Financial advice: The good, the bad and the ugly

25 January 2018
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Good advice may be priceless and welcome but bad advice is worthless, which makes it dangerous. We asked 10 leading financial experts to reveal the very best and worst advice they’ve ever heard.

Helen Howcroft, managing director of Equanimity IFA, has come across plenty of good and bad financial advice in her time. She tells us: “The best bit of financial advice I got was from my grandfather, who was brought up in the depression and the inter-war years and was very sharp on money matters. He told me from an early age that the best thing I could do was to get on the property ladder because if I didn’t I’d just be paying off someone else’s mortgage.

“The worst advice was to buy accident insurance. Yes, it may just be worth it if you are a cyclist or biker in central London, but for the rest of us it’s a waste of money. We’re all likely to live past 65, so the £7 a month these policies cost is money better spent elsewhere.”

Patrick Connolly, chartered financial planner at Chase de Vere, tells us: “The best advice came from my mum when I was 18 and off to university. She told me to never spend more than I earn. I qualified for a student grant in the days before students got hit with huge tuition fees. I’ve maintained this philosophy and have never even owned a credit card. If I can’t afford it, I don’t buy it. This also means that, with the exception of buying my house, I’ve never been in debt. 

“The worst financial advice that I can recall happened many years ago when Sunderland Football Club was looking for a new manager. A friend of mine said that he had a contact with a sports journalist in the North East and he had been told that Sunderland were talking to Kevin Keegan.

“He advised me to bet on this and so he and I put on bets with the bookmakers at odds of 66-1, 50-1 and 33-1. We then sat back and waited for the big announcement so that we could collect our winnings. Unfortunately, it never happened – my first and only attempt at ‘insider dealing’ ended in failure.”>

Juliet Schooling-Latter, research director at Chelsea Financial Planning, reveals the best advice she’s received was a savings tip. She says: “Don’t be greedy. Save some for the next man was what I was always told, and it’s true. You may see an investment rise 10% after you’ve withdrawn your cash, but it could then drop by 30%. So be happy with what you make.

“When it comes to bad advice, where do I start? Probably pet insurance. It costs a packet, gets more expensive as your cat grows older and there are more exclusions added all the time. The amount you spend could surely be better used dealing with problems as and when they arise.

Martin Bamford, director at Informed Choice, tells us: “I had a client approach me five or six years back with a terrible problem. She had been advised to take out a £400,000 loan with the aim of making £700,000 through a traded endowment policy run by an offshore firm based in the Cayman Islands. We pointed her in the direction of a good solicitor.

“I’d say advising against getting life cover is bad advice every time. Only recently, we had the case of a father who slipped on a step ladder and died, leaving his wife and kids behind. He had life insurance, so, while it was a tragedy, the mortgage was covered.”

Michelle Cracknell, chief executive of the Pensions Advisory Service, offers these nuggets: “My father opened up a National Westminster (NatWest) Bank account for me at age 10, where he was a guarantor. He sat me down with a small ledger book and showed me how to do a simple double entry accounting of the ins and outs of my bank account.

“While the little book has been replaced with a digital version, I still benefit from the budgeting achieved from keeping a record of my expenditure and, over the past 40 years, I have received refunds from incorrect amounts being deducted from bank accounts or added to credit cards.

“The worst advice that I received was from a friend of a friend whose work and retirement strategy was buying houses to rent and he was looking for partners in this venture. His brother supposedly had given up work at the age of 42 and was now sorted with an income in perpetuity.

“His brother was then hit by a number of non-paying tenants and had not factored in the dilapidations of the property. Luckily, the other partners did not materialise and I used my money to pay off my mortgage.”

Scott Gallacher, director at Rowley Turton, says: “The best advice, from a colleague, was to pay myself first. That is, to make any savings and pension contributions at the start of the month before I spend the money. I followed this advice from age 30 and effectively forewent pay rises for several years and instead paid those pay rises into my pension. This allowed me to reach a 15% contribution rate with no real change in my standard of living.

“The worst advice was probably to buy a Bulgarian holiday property. Fortunately, I declined this advice and have since met several people with Bulgarian holiday properties that they do not use nor rent out. Effectively, this is sunk money.”

Michelle Lawson, director at Lawson Financial, says: “For me the worst advice is always from friends, people down the pub, and so on, who may have only had one mortgage and then tell their friends what is best for them. I had a client recently come to me for professional advice, which I gave. They said they’d run it past their friends who had just bought their first property! Their friends then ended up saying that the deal that they had was better. What they didn’t discuss was their credit history and deposits, as their financial situations were poles apart.

“The best advice for me is for people who recommend their friends to take advice from a qualified individual who knows the industry, products and lenders. I love getting recommendations as they show I have done a good job and I know the clients trust my judgement.”

Dennis Hall, chartered financial planner at Yellowtail, says: “Back in the mid90s, I’d recently moved from Devon to London. I was working for a bank alongside other fi nancial advisers, and I assumed they would be more knowledgeable than me.

 “One considered himself a stock picker, boasting about how he’d quadrupled his money buying shares in Devro, the sausage skin manufacturer. When he tipped another Initial Public Offering for a Chinese manufacturer of cotton toilet tissue, I piled in. I lost my entire investment, and so did he. Shortly after, he also lost all the profits he’d made on Devro.

“The best advice I’ve received came out of a conversation with a former member of the Bank of England Monetary Policy Committee (he was a client). He was describing how each month they met over two days, and in traipsed the economists, one after the other, predicting what would happen in the future and making excuses why previous predictions did quite pan out.

“The bottom line is, no one knows and no one can forecast with any degree of accuracy or consistency. That conversation completely changed my thoughts about investing. From then on, I avoided ‘speculative’ and expensive active management and built a strategy based on capturing market returns as cheaply as possible using index funds.”

Annabel Brodie-Smith, communications director at the Association of Investment Companies, received good advice from an ex-colleague: “Save £50 every month in a global investment company. It’ll grow over time and regular saving smooths out the highs and lows of the stock market, so you can sleep soundly at night.”

Her worst advice came from home: “My father was not comfortable investing in the stock market. I remember him saying: ‘I’d prefer to invest in bricks and mortar – there’ll always be a need for property, Annabel.’ He subsequently invested in two student let houses.

“Yes, they generated good rents, but something was always going wrong, which needed money spending on it. It would have been less hassle if he’d invested in an equity income fund.”

Aaron Strutt, communications director at Trinity Financial Group, imparts the following practical advice. “Someone I know, who was brought up in America, said her mum used to lend her and her four siblings money, charging a little interest. She learnt more about finance through her mum than at school. Incidentally, her mum’s rate was better than the bank.”

Aaron adds: “I can’t put my finger on any specifi c piece of bad advice. Then again, I’d ask my dad if I was unsure of something fi nancial.”

Dan Moore writes for publications such as the Times, FT Adviser and This Is Money.

In reply to by anonymous_stub (not verified)

Re Pet Insurance.as "bad advice"We adopted a young collie dog while on holiday last year and immediately took out insurance with PetPlan. We had the dog checked over and reports came back "fine". We then had her spayed - and thereafter she went rapidly downhill. We were subsequently involved in visits to three vets as they tried to find what was wrong.. Eventually the original vet practice stated the dog had a neurological problem - but in essence there was nothing they could do. After returning from the vets with the "neurological" diagnosis - and "come back in a couple of days" after they had given her more shots - we tended the dog during her last two nights and on the second night she began whelping, occasionally gasping for breath. The final morning there was nothing the vet could do and we had to have the dog put to sleep. All in all we spent over £1400 on vets fees in the two weeks we had the dog. Despite not making a single payment to Petplan, we were refunded everything - except of course for the spaying and euthanasia. While this may be somewhat of an exceptional case, taking out pet insurance proved to be a very good decision. But isn't that what insurance is all about - protection against the unexpected?.

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