Teamwork can steer you right

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This is a hectic time of year for your personal finances. It’s when your financial planner should double-check that you have maximised – as best you can – all of your available end-of-tax-year benefits and be preparing for the year ahead. But you might also want to ask them the thorny question: “What’s your relationship status?”

Let me explain.

On the one hand, your financial planner will be reviewing your portfolio and reallocating your invested wealth, where appropriate, to take full advantage of tax-efficient wrappers available to you, such as ISAs and pensions.

On the other hand, with the UK stock market recently reaching another high, your financial planner must also take even greater care over the asset allocation of your invested wealth.

Market highs are a timely reminder for you to review your investment strategy as it begs the question: what next? A further rise or a negative correction?Is your financial planner still fulfilling both of these highly specialised advisory roles on their own? Far better, surely, that your investment portfolio is managed in partnership with input from top-performing investment professionals chosen by your financial planner.We now live in a very volatile world where every morning seems to bring news of further impactful external global events which add an additional level of complexity to your investment strategy.

That’s why, if you haven’t already done so, you really need to ask your financial planner the “relationship” question.

Don’t worry, this has nothing to do with their personal life. It is a question designed to establish whether they may still have a potential conflict of interest in terms of their efficient time management. A conflict which could potentially restrict the quality of their overall financial planning and investment advice at this crucial time.

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Historically, many independent financial planners also chose to take on the role of investment managers. In practice, they identified investment funds from their own research which they believed best suited their clients appetite for risk. This often worked well in a less complicated world. It is a model that can still work when the financial planner seeks professional research input from external investment managers.

But simply relying exclusively on in-house desk research is an investment strategy that I believe is no longer fit for purpose.

Financial planners have long had to meet extremely strict examination qualifications and to demonstrate high levels of professional competency. As part of these strict criteria, they also study investment strategy as a major component. But they rarely hold the additional professional qualifications to also provide an investment management service.

However, their close personal relationship with a client, built up over many years, uniquely qualifies them to fully understand their changing attitude to investment risk.

That understanding is crucial and hugely beneficial to you when changes to your investment strategy require implementation.

Today’s successful financial planner must be a serious team player. Their professional competencies clearly qualify them to design your successful personal financial plan – one that can enable you to better build and protect your wealth. But they must also work much more closely now in partnership with your accountant and solicitor to ensure that as much of your wealth as possible can cascade direct to your family when you pass on.

Imagine that the long road to achieving your financial goals is a car journey. Your financial planner’s role is to plot the correct co-ordinates on your GPS and to adjust these when necessary to keep you on track. They will also regularly assess your appetite for investment risk.This is a vital role that cannot be understated. They are best qualified to provide the tax-efficient financial strategy that will get you to your “financial freedom” destination in later life in the best shape possible.

But what could get you there quicker is the quality of the chosen investment managers’ advice and research that your financial planner uses on your behalf.

The right choice of investment managers can fine-tune your car’s engine and have it performing at its maximum performance level to get you to your ultimate financial destination as quickly as possible.

They can even be sacked, if needs be, if your engine misfires. That is the modern and, I believe, much more efficient financial planning model. Many successful financial planners now operate asan independent business within a wider corporate group that is able to provide them with direct access to qualified investment management professionals, to help guide their choice of assets and managers for their clients.

And yet – perhaps not surprisingly – according to research conducted by American financial services firm Morningstar in July 2023, underperforming investment performance is one of the reasons why clients change financial planners.

That could mean unravelling a perfectly sound financial plan route map when it is only the engine on the car that needs fine tuned.

That is why, as the end of the 2024/25 tax year fast approaches and the new one beckons, the “relationship” question is probably now long overdue.

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