When Should You Get Financial Advice?

The need for financial advice is as evident as the fact that the stock market is risky. But when should you get financial advice? 

Financial advice from a regulated professional is one way that we can help navigate the uncertainty of financial markets, and the volatility of investment returns. 

Should you get financial advice at the outset? I.e. when you decide that you would like to refresh your financial position and establish a financial plan. Or should you get financial advice only when you’ve performed a lot of research yourself and have a clear idea of what you’d like to do? Or somewhere in the middle?

The answer depends. I’ll use the rest of this article to give my opinion on when is the optimum point to get financial advice in a few example scenarios. 

When should you get financial advice?

Scenario 1: Young adult planning for retirement

If you’re just starting out in your working life, then you may find yourself able to save a small amount each month. Depending on whether you’re privately renting accommodation or living with your parents, this monthly amount might vary significantly. 

When I began work, my salary was only marginally higher than my rent, therefore I couldn’t afford to save much more than £50 per month to begin with, but this grew over the years. 

When is the right time to get financial advice if you’re at the bottom rung of the career ladder? The right answer could be ‘not now’. 

Financial advice is relatively expensive, costing between a few hundred pounds and a few thousand pounds. A financial adviser could guide you through the steps of making a financial objective (e.g. saving a deposit for a house), and set out the steps to get there (saving cash in a Cash ISA or Lifetime ISA for example), but I expect that you’d be disappointed to pay for such advice. 

For short term saving objectives, a cash account is probably your best option, because your short time horizon will make buying shares and corporate bonds inappropriate – there’s just too great a chance that they will have lost, rather than gained in value over a short period.

There are a wealth of useful resources online to help you in your short term saving journey, which are so rich and helpful that you may find that you don’t need to find a financial adviser for additional help. 

Scenario 2: Middle age adult approaching retirement date

Midde aged adults who have worked most of their working lives will have lots of things to consider as they approach retirement: 

  • What should my savings and investments be doing to produce a retirement income?
  • How much can I expect to earn in retirement?
  • What decisions should I take with my workplace defined benefit or defined contribution scheme pension?

At the same time, someone in this position is likely to have pensions and savings of more than £100,000 and pots of money scattered across several accounts. 

Add into the mix the fact that they may still have financial dependents, and/or complex family structures. 

This is the perfect opportunity to invest in financial advice. All of these questions and issues may sound complex, but a qualified adviser will be able to break them down into the constituent parts, and develop a plan that tackles them one by one. 

Their objective is to ensure that your money is doing exactly what you need it to, to align with your own retirement objectives. Retirees can often sleepwalk into a completely inappropriate financial situation at retirement, simply because they carry on as if an earth-shattering life event has not just occurred. In reality, a lot has changed, and therefore your money should change to. An adviser can help you with that.

Pensions in particular can be particularly hairy areas with legal pitfalls hidden behind nuanced terms and conditions. Specialist pension advisers can help you decide what decisions to make regarding your pension, to ensure that you do not forfeit an advantageous position. 

Scenario 3: Small windfall to invest

You may be lucky enough to land upon a modest sum of money out of the blue. It could be a scratchcard win, a large bonus at work or even an unused redundancy payment.

When this happens – people often make a high level decision as to whether to spend it, or save it. If save, investments often come to mind, as it feels good to tuck away this windfall in a place where it will generate a higher return. Because it was not ‘earned’ in the same way as salary, I find that people’s risk appetite is often a bit higher when investing in a windfall. 

When is the right time to get financial advice for a small windfall? The answer depends upon the value. Financial advisers have a minimum charge for advice – even if the advice is as simple as telling you a single fund to invest it in. This means that if the windfall is too low, the adviser’s fee will eat up quite a significant part of it. 

For this reason, advisers will often be honest and upfront and explain whether or not they feel that their services would be appropriate. I would recommend that you ring around and speak to a couple to understand what their fees would be and whether you think this represents a sensible trade-off. 

Overall – when should you get financial advice?

The answer to when should you get financial advice is that you need to pay attention to your circumstances. For complex situations involving a sum of money (£10,000+), it’s always the right time to speak to a financial adviser. 

In terms of how much research you should do upfront – I recommend you perform as much research as you want to. If you sign up for an investing course, and invest a bit of time upfront, you may feel empowered enough to go without advice, and save £1,000 in fees by doing so. 

However, if you just want to quickly make a decision then heading to an adviser as soon as your circumstances have changed is a sensible option too. 

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Comments 1

  1. Hi, I want to become an FCA permiter. please let me what is the courses and how can I enroll for learning and exams?
    many thanks
    Yaser

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