Tuesday, 17 April 2018

Understanding the role of professional financial and investment advisers

Pitfalls to avoid when looking for a professional financial adviser

April 17, 2018: Many people already seek the services of an expert financial and investment adviser. But for some, knowing where to start and who they should turn to, can seem a minefield. This is made more challenging due to the nature of long term investing – you don’t know if you have made the right decisions until years later. So, finding someone you can trust is all important.

The first thing to be clear on is who has what role:

A financial adviser is there to understand your needs and build a financial plan to help you reach your financial goals. Financial advisers have a broad knowledge of all the various financial products available and the latest financial and tax regulation. As well as helping to ensure your investments are held in the most tax efficient way, many will offer holistic financial planning, where they will advise you on all aspects of your financial needs.

An investment expert will select and manage the investments within your financial product. An investment expert could be someone who works within your financial adviser firm or, increasingly, it could be an external company who specialise in managing investment portfolios on behalf of customers. These are referred to as Discretionary Fund Managers (DFMs).

Investment managers at DFM firms will often work closely with financial advisers, recognising that a client’s portfolio may form only part of an overall financial planning strategy. An investment manager’s decisions are usually underpinned by research carried out by in-house research teams, who have extensive expertise in researching assets, such as equities, collective funds and fixed income markets.

Quilter Cheviot is a DFM operating in the GCC. Mark Leale, Head of Quilter Cheviot’s Dubai representative office, says: “Using a DFM to provide bespoke portfolio management is growing in popularity among high net worth investors in the Middle East who require a tailored approach to their investments to help reach their financial goals.

“Combining our investment management expertise with the skills of an experienced financial planner can be an ideal solution to meet clients’ investment needs, enabling the adviser to focus on the financial planning aspects, while we focus on managing the investments.”

Financial solutions provider, Old Mutual International, has been providing solutions to clients through advisers in the Middle East and Africa region for nearly 20 years. The firm has seen the sector evolve a great deal in recent years with financial advisers keen to bring in experts such as DFMs.

Cheryl Gleeson, Head of Proposition at Old Mutual International said: “We are seeing a shift in the way adviser firms in the region run their business. More advisers are now focusing on the ongoing needs of their customers and are adapting their processes and remuneration structures accordingly. As regulatory change intensifies in the region we expect to see more advisers looking to outsource investments to investment experts as a way of de-risking their business and helping to ensure positive outcomes for their customers.”

Pitfalls to avoid when selecting a financial adviser.
Don’t take fancy marketing material on face value – seek recommendations from existing customers, they are best placed to share their experiences with the firm.
Share your financial objectives – ensure the adviser takes the time to understand your financial circumstances, objectives and attitude to risk and recommends a solution suitable to your needs.
Avoid financial advisers who do not offer an ongoing advice process – financial advice should be a continual process to check you are still on track and your investments are performing as expected.
Ask who is responsible for selecting your investments– selecting the right investments and building a portfolio for a customer requires expert skills and knowledge. Does your financial adviser have the necessary skills and knowledge do this or does the firm have an in-house investment process run by investment experts or outsource to investment professionals (such as a DFM).
Don’t invest in anything until you read the small print – this includes understanding what your commitment is, what the risks are, whether you can lose money, how long you have to wait until you can access your investments and what the upfront and ongoing charges are.
Check the adviser’s experience and qualifications - some advisers give specialist advice in certain areas and some offer holistic financial planning. You should ask if they have the experience and or qualifications to match their expertise.

Investors should remember that the value of investments, and the income from them, can go down as well as up. Investors may not recover what they invest. Past performance is no guarantee of future results.