Hi Kilkennyman,
I’ve not much to add to Vincent's excellent post however:
Be aware that most brokers will offer you a product as a solution such as a tracker bond or some fund or other. In return for selling you the product they are paid a commission.
An adviser who has conflicts of interest is likely to give self-serving advice. The most common conflicts are the widespread practices of the adviser being compensated by commissions on products they sell to their clients. In such a situation, one shouldn’t be surprised that some financial advisers may recommend products which maximize their own commissions, rather than those which are in your best interests.
An alternative way of looking at financial advice is to find someone who will advise you on a suitable financial planning and investment strategy for a fee.
1) Financial Planning -
Financial Planning relates to areas such as tax management, life assurance, income protection and retirement planning. It is also about bigger personal planning issues associated with goal setting and questions around what makes each investor different. A good adviser should consider in detail each investors own particular risk capacity and their particular hopes and plans for the future. Only then should they consider devising a suitable investment strategy that will help you to achieve your financial aspirations.
2) Investment strategy –
In the past, this has traditionally meant attempting to find a specialist investment manager such as a stockbroker or fund manager, and hoping that they will be successful in identifying the next hot investment.
The conventional approach to investment often relies on spurious assumptions and false hopes.
It requires a forecast about the future. However, this thinking is flawed. Financial Advisers cannot predict the future, they can only speculate, and they do so with your money – speculation can cost you dearly.
A better approach relies not on forecasting but the principle of ‘asset class investing’. Countless studies have shown that the greatest contribution to investment returns is the decisions made around asset allocation – that is to say how much is invested in cash, property, bonds and equities.
The key to success when investing is to maintain a disciplined approach based around matching an appropriate mix of assets to your own particular risk capacity.
Most of the time there is no need for the expensive active management strategies of a traditional stockbroker or fund manager and the best results come from sensible diversification and risk management, at a reasonable cost.
All the best,
Marc
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