When should you pay for advice? - investing
So you've got a financial decision to make, but should you pay for advice or go solo?
Which route you take will depend on your confidence with money matters as well as your specific needs - for example, whether you need to sort out a tax problem or just want to set up a regular savings account.
Charges for financial advice should become clearer from January next year, following changes known as the 'retail distribution review' or the RDR. From then, you'll face an upfront fee from independent financial advisers if you do decide to seek their help.
But how do you know when it's wise to pay for help? Here are some key financial milestones and guidance on whether you can do it yourself or need to call in the experts.
SETTING UP A REGULAR SAVINGS PLAN - NO
With a little research this should be easy to do without advice. Both cash and equity-based ISA providers offer regular savings options as an alternative to one-off payments into a plan.
It's straightforward and painless to set up a regular direct debit, with providers such as Fidelity FundsNetwork, for example, requiring a minimum investment of £50 a month, and plenty of others willing to accept less.
You can even opt for ready-made portfolios if you're unsure which funds to pick.
CONSOLIDATING EXISTING INVESTMENTS - MAYBE
If your investments are spread across a number of providers and brokers, it can be hard to keep track of their performance and costs.
By transferring your portfolio to one place, you may benefit from more transparent charges, lower fees and better access to your investments. It may be wise to seek advice to check whether this route is right for you.
However, sophisticated investors should be able to consolidate their portfolios themselves. Brokers such as Killik & Co, as well as online platforms such as Interactive Investor, have offers for customers looking to consolidate their portfolios.
INVESTING A LUMP SUM - YES
If you have a pot of cash to slot away from a bonus, say, or an inheritance or even a divorce settlement, this'll prove a welcome boost to your finances.
But depending on the size of the sum and your objectives, it also demands some tricky decisions, and advice is likely to help make sure you get them right.
"It's often essential to get the right mix of investments, depending on the client's situation," says Adrian Lowcock, senior investment adviser at IFA firm Bestinvest. "An adviser will have the skill in being able to assess this properly."
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.