The financial watchdog has just launched a consultation on introducing a new core investment advice service to the market. The basic idea is that reducing regulation around this form of simplified advice will result in lower fees, and so more consumers choosing to invest rather than being stuck in cash.

The issue is that fully fledged, holistic advice currently costs around 1% to 3% of the investment sum, often with minimums of £500 or more. Clearly this only becomes economic for investors with bigger portfolios. At the same time, it’s never been easier to be a DIY investor with all the tools and information now available online. But while many investors are now confident about going it alone, there are still times when seeking professional financial advice is the sensible thing to do.

WHEN CAN ADVICE BE USEFUL?

Generally speaking, financial advice is most called for when there are large amounts of money on the line, and a great deal of complexity. These two categories can often intersect when it comes to pension planning. Everyday pension saving doesn’t really necessitate the services of a professional adviser, for instance if you simply want to set up a regular SIPP contribution in addition to your workplace pension. But if you’re a high earner bumping up against the annual allowance, or the lifetime allowance, an adviser could earn their crust by helping you avoid the nasty tax charges that follow from breaching these allowances.

Transferring out of a defined benefit pension like a final salary scheme should also be an endeavour considered under the guidance of a specialist financial adviser. The value of the guarantees provided by a defined benefit scheme can be hard to uncover and assess. Features like inflation-linking, a spouse’s pension, and early retirement options can often be overlooked or underestimated. A professional financial adviser can help you get to the bottom of these issues, as well as providing an idea of the growth rate you would need on your assets to match the income of your defined benefits scheme, if you were to transfer out.

WHY ADVICE CAN HELP AS YOU APPROACH RETIREMENT

You may also find the services of a financial adviser helpful as you approach retirement. This is a tricky period to negotiate in which you will transition from earning an income to relying on your assets to cover your expenditure. An adviser can help you decide how to draw an income from your pension without taking too much risk. They can also conduct a cashflow analysis to ensure you’ve got enough assets to fund the retirement you need, and what steps you might be able to take to improve the situation if not.

Mitigating inheritance tax is another area where an adviser should be able to provide some meaningful help. This is an extremely complex area and mistakes can be costly for your beneficiaries. An adviser can help you make the most of your annual gift allowances, setting up trusts for beneficiaries, using pensions, or investing in AIM shares to try to reduce your liability. This is also a pretty uncomfortable subject area for families to discuss, and it can actually help to have a professional adviser there to guide the conversation in the right direction.

You may also simply find yourself lacking the knowledge or the inclination to select and run your own investments. In this case a financial adviser can help you pick a portfolio, or fully manage it on your behalf. This can be particularly economical for those with large sums to invest, especially when combined with some tax planning which helps make sure any investments are held in a tax-efficient manner. There may also be certain life events where you need an adviser to run the rule over your finances and get them into shape, such as following a divorce, or if you’re moving overseas.

When many people think of financial advisers they probably conjure up an image of someone in a pin stripe suit, with a flash watch, a Jaguar, and a distinct lack of interest in their clients’ financial affairs if it compromises their tee-time on the golf course. There’s probably a kernel of truth to this stereotype but it harks back to a bygone era of the 1980s and 90s. Today financial advice is much more professional than it used to be, thanks in no small part to increasing levels of regulation over the last 20 years or so.

FINDING AN ADVISER IS A SIMPLE PROCESS

Finding a financial adviser is also straightforward nowadays with websites like unbiased.co.uk letting you search for a financial adviser online, depending on what exactly you need help with. But also don’t discount sounding out friends for any positive or negative experiences with financial advisers.

Often the best financial advisers won’t need to market themselves because their clients recommend them so widely. Most advisers will offer you a free consultation to assess what they can do for you and what the costs will be, and this also provides a good opportunity for you to evaluate them too. As with any service you’re getting a quote for, do spend the time to get a consultation from a number of advisers, so you can pick one who’s right for you.

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