Does Independent Financial Advice Find the Best Deal For You?

After what feels like an eternity in recession, lenders are still not keen to lend and until the UK general election is over, it doesn’t feel like very much is going to change.

Pre credit crunch times had a mortgage market providing in excess of 25,000 different mortgage deals and loans galore, but today the UK markets have less than 5000 mortgage products on offer to the consumer.

So where did the credit crunch come from and could it happen again?

The US finance markets imploded in the 4th quarter of 2007 due to bad credit on the balance sheets of large financial institutions, which ultimately caused what is known as a credit crunch.

In a credit crunch, lenders stop lending and start hoarding cash because they are afraid of rising bad debts, leading to bankruptcies and loan or mortgage defaults. They charge higher interest rates in a bid to stem the flow of business or reject all but the safest loans.

The UK economy had been flooded with easy to access borrowed money since the mid 90’s, but the credit crunch meant that tightened credit would spell trouble for companies who needing funding in the form of loans to pursue their business plans and the consumer, who had become used to freely spending money they didn’t have, but could easily access on credit cards for expensive purchases such as luxurious holidays and smart cars.

The answer to could it happen again is a simple one, YES!

If an appetite for investment in more risky markets returns, which you have to say it will, then pushing the limits commercially to gain extra percentage market share and profit, could lead to the whole thing happening all over again. Having said that, it will take sometime to get there, as returning confidence to dabble by investors will be slow to return, but good times will return and the painful effects will soon be forgotten.

So, how is the man on the street directly affected?

UK mortgage and loan lenders are releasing more new products on a daily basis and the best mortgage deals of today are soon replaced tomorrow, but the good news is that the deals are getting better and better. The percentage levels that lenders will loan to is increasing and a 90% mortgage, with a competitive interest rate is out there to be found, if you know where to look.

So how do Independent Financial Advisers add value?

Independent Financial Advisers (IFA’s) are well placed to search the market, compare mortgage rates on their client’s behalf and secure a great mortgage rate to suit the borrower’s exact needs. In addition to finance, IFA’s can provide a good value for money service if you are looking to source good quality, value for money, but cheap life insurance cover and pension plans, with advice that is specifically tailored to the individual or families needs.

Financial advice is available in many guises, the internet has led to a plethora of channels being available for the consumer to utilise when seeking help and advice. Finance related price comparison websites have the added advantage of being a one stop shop for all mortgage, loan and insurance needs. By completing your details once, you have the advantage of using their services to trawl the market and find you the best deals available, but there is still an argument for using the services of a local to you, independent financial adviser. The IFA can take the time to understand any unusual circumstances that you may have and tailor their financial advice accordingly and some finance price comparison websites are now offering both options under one roof to facilitate the needs of a far wider consumer group.

Financial Advice: Rebuilding A Relationship of Trust

“We can’t legislate wisdom or passion. We can’t legislate competency. All we can do is create the structures and hope that good people will be appointed who will attract other good people – people who will make careers and listen and see to it that never again do we go through what we have gone through.”

Connecticut senator, Chris Dodd, as quoted in The New York Times, July 15, 2010

With the recent passage of the historic Financial Regulation Bill, the transgressions of the financial industry and new provisions designed to prevent these types of excesses in the future have once again taken center stage. The legislation comes at a time when mistrust of financial services is epidemic. Nervous investors traumatized by losses and mismanagement of their funds wonder how to go about getting reliable and trustworthy advice.

Not long ago I came across a small column in the Business section of The New York Times Sunday edition, entitled “Beware Advice That’s Generic.” I thought, “What’s wrong with offering advice that may have a broad general application?” I realized that if people mistake such advice as directed towards them specifically, it could end up doing them a disservice. This led me to the larger question, in relation to financial matters, whose information and advice can you trust?

Three Suggestions

This is a big issue and one that deserves careful thought. I would like to offer three basic ideas to help put you on firmer ground when seeking and evaluating financial advice. First, become more independent. Take more responsibility for your financial well-being. Second, commit to the selective use of a number of different resources. Third, establish a relationship, or two, with trusted financial professionals.

Taking more responsibility means educating yourself about financial subjects. Pick a topic and research it. Maybe you want to learn more about bonds or determining a good investment mix. Having more information will help you make better financial decisions. While you will probably still want to seek professional advice, the more you know yourself the better your decisions will be. The old saying is true- no one cares as much about your money as you do.

Beware of Sound Bites and White Noise

Choosing your resources for information selectively is extremely important. People seem to want sound bites and easy answers. But in personal finance there are few easy answers and the sound bites can lead you astray if you aren’t careful. I would encourage people to avoid the television and radio. There is too much “white noise” being passed off as valuable information about the markets.

Pare down both the quantity of information you take in, as well as the focus of your information gathering. Investigate subjects of particular interest to you. I find the personal finance articles in The New York Times, The Wall Street Journal and Morningstar to be of very high quality. And, referring back to the article I saw in The Times – be wary of generic advice that doesn’t apply to your situation!

Financial Relationships

Becoming better informed is an important part of taking charge of our financial health. However, we recognize the need for expertise. Much as the family physician is a trusted source of advice on many important issues, he is not the one we would go to for a knee replacement. We may very well turn to him, though, for a good referral to the appropriate specialist. In much the same way, we need to cultivate those relationships we already have with trusted professionals in various areas of our financial lives. These could be personal bankers, accountants or estate-planning attorneys. Ask these professionals, as well as neighbors and friends, if they can recommend a financial planner whom they like. Many financial advisers offer free initial consultations. Subscribe to their newsletters. Get to know who they are and how they might help you.

In conclusion, educating ourselves is really our best response to the skepticism and mistrust we may feel when looking for sound financial guidance. Seek out a few good sources of information, and begin to develop a relationship with a financial professional. Don’t wait until an urgent need leaves you scrambling to find someone. Engage simultaneously in all three of the steps we have discussed. The old adage applies here: dig your well before you need it.

And finally, you still need to be skeptical and to ask a lot of questions. By all means, get a second opinion.

To read “Beware Advice That’s Generic” click here.

‘Demand’ For Generic Financial Advice

There is a great need for a generic financial advisory service to be rolled out across Britain.

So claims Citizens Advice, following analysis of a pilot project it carried out with a number of independent financial advisers (IFAs) and the Personal Finance Society. Funded by Barclays and Aegon, the Moneyplan scheme saw some 30 IFAs offer face-to-face monetary advice at Citizens Advice branches throughout the country for free.

Following on from such guidance, it is possible that consumers will be able to secure access to cheap loans and other competitively-priced financial products, so helping them to get back on to their fiscal feet.

Overall, pensions, mortgages and investments were among the main areas consumers were looking for advice on. Insurance and understanding documents from money providers, which may include loan lenders, were also sources of requests for help with money.

With owner-occupiers, aged 50 years or above and who are on a relatively low income, making up the majority of clients using the Moneyplan service, the company advised that “the trigger” for causing people to seek out help with their finances often follows on from retirement, illness, bereavement or becoming redundant.

For those people concerned about handling their finances should they be affected by any of the above life-changing circumstances, a low-rate personal loan could be a means of financial assistance.

Findings from the initiative also revealed that more than half (55 per cent) of those seeking guidance were on a low income, earning less than 1,000 pounds per month. Meanwhile, 71 per cent of such people were shown to be over the age of 50, with 46 per cent reported to be living alone or in a couple who do not have any dependent children. In addition, just less than half (48 per cent) have a mortgage, with 31 per cent of those who go to Citizens Advice for help own their home outright.

Currently, the provision of generic fiscal advisory service is the subject of an independent review, headed by Otto Thoresen. Citizens Advice went on to report that there is “significant demand” for such assistance. However, the guidance institution suggested that many people often do not think about getting help from an IFA or believe that they may be unable to afford such advice.

Jackie Nowell, head of partnership development for Citizens Advice, said: “The results so far of partnering Citizens Advice Bureaux with IFAs in the Moneyplan project indicate both that there is a need for a national generic financial advice service and that this is an effective model for delivering it. The range of issues presented to the IFAs is broad, but it appears that there is particular demand from those who may own their own homes, but have low incomes. This evidence emphasises that there is a gap in provision which needs to be addressed.”

From receiving comprehensive financial guidance, it is possible that people might be able to seek out competitively-priced personal loans, savings accounts, credit cards and other financial products with greater ease. Following on from advice on loans and other areas, people may find that they are able to get to grips with money more effectively. However it may be advisable to stick to the professionals when seeking help. A recent study by Birmingham Midshires indicated that 16 per cent of consumers have been given poor monetary advice from either a friend or family member, which has seen eight out of ten people suffer financially.

Financial Advice From 1796

As leader of the Constitutional Convention, commander of the Continental Army and first American president, George Washington is considered by many to be one of our nation’s greatest heroes, renowned for his character and leadership. In his 1796 farewell address, Washington masterfully articulated his reasons for not seeking a third term of the presidency, and offered an eloquent argument for the importance of patriotism and protecting liberty. He also offered some prudent financial advice in a portion of the speech penned as “Warnings of a Parting Friend.” I believe these points still hold true today.

Quote #1: “And there being constant danger of excess, the effort ought to be by force… to mitigate and assuage it. A fire not to be quenched, it demands a uniform vigilance to prevent its bursting into a flame, lest, instead of warming, it should consume.”

Washington seems to be speaking about the danger of political parties, departments within the government, and individuals who try to seek more power and riches for themselves. He indicates that the spirit of always wanting more is good to a certain extent (a fire not to be quenched); however, if not vigilantly watched or kept in check and balanced, it could destroy (consume). This lesson can still apply to both personal and government spending and the importance of living within our means.

Quote #2: “As a very important source of strength and security, cherish public credit. One method of preserving it is to use it as sparingly as possible, but remembering also that timely disbursements to prepare for danger frequently prevent much greater disbursements to repel it… “

Washington appears to be emphasizing how important having good credit is. He was advising the nation and its citizens to be careful how often they use credit and for what purpose. Washington also seems to acknowledge that for a prudent purpose, credit could and maybe even should be used if the benefit ensures stability and offers a hedge against potential risks. These important financial lessons should jump out of history books and into our personal and government spending habits!

Quote #3: “… avoid likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertion in time of peace to discharge the debts which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burden which we ourselves ought to bear… You should practically bear in mind that towards the payment of debts there must be revenue… “

Washington warns against going into debt unless the expense is absolutely necessary. In today’s times, many people incur debt to go to school, purchase a car or buy a home; but that does not mean you should necessarily go into debt if you don’t have to. Washington also points out that debt incurred during hard times should be repaid during times of peace and prosperity; if not, the debt will likely not get paid off. (He has definitely been right about that on a national level!) On an individual level, the takeaway is to consider paying off debt when you have extra cash available, and ideally to pay it off sooner rather than later.

Washington was a truly legendary leader, and in his Farewell Address I believe he was speaking to the nation as a whole and to its people as individuals. I also believe Washington’s advice is as timely and true in 2012 as it was in 1796. With such powerful and still-applicable words, it’s no wonder that reading Washington’s Farewell Address has been an annual tradition in the U.S. Senate since 1896. And remember, we know Washington’s words must be true because he could not tell a lie!

Take Heed of Sound Financial Advice For A Gratifying Retirement

We are aware that the economy worldwide is struggling to maintain its stability. People around the globe are having a hard time coping and surviving to maintain its own personal economic finances. Choosing your destiny is not an option, but deciding your future is the best opportunity that you can offer to yourself and your family. We fully understand that everything we do involves monetary value. That is why we should prepare ourselves to have extra funds for emergency purposes and for future reasons. We can acquire this through saving our money, economising our resources, and protecting our assets. Employing a person or a company to handle and manage your finances and giving you financial advice on how to economise and save money is the ideal thing to do.

One of the soundest advices a professional planner can tell you is to invest in health and life insurance while you are young and fit. The reason behind this financial advice is that with youth comes vigour and wellness. A person has a very low risk of dying at a young age. Although it is not impossible, the probability of it happening is very minute. Health wise, a middle aged person’s physical condition gradually starts to deteriorate while a twenty something individual is more or less at the prime of his life. In the insurance company’s point of view, older individuals are more likely to make a claim than younger individuals. Therefore, it would be a wise move to start working through your contributions at a young age while the premiums are still cheap.

Another good thing about this scenario is that you will be able to pay off your premiums earlier thus allowing you to reap whatever benefits it has in store for you. This means that you won’t have to wait until you are too old to be able to enjoy the rewards of your investment. If you play your cards right, you might be able to live a comfortable life in your late fifties even before your retirement age. Imagine the things you could do by then. You could travel the world, explore the cultures of other countries, go on a cruise, or purchase things you’ve only dreamed about before. Apart from that, you will be able to secure your family’s future.

Some people may not agree, but there are parents who worry about the inheritance they want to leave to their children. As a parent, there is that part of you that wants to make sure your children, no matter how old, will not be left empty-handed. Others would want to make sure that everything is in place, from their retirement to their funeral arrangements so that they would not be a burden to the loved ones they would leave behind. With that said, it is indeed a wise effort to perform wealth management, be it by yourself or with professional help.