How To Know You Are Ready For An Independent Financial Adviser

An independent adviser is a financial adviser who can find the best solution for you and your finances over the other types of advisers, some of whom are restricted to just a single provider that they can sell.


How To Know You Are Ready For An Independent Financial Adviser

Independent advice can be invaluable in helping you secure maximum returns during the good times and minimal losses in times of recession, so you can take a healthy income or add to your other income streams as you enter retirement.

But how do you know if you are ready to receive this independent, impartial advice?

Either way, it all comes down to performance, and a good independent adviser can get the best performance out of your money. 

Although, in order for you to see this performance, you need to be ready for it in the first instance.

Paying off your debts – your mortgage comes first

Normally, the point where you may be ready for independent advice is when you can no longer manage your investments yourself. You have probably accumulated a large savings pot and, more often than not, have paid off your mortgage.

Clearing your mortgage is one of the key turning points before retirement, because in net terms your income requirements look so much better when you’re not paying those monthly payments to the bank. The mortgage is most people’s largest outgoing, and to remove that from what you need to pay out every month is a definite indicator that retirement can be possible sooner rather than later.

If you’re not paying the mortgage, you will be amassing savings, and making larger contributions to your pensions too, hopefully! 

Similar to paying off the mortgage, another indicator of whether you are ready to start investing with an independent financial adviser is your debt situation.

Never borrow to invest

You should never borrow to invest, so before you start looking at making major investments, always make sure that you have cleared any large outstanding debts you might have.

For example, if you have £100,000 of debt in a mortgage or anywhere else, and you also have £100,000 in liquid cash to invest, yes you would make the minimum for Applewood Independent Ltd clients, but we wouldn’t be interested in taking that on.

The reason being that you are indirectly borrowing the money to invest because you aren’t paying your debts off. What happens if you lose all your money? Although this has never happened in Applewood’s history, that is always a risk that you take by investing.

What happens if you’ve got nothing left and you still have a big mortgage to pay?

That’s not the sort of position that we would put anybody in.

The dangers of emotional investing

When it comes to managing your finances, of course you can try to do it yourself. You can read the papers on financial matters and follow what they’re talking about (which I don’t recommend), but it still comes down to you emotionally investing, and this can be a very dangerous game.

You may be running your own investments and emotionally reinvesting your gains into something that’s expensive, or emotionally selling your money at the bottom of trends and missing out on the recovery because there is too much at stake. 

In order to have a portfolio that is consistently performing over the years, you have to have assets in different places to create a secure and well diversified portfolio, and by doing this on your own you risk the dangers of a volatile market.

So although there are always going to be risks, ultimately the risks that you take with a financial adviser are still significantly less than the risks associated with investing the money yourself.

If you do have assets ready to invest now, and you are looking at how to grow that pot towards retirement or whatever objective you have, then you are ready to talk to a financial adviser, because making the decision to run your own money is potentially the first, and most costly, mistake you can make.

Don’t wait till it’s too late

Normally, people who go out on their own realise this too late. When the markets are up, that’s great, everybody is making money; but it’s during an event such as 2020, where the markets dropped over 40%, that people who have been investing on their own will ask for help.

However, at that point it’s too late. 

They’ve lost their money because they may have put it all into the riskiest asset classes in the hope of the best quick returns. But that is a dangerous game because you never know when the next recession is coming. 

Without the pragmatic approach of diversification, which people may not take with their own money, the down times can become a major problem and may lead to significant losses. This is because even with the greatest wealth in the world, you can never create a portfolio better than someone who does it professionally.

That’s like trying to be a professional basketball player by setting up a hoop in the garden!

Can you weather a recession?

Is your portfolio ready to weather a major recession tomorrow? If not, it’s probably time to speak with someone who is able to build you one that can. That’s where your long-term success is going to come from.

This way you’re still going to retain a large proportion of your money, which you can then use to invest in potential opportunities.

Clear your debts, then pick up the phone

So, how do you know you are ready for an independent adviser? 

First off, make sure you’ve cleared your debts. Then, if you have a significant savings pot or pension and want to know how to make it grow for you, pick up the phone and speak to someone before doing anything with it. 

At that point your adviser can still turn around and say you’re not ready yet, and tell you what you need to do first, but at least you’ll know. 

And if you are ready – if you’re at that point of making emotional decisions because you want to grow your assets – then you will have that pragmatic, trusted independent adviser helping you out.

I hope this has been useful, and if you have anything else to add, I’d love to hear from you. To find out more, feel free to get in touch by emailing alex@applewoodindependent.co.uk.

 

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.