Editorial Team
AUTHOR Editorial Team| CREATED 03 Jun 2015

How a financial adviser can help you make the right choices

The new pension rules will create significant opportunities for those who know how to use them, so more than ever it’s worth getting help from a financial adviser as you begin to plan your retirement.

Even if you’ve never used a financial adviser before, you should seriously consider doing so as you approach retirement. The choices you make when you retire are likely to involve large sums of money, and some – such as buying a lifetime annuity – are irreversible. By getting professional help at this point, you’ll give yourself peace of mind and, potentially, avoid making an expensive mistake. This is especially true now that the new pension rules are coming into force. The new freedoms on offer will create lots of opportunities, but they’ll also create significant risks for retirees who don’t know what they’re doing. (You can find out more about those risks on this website, in the section entitled “Retirement pitfalls and how to avoid them”.)

This is why the UK Chancellor, George Osborne, made what he called a ‘Guidance Guarantee’, upon announcing the new pension freedoms in March 2014. Anyone aged over 55 with a defined contribution pension is entitled to free guidance via the government’s new Pension Wise service. You can get a free consultation online, over the phone or face-to-face, and we recommend that you do so. (You can find out more at the Pension Wise website.)

However, guidance can only go so far. It should help you to avoid any big mistakes with your money and start narrowing down your options. But it isn’t the same as advice, which is about giving you specific recommendations of what to do, based on a detailed analysis of your circumstances, needs and goals. By getting professional help, you’ll avoid not only the risk of making a big mistake but also the risk of missing big opportunities. Here are the main reasons why financial advisers are worth consulting as you begin to plan your retirement:

They are highly qualified, regulated experts

Financial advisers in the UK are regulated by the Financial Conduct Authority (FCA), the government body responsible for upholding standards in the financial services industry and protecting consumer rights. They need certain qualifications in order to practise, plus a detailed understanding of pensions, tax laws and investment products.

By confirming that your adviser is FCA-registered, you can be confident they’ll be able to help you with your retirement planning. You can also make sure that you’ll be entitled to compensation if they give you bad advice and you lose money as a result. So make sure that you find one via an approved directory, such as the free 'Find an adviser' search tool.

A financial adviser can alert you to changes in the law that could affect your finances, and to new products that could improve your chances of achieving your goals. They can also help you manage investments and other financial arrangements to make the most of your money – for example, by making sure that you don’t pay more tax than necessary.

They’ll take the time to understand your situation in detail

Your first meeting with a financial adviser will typically involve a detailed discussion of your circumstances, needs and goals. The adviser is obliged to learn everything about your situation, so they can recommend financial products that are genuinely suitable and affordable. They’ll also want to be clear about how much risk you’re willing and able to take with your investments.

As far as retirement planning is concerned, they’ll want to discuss:

  • your health and medical information
  • the status of your spouse or civil partner, in both financial and health terms
  • what level of income you think you’ll need during retirement
  • how much financial flexibility you want during retirement – for example, in terms of making variable withdrawals from your pension
  • any wishes you may have about leaving a legacy.

By gathering all this information, they’ll be able to help you build a realistic retirement plan that gives you the best possible chance of achieving your goals, without paying any more tax than necessary.

They will recommend what you should do, not just offer information

A financial adviser can help you choose the best course of action for your individual circumstances – and revisit it at regular intervals to ensure your plans remain on track. They will also tell you if they think you are about to make a mistake. A guidance service, by contrast, can only deliver information, leaving you to make all the necessary plans and decisions for yourself.

They have access to products and tools that you don’t

Financial advisers have access to a wider range of research tools and investment products than the average person. They make it their business to keep abreast of all the new products coming onto the market, and all the new rules and regulations – including tax laws – that could affect their clients’ finances. And they continually explore ways to combine these things so that you benefit.

The cost of seeing a financial adviser could therefore be outweighed by the amount you’ll save by avoiding mistakes. And this is especially the case where retirement decisions are concerned, because the sums of money involved are typically very large. As the advisers themselves put it, ‘the cost of advice is far less than the cost of ruin.'

If you don’t have a financial adviser and would like to find one in your area, use our 'Find an adviser' tool.

Editorial Team

Old Mutual Wealth Expert in Finance, Protection, Investments, Pensions