Free Investment Advice: The Best UK Resources Available to You
The UK introduction of the Retail Distribution Review (RDR) from January 1st 2013 was undoubtedly a positive thing. While it involves other elements, the core of RDR was that it meant Independent Financial Advisors (IFAs) would no longer be able to be paid commissions on the investment products, like funds and trusts, that their clients bought into. This was, understandably, considered to be a conflict of interests and incentivised IFAs to advise their clients to invest in the products that earned them the best commissions rather than what was necessarily the optimal choice for their investment portfolio.
Of course, by no means all IFAs would have compromised the advice they gave their clients pre-RDR. Nonetheless, removing the temptation to do so, and suspicion some did, was clearly a positive development for retail investors and the wider consumer-facing investment industry. However, as with most big changes there were knock-on effects. Arguably the most significant of those was that the change to the business model of IFAs has meant far fewer retail investors receiving qualified advice on their investment portfolios.
In the post-RDR environment, what has been termed ‘the advice gap’ appeared. No longer receiving commissions from funds and trusts, IFAs now have to charge upfront and transparent fees when providing personalised investment advice. IFAs are certified professionals that have invested time and money in qualifying and like all certified professionals their time is not cheap. Hourly rates for consultancy can range between £75 and £350 an hour with an average of £150 according to the government’s Money Advice Service website. IFAs can also charge a set fee for putting together an investment portfolio, a monthly fee, which might be flat or a percentage of investment capital or an ongoing fee like a retainer.
Whichever way the fees are sliced, paying for qualified investment advice will realistically cost between a few hundred and several thousand pounds a year. Unfortunately, the situation means that many smaller retail investors come to conclusion, sometimes with good reason, that turning to an IFA is too expensive. If an investor only has several hundred to several thousand pounds that can be set aside annually for their pension or general investment portfolio a few hundred to a few thousand pounds can indeed add up to a painfully high percentage. And that’s before any fund management or investment platform fees. So many choose not to and ‘the advice gap’ has appeared.
Free and Affordable UK Investment Advice Resources
While the situation around access to qualified advice is far from ideal for smaller investors, the good news is there are a number of free resources at their disposal. There are others that charge a small fee, usually a subscription, and are accessible for most budgets. These resources are generally not exactly ‘advice’ in the full sense of them being regulated financial advice, though some government resources are. Nonetheless, if used correctly they can provide, especially in combination, valuable information, insight and direction to help retail investors make informed investment decisions.
Free Government Resources
The UK Government provides two free investment advice resources:
- The Money Advice Service
- The Pensions Advisory Service
The Money Advice Service is an online resource that contains a wealth of information on investment and tax questions. Its content covers clear explanations of different classes of investment products and objectively discusses explains their strengths, weaknesses and the kind of investor and investment goals they are best suited to. In addition to investment and tax information the website also covers information and advice on a wide range of consumer finance questions and products.
A phone line and online chat functionality are also provided and UK citizens can get in touch and receive free and impartial money advice. The service the resource offers, however, is general and it doesn’t provide advice on particular investment products such as whether a portfolio should contains funds x,y and z.
The Pensions Advisory Service: another government resource available to UK citizens and permanent residents, the Pensions Advisory Service, as the name suggests, offers information and advice on all pensions related questions. The service additionally helps to resolve, and potentially mediate, disputes between pension product holders and providers. However, while the service provides information and guidance on pension related matters, it also does not provide the kind of specific ‘regulated’ investment advice an IFA would. The advisors will not put a pension investment portfolio together for you.
Both services, may, if they deem the circumstances to be appropriate, direct individuals to charities which can offer a free IFA service.
Free and Affordable Commercial Investment Advice Resources
A good range of commercial resources that offer free, or on the basis of an affordable subscription, investment advice, information and guidance is also available to UK investors. These are generally of an online nature and include specialist investment and finance medias and mainstream media such as the BBC, magazines and newspapers with money and investment sections. Again, these resources can be considered as providing guidance, information and tips, rather than regulated investment advice.
Many of these commercial resources provide free access to some content but require a subscription for full access. The Telegraph’s Money section is a good resource and publishes regular content on general investment topics as well as opinion and research on particular investment product, vehicles and instruments. The Daily Mail Group’s This Is Money website is another good resource. Specialist investment online and print magazines for UK investment information and opinion include the Financial Times-owned Investors Chronicle, Money Week, The Motley Fool and Shares Magazine.
Good independent specialist investment and consumer finance websites for UK investors include MoneySavingExpert.co.uk, Boring Money, 7 Circles, What Investment and Master Investor. Reddit also hosts a good blog called UK Investment.
It is important to keep in mind that fund and stock tips that can be found published in mainstream and specialist media focus on individual investments and not their place in a balanced portfolio or your personal financial circumstances, risk profile and investment goals.
A relatively new development, robo advisors are investment websites that lead individuals through an online questionnaire that, if answered honestly and fully, assigns an accurate investor profile. These companies essentially automate the investor profiling process that would be initially gone through with a human IFA. A recommended investment portfolio that matches that investor profile is then proposed. Robo advisor investment portfolios are generally built from ETFs - passive index-tracking funds with very cheap fees.
Sometimes It Makes Sense to Pay for Regulated Financial Advice
Despite the fact that there are free resources available and that using an IFA is a financial commitment, it might be one that it is better to make. Within reason, setting aside a budget to take advice from an IFA can also be considered an investment and could be a very important one. For a smaller investor with a long term investment outlook, an investment portfolio will be relatively stable and won’t have to be adjusted regularly. Investing in professional advice to help you put it together optimally needn’t cost a great deal and once that’s been done a quick annual or 2-year review should be all that is necessary to keep you on track.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.