How does an excellent IFA add value?

Humans can be their own worst enemy when it comes to investing. Also, everyone is not equal regarding their financial literacy or discipline, and an excellent IFA or independent financial adviser helps you to tune out the noise, keeping you focused on sticking with your plan. It 's hard to succeed as an investor without an understanding of one’s investment psychology drawbacks. A great IFA acts as a buffer between the client’s impulses or fears in reacting to the market; also as a behavioural coach, continually reminding the client to think in ways that will help them succeed with their goals.

I see my role as an investment adviser as follows:

  1. Helping my clients' have focus and clarity with their long-term financial goals
  2. Put a suitable and effective plan into place, one that can survive short-term shocks and volatility based on their own risk appetite.
  3. As my relationship with my client deepens, I ask open questions to help them understand their needs driving their fears and motivations in their relationship with money to help them have greater freedom in this area.

Sometimes a client wants safety, and low risk has ambitious plans for an early retirement and needs to increase her pension fund sharply. So, balancing a client’s attitude to risk as well as their capacity for loss along with their requirements to invest is not always easy.

I enjoy gently challenging my client's preconceptions and assumptions around investing, helping them notice the paradoxes and contradictions. We all suffer from cognitive biases, and this can muddy the waters when it comes to clear decisions around investing.

A central claim of prospect theory is that people are not consistently risk averse. Yes, they are much more sensitive to losses than to gains. But they are also risk seeking, both in their attraction to long shots and in their willingness to gamble when faced with a near-certain loss. To complicate things further, we know that people do not have a global view of their assets. They hold separate mental accounts and are much more willing to gamble from some of the accounts than others. To understand an individual’s complex attitude toward risk, we must know both the size of the loss that may destabilize them and the amount they are willing to put into play for a chance to achieve large gains. - Daniel Kahneman, psychologist.

Not having a clear financial plan can cause worries; reassurance is needed around a fundamental question ‘Am I doing enough to meet my financial goals?’ A great IFA helps frame investment decisions around the long term – reminding you to invest what you can while keeping aside funds in case of liquidity needs and emergencies.

Creating a comprehensive plan should address the following:

  • Creating clear, appropriate investment goals with realistic expectations
  • Developing a suitable asset allocation
  • Acting as a behavioural coach to maintain perspective and long-term discipline
  • Making changes to the portfolio when needed – rebalancing and optimising tax planning.
  • Ongoing communication, coaching and educating as needed

Action creates clarity, and an excellent IFA will help you create a suitable plan to work. It is getting you to your long term goals that count.



Diary of an IFA in London

In my diary of an IFA in London series, I write about my work week.

I know its going to be a good day when I don't check my emails first thing. I get my cup of tea in bed, made by my beloved husband who leaves home early and read the previous day's Financial Times in bed. I like to spring out of bed feeling excited about getting my goals accomplished - like I imagine Tony Robbins (US based life coach) does-on a good day. Today feels like an excellent day.

I usually clear my email inbox as part of my Sunday night ritual - I go through all my emails for the week, replying to anyone I haven't already, filing everything neatly into folders. It helps me feel ready for the work flow of Monday.

Mondays are a day reserved for admin so I avoid client meetings on this day. Monday mornings, I look at my list of activities for the day and tackle the biggest,baddest frog first. Frog, you ask? You  know, Bryan Tracy talks about your “frog” being your biggest, most important task, the one you are most likely to procrastinate on if you don’t do something about it. So, I get down to business - scratching items off my list as I go  along. I have 3 pieces of research that I need to finish - a large mortgage, a pension transfer with a portfolio with passive funds and a new pension for the director of a limited company. Nice and varied. The mortgage is going to take longest as I have to contact several different providers to scout for the best deal for my client.

Tuesday is focused on getting the best rates for this large  mortgage deal. My client is buying a home in Central London at a pretty price. I have rung around all the banks (that offer big mortgages) high value teams, then the private banks and a couple of the private banks are extremely keen to get this business. The credit teams at these banks tend to be cautious and want to see all paperwork beforehand...but I am organised and armed with everything they need. This work has taken all my focus today with various phone calls between me, the client and the bank offering the most competitive rate. I have politely declined meeting offers from the other provider wanting to pitch for the business; no point wasting their time at this stage.

Wednesday is focused on getting the private banker all the information he needs and the process is on its way, I  can now relax about this piece of work. They have met; the banker now knows the client is not a figment of my imagination. Lunch is with a client who I have been talking to for a while about transferring his pension across. We have known each other for years; the meeting is friendly and we are both quite engaged with each other, flitting from business to banter and back to business. Even though the trust levels are high, he asks me some tough questions and I answer, thoroughly convinced that my proposed solution is worth it. He likes the portfolio I have constructed with the least expensive passive funds in the market, he likes low costs, I give him a bunch of paperwork to read before he signs it after going through the mandatory bits with him and we set up a meeting for the following week.

 Thursday is busy, busy, busy. I have 2 client meetings in Canary Wharf followed by a third in sunny Shepherd's Bush. I agreed to visit my client in Shepherd's Bush as she has young children to pick up from school- its also not a long journey on the tube; I  enjoy reading my kindle on the tube, decompressing from meetings if you will. I don't own a car, I am a Londoner and public transport rocks. I am also frugal and cars are an unnecessary expense for me. The meeting goes well - the client asks a lot of questions, takes careful notes and we agree to meet again in a couple of weeks.

Friday requires me to be a human courier and rush some urgent documents from my client to the banker. A bike courier would normally do but having been scarred with documents being misplaced within departments in a large organisation before, I rush to do it myself. I have a few client phone calls, meetings to book for the following week, paperwork to print for next weeks client review meetings and then after that...its Friday fun. I meet a friend for lunch  - hey! I am self employed and choose my working hours... Lunch over, I head over to research ethical funds at the British Library. I love the library, I have a reader pass and spend many an afternoon speed reading through books and feeling inspired about a new blog post. By 6 pm, I return my books to the librarian and exit the British Library feeling good about a productive week and look forward to a relaxing weekend.

When & why do I really need an IFA?

By: Cleona Lira on 10 th November, 2014 “When & why do I really need an IFA to get financial advice ?”

I was asked this question recently by a prospective client and  thought it would be useful to post my response here.

1. Do you really need Financial Advice?

If you are clear on what you want and know you could easily do it yourself then perhaps you are not seeking an ‘adviser’.

Financial advisers are not order takers. We recommend financial products that are suitable for you after assessing your situation and after a thorough fact-find. If you know exactly what you want and how to get it, perhaps you are not seeking advice but execution in which case it is questionable whether you need an ‘adviser’.

2. When do you need an IFA? When is it financial advice?

Here are some examples that spring to mind of when you may really need an IFA:

  • If you are looking to transfer a pension & do not know what to do next

  • If you need a mortgage but have no idea how to navigate the various choices available or where to find the best rates

  • If you are interested in investing but do not know how to set up an ideal portfolio or define the risk you are comfortable to take

  • If you need to talk to someone about the level of life insurance to take, then find the cheapest plan

  • If you need a critical illness policy, are concerned about having hereditary conditions in the family such as diabetes and would like someone to pre-screen the most suitable providers for you

  • If you need to invest a sum of money but are unclear about how to construct the ideal portfolio

3. Is it your area of competence?

Sometimes clients understand clearly what they need but this isn’t something they deal with day in, day out. People lead busy lives earning a living, they do not necessarily read the financial pages or care about the intricacies of capital gains tax. So, they may miss out on important, essential steps in financial planning. Often, I see clients not putting a life insurance policy in trust or not placing their investments in ISA’s. A good, competent IFA will not only ensure you have a great financial plan but also find the most effective way for you to achieve this. So, in the examples above, to make your financial planning smarter, you would need an IFA.

A good analogy to reflect on is if you were in a plane that was about to crash, would you rather have a pilot with 20 years of experience? Or would you rather have one with a manual he found on the internet?

DIY can take you so far but when panic sets in, it is useful to have a calm professional who can talk you into making choices that are good for you in the long run.

 4. Adding value over the longer term is another reason why you need an IFA

My belief is that trust with an adviser takes a long time to build. The clients that trust me most have met me multiple times over the years. As I get to know my clients better, I add value in various ways often challenging their psychology and some of their limiting beliefs around money.

I would imagine this is the case with most IFA’s…that value is added over time. It could simply be a call to say “I notice that the bank you are with for a mortgage has a better rate you can swap over to with a phone call”. Or inspiring them to be ISA Millionaires like John Lee who I think writes great columns in the weekend FT or talking about retirement planning tips in a way that makes a client want to take action.

To summarise, if you want to work with a professional in the field of financial planning, take your time to find an IFA that works for you if that is what you really need. It can lead to a great long term relationship that helps you over time.

A lot of clients do not really take action unless they are inspired to do so; in my humble opinion, a good IFA helps the client make good decisions and take great action.

To quote Tony Robbins, “A real decision is measured by the fact that you've taken a new action. If there's no action, you haven't truly decided”.