When asked about how stressful the responsibility can be for investing advice for the public, I balance the thought with how stressful my life would be should I not be qualified to make the decisions I do.
It is only with a healthy cynicism that I have been able to break through worlds of emperors’ new clothes and industry self fulfilling charges.
Here is an example which although it may appear complicated is worth reading.
We are all busy so the thought of spending time doing our own legal, accountancy and financial services work would be catastrophic. And so we trust our financial adviser to make financial decisions for us.
At your bank unfortunately you will simply be given a managed fund (more on those another time as I have my bit between my teeth on another subject).
Keen to beat this underperformance an adviser will look to get the best funds in the market place and choose a vehicle (a product) within which to manage your money.
Up front, financial advisers should explain the total cost of your investment to you, but for varying reasons they either don’t or cannot.
For those of you who have asked a financial adviser to invest your capital for you, it may well be worth a chat to see what the true costs are and to investigate the points below.
The concern lies with a new breed of investments called distributor influenced funds (DIFS), or indeed any form of investment where the financial adviser farms out the investment to another firm. A distributor influenced fund is typically where a financial adviser sets up their own fund but has someone else managing the money for them because they don’t have the expertise.