Ongoing advice on investment products

By Richard Brazier  |  7 March 2019

Many times I am asked by prospective clients why they should pay for ongoing advice on investment products. Surely, they reason, once the plan is set up my work as an adviser is completed and no longer necessary. So long as I have done my job well the fund will be invested in line with their agreed risk profile and will look after itself, in a contract that has been identified to meet their requirements.

Most of the people that I meet can absolutely see the benefits of the initial advice that we provide. They can see that we can help to identify their financial needs and quantify these into simple to understand objectives. From there we can recommend products that meet these objectives, and having agreed their attitude to investment risk, a portfolio to match this risk profile.

But why I am needed going forwards? Why should I pay you an ongoing fee once you have you recommended a contract and portfolio?

Of course, these are fair enough questions and I would liken it to how we look after our own cars. Once you have decided on the car you want and all the factors that come into this decision, most important being the colour of course, the garage’s job is done? Much as the same as ours is when you set up the recommended contract.

But is the garage’s job done at this stage? Much like an investment plan there are costs of running a car that can’t be avoided. With a car you will always have to pay for fuel and tax, and for an investment plan you will always have to pay for the annual contract charges and investment fund charges on a yearly basis.

You do, however, have the choice as to whether you pay for regular servicing on your car. If you elect to avoid this cost, the chances are your car will continue to work and get you from A to B. But you do run a greater risk of the car breaking down, especially over the longer term. Of course, just because you get your car serviced doesn’t guarantee it won’t break down but you are increasing the odds that it won’t.

And the same is true with paying for an adviser to regularly review your investment contract. This service means that you at least once a year get to speak to your adviser to review your plan. During which they can discuss whether your objectives have changed, whether your risk profile has changed and if your circumstances have changed to name a few. From there they can advise you if any changes should be made to your contract or investment portfolio. You will receive regular updates on how your investment is performing and you have access to your adviser throughout the year on an ad hoc basis.

Like the car, I can’t promise that by paying for an ongoing service will guarantee huge amounts of growth each year, much the same as a regular service doesn’t guarantee the car won’t breakdown. However, the ongoing service should provide reassurance that you have an adviser that is committed to looking after your investment contract. They will be able to ensure the investment continues to meet your needs and objectives as these inevitably change over the years.