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The real benefits of financial advice

12-Nov-2018

Time to read: 8 minutes

Fed up with low interest rates yet not sure what else to do with your money? Getting financial advice could help you decide. If you think it’s something you probably ought to do but keep putting off, why procrastinate? Paying for a professional opinion to help you start investing could be a great way to give your future a present.

According to a report from the Financial Conduct Authority, in the 12 months to October 2017, just over 6% of UK adults took regulated financial advice. And yet the report suggests that 25% of UK adults may need financial advice as they have more than £10,000 in either savings, investments, or a pension they plan to access within 2 years.1

When asked why they take advice, the most common reason people cite is ‘I’ve had advice before’. But where does this advice habit come from? And with the cost and risk involved, what are advice-seekers getting actually out of it?

Contrary to what you might think, it’s not just about money. The real benefits of seeking advice are far broader than that. 

So if you’re one of the 25% who may benefit, let’s explore what means to take advice and what it might be able to do for you.

 

Benefit 1: It could help you get more from your money

At the risk of stating the obvious, a key reason why people seek advice is to try and get their money to work harder. What you might find a little more surprising is the degree to which it can work.

In 2017, the results of a long-running study into the outcomes of financial advice were released by the independent think tank, International Longevity Centre. To examine the long-term effects of financial advice, the study compared the savings in 2012-2014 of those who received financial advice in the 2001-2007 period against the savings of those who didn’t.1

In the wealthier subset of the study, those who took advice saw their savings grow by 17% more than those who didn’t – despite this being the period in which we had the global financial crisis. Yet the impact of advice was even more striking for those on modest incomes.

In what the report refers to as the ‘just getting by’ group, those who took advice saw their savings grow by on average 39% more than those who didn’t – with an average increase of £14,036. This just goes to show how everyone could potentially benefit from taking advice, even – or perhaps especially – those who are less wealthy.

Now, when we talk about getting advice to make your money work harder, we’re essentially talking about getting investment advice. And when it comes to investing, you need to be aware that there are risks involved, which means you may not get back what you put in. 

You also need to remember that just because in the report the advice-seekers’ investments performed well between 2001 and 2014, this is no guarantee that investments will perform that way in the future.

The reason the report covered such a long period of time is because investments should be seen as medium-to-long-term commitments. This means if you’re thinking about a taking out an investment, you should be prepared to hold it for at least 5 years.

And one more thing you need to know. There are always fees involved with taking investment advice and most services require a minimum investment. 

 

Benefit 2: It could save you time

OK, assuming you’ve decided you’re ready to invest for 5 years or more and are prepared to accept a degree of risk, how do you go about it?

Yes, if you put your mind to it, you certainly could figure out how to invest. But acquiring the right level of knowledge to make an informed decision on what to do with your money is not a quick task. By delegating to an adviser, it could help free up your precious time and energy to spend on something else. 

And if the reason you haven’t done it already is you don’t find the task very appealing, then offloading this task to another can make you feel rather good about life. Like the sweet-relief feeling that comes from getting someone in to do your decorating.

There’s a cost involved with instructing a professional to do some work for you, of course there is. But if you have other things you’d rather do with your time than spend countless hours researching online, an advice fee could be a fee worth paying.

 

Benefit 3: It could simplify things

If you’ve never invested before, it’s easy to get mystified by the size of the task. It can feel like a whole other world. It certainly speaks another language. So if you’re not sure where to even start, an advice service could help to cut through the noise.

Whether you take advice online, by phone or face-to-face, it can help to reduce the task to a manageable size. You’ll be asked a set of straightforward questions to clarify what’s relevant, before having your options helpfully streamlined for you.

Bear in mind that different advice services charge different fees and usually have a minimum investment level as eligibility criteria. To find out about getting investment advice from HSBC, see our advice options page.

 

Benefit 4: It could help you take action

Ever struggle to decide what to watch on Netflix? The modern world offers us a huge amount of choice. But while choice can be amazing, it can also be stressful. The more options we have, the more taxing it can be for our brains to process, the higher the potential for anxiety and – often – the slower our decision making. 

Consulting a professional can be a great way to sidestep this ‘decision paralysis’ and take action. And why’s that so important? Because when it comes to investing in your future, time is money. 

The sooner you start making your money work harder, the sooner you start earning interest on your interest and the bigger your savings will get. Remember, we’re talking about investing here which means you’d need to comfortable with taking a degree of risk.

By the way, you’re not the only one who get decision paralysis. Financial advisers do too, which is one of the reasons why we limit the number of funds our advisers can select from. HSBC has specialist teams of investment professionals – some who carefully select the investments we offer and others who actively manage them – leaving our advisers free to focus on you and your needs.

 

Benefit 5: It could increase your confidence

When you research something yourself, you’re often left with a nagging doubt that you might not have come to the right conclusion. You know, that ‘what-if-I-missed-something?’ feeling. 

Yet when you receive a professional investment recommendation, you can feel more confident and reassured that the investment decision you’re taking is well-informed one that’s suitable for you right now. 

 

Benefit 6: It could help you feel supported

Financial decisions can be difficult to make on your own. And they’re rarely just about you. Either directly or indirectly, they can also affect your partner or family – which can add to the pressure.

The pace of modern life means our brains are constantly being pulled into short-term activities, which creates short-term thinking. And that makes it difficult to focus on what you want your future to look like – and what it will take to get you there.

By consulting a trusted adviser about those longer-term decisions and discussing with them the risk and the time commitments involved, it can feel like someone’s got your back. And not just anyone. In seeking their professional and objective view, you’re benefiting from their years of knowledge and experience.

 

So, could advice be right for you?

Being able to take care of your own future shouldn’t be the preserve of the few. We want more people to learn how to do it.

We’re keenly aware that a large section of the population needs financial advice to help them plan for a better future. Yet the problem with traditional financial advice is that many people can’t afford it. We don’t think that’s right.

Thanks to new technologies, we’re making high-quality, regulated financial advice accessible to more people. You can now get online investment advice for a fee of just 0.5%. That means if you made the minimum investment of £1,000, our advice would cost you just £5 – that’s the price of a coffee and a piece of cake. 

With our online advice service, there’s no need to book an appointment or pick up the phone. You simply answer a series of questions and we’ll help you work out how much you can afford to invest, how much risk you’re comfortable with and – perhaps most significantly – whether investing is right for you right now. And there’s no-obligation: you only pay a fee if you follow our advice.

If you’d prefer to talk to us about ways to make your money work harder and you’re thinking of investing £15,000 or more, you can receive investment advice by phone from the comfort of your own home. Our financial advisers can help you identify your preferred level of risk then recommend which of a series of diversified HSBC funds is right for you.

If your needs are more complex and you have £50,000 or more in savings and investments, you can meet with one of our advisers for a full financial review. From protecting your family to passing on your wealth, they will spend time getting to know your current plans and future ambitions. They can recommend from a wide range of products that we’ve hand-picked from a limited number of carefully selected providers, including HSBC.

Bear in mind that as well as the one-off fee for our advice, the investments we recommend usually include ongoing management charges.

If you’d like to find out more about the wider advice industry, including how to seek independent financial advice, you could visit moneyadviceservice.org.uk

 

Choosing your own investments

Of course, not everyone wants or needs financial advice. Many people are perfectly happy making their own investment decisions.

If that’s you, you can buy funds via our online fund platform, Global Investment Centre, or shares via our online sharedealing service, InvestDirect

For an overview of the different ways you can invest in an ISA, take a look at our stocks & shares ISA page. Or, if you’d like to read a helpful introduction to the whole subject, take a look our beginner’s guide to investing.

 

1 Source: Financial Conduct Authority, 'The financial lives of consumers across the UK' survey, 2017

² Source: International Longevity Centre UK, ‘The value of financial advice’, 2017

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