SimplyFinance - Investments

What to expect from a Financial Adviser

2009-12-15T00:00:00Z

At a time when you are planning your finances for now and the future, who should you turn to for the best advice? For people with both the time and inclination, the internet is a great resource, particularly for information. However, for the majority, seeking professional advice before acting is essential.

The value of consulting an expert can't be underestimated, considering the fact that since the State Pension was introduced in the early 1900s, a new piece of legislation has been introduced every single week!

Financial advisers study for many years to attain a level of knowledge and expertise. They have access to the latest information on what?s available in the market regarding financial products, funds and legislation.

When dealing with something as important as, for example, your pension, you need to be confident that the advice you get is the most current and appropriate and covers all the options available. This is because there are a variety of ways to fund for retirement, not just traditional pensions - and not all advice points to a product. Equally, people might read a newspaper and be forgiven for thinking that the only way to invest is through an actively managed investment fund, while there are - in fact - other ways. Unless your research is thorough, a little information can be a dangerous thing!

Unfortunately the relatively recent history of personal finance advice has affected the level of public trust in the advice profession. Failures including the collapse of Equitable Life, pensions miss-selling and the closure of final salary pension schemes are just some of the issues that have blighted the sector. But while some people may have had bad experiences, it's not always because of their adviser. The vast majority of consumers find professional advice an invaluable component of their long term financial planning.

Nevertheless, the Financial Services Authority (FSA) has launched the Retail Distribution Review (RDR), a process aimed at restoring consumer trust in financial services.

Two key proposals of the RDR are first, removing the potential for "commission bias", so people will pay for the advice directly rather than the adviser taking a commission from the sale of a financial product.

Second, is raising the minimum level of qualification for advisers. Research by the Chartered Insurance Institute shows that consumers expect advisers to be professionally qualified to at least degree level, whereas the current entry level is just "A" level. Of course, quite a lot of advisers are qualified beyond the minimum already and there are over 1,800 Chartered Financial Planners, which requires qualifications at degree level.

Making financial advice a more challenging profession to enter by requiring a higher level of professional expertise should give consumers reassurance that they are getting advice from a competent person. But professional standards are not just about exams. The RDR will mean tougher rules on maintaining knowledge and skills and also closer monitoring of behaviour to make sure advisers behave ethically and with integrity.

So, what can you expect in practice from an adviser?

When seeking an adviser it is important that you choose someone you feel comfortable with. Your adviser will help you plan your finances for possibly the next 30 years, so it's about building a relationship that will support you as your circumstances change. Ask friends and family for recommendations or seek a referral from another professional such as a solicitor or accountant, if you know one.

Financial advice is fast becoming a trusted profession and with thousands of advisers en route to Chartered status it is now much easier to find an adviser you can trust. Visit www.findanadviser.org to find a trusted adviser local to you. Don't be afraid to talk to 2 or 3 before deciding - a crucial factor in a successful adviser / client relationship is good communication!

See also: Mark's tips on How to Find a Financial Adviser

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Mark Hutchinson MBA, Head of Marketing, the Personal Finance Society

Mark joined the Personal Finance Society in November 2008. He is responsible for promoting the organisation to a range of stakeholders, communicating the events and services available to members and delivering an overall membership package that is highly valued.
Mark's background marketing financial services stretches back to 1989. He has recently held senior marketing roles within AIG Life and Close Investments. Mark completed his MBA in 2002.

Is Life Planning the New Direction for Independent Financial Advisers?

2010-05-11T23:00:00Z

What is Financial Life Planning?

Financial Life Planning is an approach to investing and a strategy that covers everything from health care, taxes, insurance to family legacy. "You can't deal or manage money unless you know where you're going with your life and similarly you can't change your life without addressing your finances. Money and life interlink," said Jeremy Deedes, director of the Yorkshire-based Planning for Life Ltd.

"Everyone who deals with money is under the spotlight right now" writes Philip Calvert, founder of the Financial Adviser social networking site IFA Life, "and that's where Financial Life Planning comes in". He acknowledges the fact that life planning has been offered for years now however stresses that those IFAs who offer it now hold a competitive advantage and describes Financial Life Planning as "the most significant opportunity the financial advice industry has even seen."

How could you benefit from Life Planning?

According to the Kinder Institute of Life Planning, those on a Life Planning scheme report:

* A significantly reduced workload
* Increased income (Life Planners are in the top 2% of earners in the profession)
* Greater profitability from your earnings and investments
* More time available for your family and hobbies
* More time to develop new income streams from your expertise

What is an Independent Financial Adviser?

As Independent Financial Adviser helps you understand and meet financial objectives in areas such as pensions, investments and savings. Through making use of their experience with a range of financial products and keeping abreast of changes to markets, the IFA is able to match financial options with the specific needs of their clients. Also, IFAs can help you to handle your financial portfolios should life-changing events occur, such as marriage, divorce, parenthood or a change of employer or business.

What are the key skills for a financial life planner?

According to Deedes, a life planner needs to:

* have the ability to listen empathically and understand the client's circumstances and goals
* help the client work out for themselves what they want to do whilst leading them through the process of life planning
* carry the responsibility of being there for the client when life gets difficult or changes its course

How Green are your Finances?

2009-11-19T00:00:00Z

Ethical Finance is not currently a priority for more than half of Britons, according to research organisation EIRIS. The online survey aimed to explore the attitudes of the British public towards ethical financial products in the aftermath of the credit crunch.

One of the questions asked was whether those surveyed were interested in the ethical credentials of the products and services they buy. Only 44% said that that they were, and three-quarters of this interested number would take the ethical aspect into consideration next time they looked for financial products and services.

However, the survey seems to have raised the issue of awareness; 62% of respondents could not actually name one ethical financial product or service, and surprisingly almost half of those who said that they would consider ethics as part of their decision-making could not name any either.

So what are the reasons for the lack of knowledge or interest in ethical finance? According to the survey, 46% of people feel that "there is not enough information available on how they make a visible difference in the world", whilst 35% "do not trust the claims of financial providers".

When it comes to perception of the ethically-focused products, only 15% felt that they would perform less well than similar standard products. This shows that although there is a lack of concrete awareness about the products available in the market, people do feel generally positive about ethical finance.

Mark Robertson, Communications and Development Manager at EIRIS said: 'Our survey provides firm evidence of growing interest in ethical finance, suggesting that the message that it is possible to both make money and make a difference when investing ethically is starting to get through to consumers. But levels of awareness, trust and confidence in ethical finance are low. The industry must respond with greater transparency and provide more information on how saving and investing can make a positive difference'.

A new website launched by EIRIS, www.yourethicalmoney.org aims to make it easier for consumers to make ethical and environmentally-friendly choices in their finances. Users can search the site for bank accounts, investment opportunities, credit cards, pensions and other products that match their ethical concerns. There are also tools and letter template for those who wish to make an active difference. So if you feel that you would like to do more, but perhaps did not know where to start, now is the time to act.

Get the Most from your Child Trust Fund

2009-08-18T23:00:00Z

Although the 'green shoots' may be showing now across the world's economies, parents are clearly worried about the future effect that billions of pounds' worth of debt is going to have on the lives of their children. The Yorkshire Building Society has reported a 20 per cent rise in applications for Child Trust Funds in the past month.

A Child Trust Fund is an investment product that ensures that parents can use to provide their children with a cash lump sum when they reach 18, which will ensure that, whatever the financial climate, they have a head start with their savings.

However, the Yorkshire's research also shows that a sizeable number of parents are using other savings accounts to prepare for their children's future. Brand recognition is cited by parents in the survey as the main factor when choosing a child savings account, with 'the interest rate offered' coming in a surprising second. However, by using a well-known brand for their savings purely out of familiarity, parents could be losing out on valuable interest.

How can a Child Trust Fund benefit my child?

A Child Trust Fund is a long-term savings and investment account for children. It was introduced by the government for children born on or after 1^st September 2002. There is no tax charged on interest earned through the account, and £250 is added to the child's account when it is opened. Although the fund must be started by a parent or guardian, the money legally belongs to the child, and they can access the savings when they turn 18. Lower income families may be eligible for an additional £250 payment from the government. Visit the Child Trust Fund website for more information about this.

There are three different types of Child Trust Fund to choose between; savings accounts, accounts that invest in shares and stakeholder accounts. Click on the link to find out more about the different types of Child Trust Fund. The type that you should choose depends on whether you are prepared to take a financial risk in order to potentially see greater rewards. As with other investments and savings accounts, the highest interest rates can be found on the higher-risk accounts, but you can move between accounts at any time so your initial decision does not have to be final.

Shop Around for the Best Interest Rate

Your choice of provider does not need to be set in stone either, and therefore parents are encouraged to be proactive and shop around at regular intervals to ensure that they are getting the best possible deal for their children's savings.

Chris Edwards, Yorkshire's Head of Savings&Mortgages said: "Child Trust Funds are a really good way for parents to save for their child's future. However, we're urging parents who have existing Child Trust Funds or those who are in the process of choosing a provider, to shop around for a good deal". According to the Yorkshire's own data, over half of all parents surveyed (52 per cent) who have children eligible for a Child Trust Fund do not realise that they can transfer to another provider.

One current offering is the Yorkshire's own Child Trust Fund. According to Edwards, just £10 per week saved in a Yorkshire Building Society Cash Child Trust Fund since the child were born would be worth approximately £11,740 when the child reaches 18 but a provider paying just 1 per cent less in interest [in total, over the life of the fund] would mean that they would get just £10,870, an £800 reduction in lost interest over the duration of the fund." This example illustrates the need to be proactive in order to get the best savings - the Child Trust Fund can be moved at any time, so it's up to the providers to remain competitive. The child can themselves make decisions about how the money should be managed from the age of 16.

Check with the fund provider about any fees that you will be charged over the duration of the account. Unless you are completely certain about the type of Child Trust Fund that is best for you, it's best to consult an independent financial adviser before committing to an investment.

Invest Time as well as Money in your Pension

2009-08-23T23:00:00Z

As many as 2 million UK adults do not know which provider is managing their pension, and which investments are being made with their money. Research by asset management company Lincoln Financial Group has also found that a surprising 48 per cent of UK pension holders do not review their pension options once the initial investment has been made. This indicates that pension holders are not fully aware of their rights and of the benefits that can be gained from shopping around. So what are you losing out on by not paying enough attention to your investments, and how can you maximise your return on the money that you have so carefully saved?

If you are a UK personal pension holder, you would usually purchase an annuity with some or all of the savings that you have accumulated through your personal pension scheme, so that you will have an annual income throughout your retirement. You don't have to do this straight away, although you are required by law to purchase an annuity product by the age of 75. The majority of pension contracts that are in place now have an 'open market option'. This means that you could buy an annuity from any provider on the market, rather than sticking with the company that provided your pension.

Although a few pensions plans will have restrictions, it is usually your right as a consumer to choose the open markets option, although these figures from Lincoln suggest that very few people exercise this right. Unfortunately, this could mean losing out on thousands of pounds in retirement income, since the fact that a company offers a good pension scheme doesn't guarantee that their annuity rates will also be competitive.

Simon O'Connor, Head of Products and Marketing at Lincoln Financial Group, said: "With people not taking the time to review their pension options, it's not surprising that the majority are still unaware of the Open Market Option and so fail to shop around to get the best annuity for them on retirement. More needs to be done by the Government and the industry to ensure consumers are aware of their annuity options and make sure they get the best retirement product for their circumstances.

O'Connor continues: "Flexible annuity products carry increasingly important benefits in the current climate, such as helping to protect a pension pot against the effects of inflation and providing the option of an income guarantee." It's particularly important to choose the most financially beneficial annuity, because you cannot change providers once you have made your decision, or even alter the type of annuity that you have chosen.

One example of where you might be benefiting from swapping providers is if you suffer from a health condition such as asthma or a heart condition. You may qualify for what is known as an Impaired Life Annuity or an Enhanced Annuity, which pays the annuity holder a higher income to allow for increased healthcare and treatment costs. Not all providers offer this, so you would be in danger of missing out on this option if you only looked at the products offered by your pension provider.

If you accept the annuity that is offered by your pension provider, you're likely to only have to sign a few forms and the rest is then taken care of for you. Providers rely on the fact that most of their pension holders are going to take this easy option, rather than going down the more complicated route of shopping around. However, for the sake of a few months of research, you could be adding significant amounts onto your retirement income, so it is well worth getting quotes from a number of providers. If you are approaching retirement and would like use your open market option to find the best annuity for your financial circumstances, we would recommend speaking to an experienced financial adviser to determine the most suitable product for you.

8 Finance Websites that Make the World a Friendlier Place

2010-07-27T23:00:00Z

Having witnessed the collapse of many financial giants in recent years, most of us are far more familiar with the cut-throat world of corporate finance than we really wanted to be. In this ruthless, high-risk environment it's easy to forget that money-making and money-saving can still have a social conscience and a sense of community spirit. Here are 8 innovative finance websites that will help you save money, make better financial choices and even start chatting to your neighbours.

Loans and Investments

Zopa is a lending and borrowing exchange where members of the public lend money to each other. You can set up as a lender and set your own rate of interest, the time period over which you want to lend the money and also the level of risk that you are comfortable with. For example, a 'riskier' borrower would be someone younger or with a less solid credit history. Your money is split among a number of borrowers to mitigate the risk, and if a borrower misses a payment, Zopa will follow up with them on your behalf.

If you want to borrow money through Zopa, you must first be identity-checked, credit-checked and risk-assessed. Once accepted, you are placed into one of 5 'markets' (based on your credit-worthiness), and will then be able to get quotes for the amount you wish to borrow. You can borrow any amount from 1,000 GBP to 15,000 GBP and can choose a loan term from 12-60 months. Unlike borrowing through a traditional lender, you are not charged a fee for repaying a loan early. It is worth getting a copy of your credit report before you apply, so that you can correct any problems and maximise your chance of being accepted.

Lend with Care is a pioneering lending service set up by aid charity CARE International, which helps people to directly support entrepreneurs in the developing world. The entrepreneurs provide an overview of their business and detail the reasons why they need a loan, the amount that they need to borrow and their proposed repayment schedule. Businesses currently featured on the site include hairdressers, market stalls and tailoring services, and you can choose which person's business you would like to support.

You can choose to lend anything from 15 GBP to the full amount requested, and the recipient receives 100% of the loan that they requested; no administrative charges are deducted from the entrepreneur's loan. As the entrepreneurs repay the (interest-free) loan in full through a series of installments, you are able to then reuse your investment capital to help further entrepreneurs get their businesses started up in the future. Lenders must set up a profile on the website but you can choose whether to provide personal details or to remain anonymous. So you get the opportunity to have a positive impact on someone's life and get your money back afterwards - the perfect recession-proof good deed!

If you want to ensure that your financial decisions complement your social or environmental concerns, Your Ethical Money is a useful website to point you in the right direction. Not only does the site (a not-for-profit initiative run by EIRIS) dispel the myth that an ethical investment means compromising on your financial returns, it also helps you identify the companies that suit your principles. The site is separated out into different financial product areas, including Insurance, Mortgage, Investments and ISAs, Credit Cards and Student Finance.

If you are looking for an investment product, you can see a list of funds and the areas in which they invest. This means that you can easily find a fund that, say, avoids investment in arms companies or actively chooses to invest in companies that support environmental issues. If you're looking for a mortgage or a personal loan, find out whether your lender of choice practices responsible lending, and whether they also lend to corporations whose activities you don't approve of. If you are choosing a pension, you may wish to ensure that your pension fund only supports socially responsible companies - especially since your financial involvement makes you a shareholder in those companies. Whatever your cause, make sure that you're putting your money where your mouth is.

Community vouchers

The recession has made everyone think a little more carefully about how to get the best possible value for money, and as a result, money-saving vouchers have exploded in popularity in recent years. However, a new breed of voucher sites has introduced a community element, relying on group-buying power to offer one daily 'super-deal' rather than hundreds of smaller deals. Groupon UK and Living Social are two such examples.

The first of these, Groupon, offers a daily, heavily discounted product or service to members in every UK city. Every deal is specific to the city you live in, and could be for anything from 80% off the price of a three-course meal in a nice restaurant to 60% off a haircut or spa treatment. The deal is only valid for that day, and if not enough people sign up to buy the deal it is cancelled and you pay absolutely nothing. Living Social offers much the same service but 90% of the deals do not rely on a minimum number of people buying them, so they're pretty much guaranteed. Both of these sites reward you financially for recommending deals to your friends and family, so if you're passing on the deals to other people, make sure that they purchase them up via a link that you generate in your account.

Community sharing

Do you have something that you're prepared to lend, give away or help out with? Streetbank is a community project that connects you with other people who live nearby. Recent additions to the site include the offer of composing and songwriting lessons, the loan of garden equipment and a four-man tent and someone offering travel advice for people heading out to Hong Kong. Of course, it is all much more helpful if this comes from someone who lives in your local area, so when you sign up you are asked for your postcode, as well as something that you can provide to fellow community members. Freecycle operates along similar community-focused lines, except that it is a free marketplace for items that people no longer need. If you're moving house and don't have room to take that chest of drawers or sofa, offer it for free on Freecycle and someone will come and pick it up from you.

You sign up to a group in your local area and can then see all 'Offered' and 'Wanted' notifications for that group. You can limit the notifications to a daily/weekly digest or see them as and when they come through. Absolutely everything has been offered on the groups, so it's likely that if you want something, someone else will have one lying around in their house gathering dust! Another such site is The Freeconomy Community, where you can share tools, skills or even offer unused space to charities or groups for weekly meetings. The aim of all of these community sites is to get local people talking, helping each other out and saving money. And if they make the world a slightly friendlier place at the same time, that is certainly no bad thing.

A fresh start - make money and make a difference in 2010

2010-01-12T00:00:00Z

If you've resolved to lead a more sustainable lifestyle this year, now is the time to join the growing number of people who want their money to do more than simply produce a profit.

Ethical investment has come a long way since the UK's first ethical fund - the Friends Provident Stewardship fund - was launched a quarter of a century ago and amidst some scepticism in the City. At the time, many doubted that ethical funds would attract more than a few million pounds. But over the last decade, growing consumer interest in ethical issues has continued to drive demand and there's now over Â£9 billion invested ethically in the UK.

In the same way that increasing numbers of us are recycling our rubbish, choosing energy efficient appliances, buying fair trade products and switching our utilities to a green energy provider, more of us are now also considering green and ethical options as part of our financial planning.

Increasing numbers of us are as concerned about whether or not our investments fit comfortably with our environmental and social concerns as we are about securing healthy financial returns. A recent poll of UK consumers conducted by Ipsos/MORI on behalf of EIRIS found that a third of us are likely to consider ethical issues when buying a new financial product.

More recently, the credit crunch and ensuing financial crisis has focused attention on what really happens in some of the world's biggest banks and financial institutions. Many of us are still recovering from the shock of discovering how the complex web of sub-prime mortgage debt stretched across the world's banks. An event which very nearly led to a number of well-known high street banks disappearing altogether and which highlighted how a focus on short-term financial gains can lead to some very nasty consequences.

This has meant that banks which take a more long-term approach and which are transparent about who they will and won't lend to, look increasingly attractive to new investors. As a consequence, since the start of the credit crunch green and ethical banks such as Triodos, and the Co-operative have reported significant increases in the numbers of people looking for a bank that takes a more sustainable approach to lending and investing.

This all adds up to an increased level of consumer interest in responsible, green and ethical finance - and evolving expectations around how banks and financial institutions should prioritise ethical issues within their lending and investing our money.

EIRIS' public opinion survey showed that we want banks and financial institutions to prioritise protecting human rights, tackling climate change and investing in fair trade in their lending and investing activities. Avoiding "sin" stocks such as companies in alcohol, gambling or armaments - which have traditionally been the focus of ethical investors - was of less interest.

As our own expectations of ethical investment have evolved, so too have the green and ethical financial products. With over 90 UK green and ethical funds now on offer the good news is that there's a lot more choice available. Saving and investing ethically is no longer just about screening out negative areas like tobacco producers or arms manufacturers from investments.

Ethical investment offers real opportunities to make a difference by focusing investment in companies whose activities contribute to building a fairer, more sustainable world. Many of today's green and ethical funds take a thematic approach and focus their investment on themes such as climate change, urbanisation, water scarcity and climate change.

Others adopt an engagement approach and lobby the chief executives of companies they invest in, or use their vote at shareholder meetings, to bring about positive change. Increasingly, engagement is playing a key role as fund managers use their influence as shareholders to encourage companies to respond to the various environmental and social challenges they face.

However, many of us remain unaware of opportunities which exist to help us rearrange our finances to match our own ethical concerns. EIRIS has therefore launched www.YourEthicalMoney.org - the UK's first consumer website dedicated to green and ethical finance. The new new website aims to empower consumers to make green and ethical product choices that will help build a more sustainable financial future.

From banking to investments, mortgages to pensions, credit cards to child trust funds, the non-profit site provides free, independent and unbiased information on all aspects on ethical finance.

You can use the website to search for your existing bank or building society, as well as your insurance, credit card or mortgage provider, to find out how they measures up against a set of specially-developed green and ethical criteria. You can also search for investment products, including ISAs and funds that match their green and ethical concerns; learn about how their pension scheme invests or find an ethical child trust fund. The site also features a section dedicated to student finance and guides on financial exclusion and greenwash in financial product marketing.

The good news is that there are now more green and ethical financial products available then ever before. So if you are serious about leading a more sustainable lifestyle in 2010 now is the time to consider giving your finances an ethical makeover. You don't have to tackle everything at once. In the same way that you might drink Fair Trade coffee some of the time, by choosing even one green financial product, you are proving that doing something is better than doing nothing.