DIY Investor? Be warned …

Longhurst Limited

10th February 2020

Despite the advantages, relatively few people speak to a financial planner or adviser before making important decisions with their money.

A survey carried out by the Financial Conduct Authority (FCA) as part of their 2017 Financial Lives report found that only 6% of UK adults had worked with a regulated adviser in the past year.

Instead of taking professional advice, choosing to go it alone means you carry the responsibility of your decisions and their subsequent outcome.

New research from financial services provider Sanlam found a high degree of confidence among DIY investors.

They found that almost half of adults in the UK are choosing not to work with a financial adviser to plan their finances. The ‘What’s Your Number?’ report from Sanlam found 44% of those that haven’t spoken to a regulated adviser believe they can manage their finances themselves.

The lack of people seeking advice, and their confidence in making the best decisions without the help of an adviser, comes at a time when more than half of savers have doubts about their ability to retire on their timetable.

55% of savers fear they won’t be able to retire on time, and 77% admitted they haven’t set a target for their retirement savings. A timetable for retirement and knowing your number (how much you need to save to live the life in retirement you want), are two important duties fulfilled by financial planners.

The research found it was members of the older generations who were least likely to have spoken with a financial planner. 51% of over 65s have never taken financial advice, and 57% of people in this age group said it was because they could do it on their own.

One in five of those responding to the survey who had more than £100,000 in savings said they had never spoken to a professional financial adviser at any time in their lives.

The majority of those said they trusted their instincts to make the right decisions.

Unsurprisingly, the Internet seems to be a popular source of information in helping DIY investors make their financial decisions. It came in second place after speaking to family members.

But the research did show that those who seek advice are far more confident about their decisions. Advised clients were twice as confident as non-advised clients about being able to retire how and when they wish.

Advised clients were also far more likely to have set an income target for retirement, and to have allocated or passed on money to the next generation while they are still alive.

Going it alone is a bad idea for your retirement planning. Working instead with a professional adviser means getting answers to the right questions, carefully considering all of the options, and mapping out a retirement plan on your terms.

Longhurst Thoughts

When we meet a brand new prospective client, who to date has been a DIY investor and a future DIY retiree, we always suggest they ask themselves the following questions:

  1. Have you built your own financial plan? One that displays your short/medium/long term goals, including costs of each and expected life events?
  2. Have you held yourself accountable to the more challenging questions? Do you even know what those questions are?
  3. Do you truly understand the world of investment management? Understand how investment returns are derived? Factors to consider? How to deal with future changes? And which investment companies to actually use?
  4. Have you disaster planned? And we mean true disasters? On you. Your family. Children. Perhaps your business?
  5. Do you know the perfect balance of asset class and financial vehicles you need to ensure you first achieve, then maintain, financial independence?
  6. Are you relying on attempting to ‘time the market‘ or ‘stock pick‘? Or worse, are you relying on a friend or family member to do this guess work for you?
  7. Do you understand what the risk actually is? Is it the capital markets temporarily declining? Or it is running out of money? How does inflation impact this? And your asset class choices?
  8. Have you checked in (to your emotions) to understand how your behaviour (during both moments of market euphoria and Armageddon) poses the biggest threat to you personally derailing your future wealth?
  9. Do you hold any financial planning or investment management qualifications? Spent years, or decades, becoming a knowledgeable and successful investor?
  10. Do you first understand, and then keep abreast with, all changes to tax legislation and financial rules, such that you know for certain your private wealth is not going to be negatively impacted?
  11. What are you like at identifying investment scams and fraud?
  12. How often are you checking and maintaining your plan (point 1 above)?

In most instances, the outcome of the meeting is an admittance that perhaps they do need the services of a caring and empathetic financial planner.

And in those instances, we are there to help.

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