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Alan Kendrick: Regular financial reviews are key
I recently saw a new client who had previously been dealt with by another financial adviser. He told me he had only come to see me as I had been highly recommended by a friend of his, but his experience with financial advisers to date had not been very happy.
I recently saw a new client who had previously been dealt with by another financial adviser. He told me he had only come to see me as I had been highly recommended by a friend of his, but his experience with financial advisers to date had not been very happy.I asked him to explain what the problem was and he told me that some years ago he had taken out a pension scheme with the previous adviser, who had obviously gone to a great deal of trouble to select the investments within the pension scheme. These investments had gone down in value and he felt the adviser had let him down.
I asked the client if the adviser had discussed with him the level of risk that the investments should have. Yes was the reply. I asked him if the adviser had discussed with him the level of contributions he should make. Yes again was the reply. I asked him if the adviser had offered regular reviews to ensure that the pension scheme remains on track and that the investments were performing as expected. I was yet again told yes.
I then asked what the previous adviser had recommended at these annual reviews. The answer was that the client felt that, if a plan has been put in place properly from the start, reviews should not have been necessary and he did not see the need to pay for them.
I could not find any problem with what the previous adviser had done, other than perhaps not emphasise enough the importance of the regular review. Any plan, no matter how well thought out, can only take into account what was known at the time it was set up. Things change and therefore the plan should be reviewed regularly so that it can be amended to take into account changes.
These changes could relate to many different things from the personal such as marriage, divorce, birth of children, death of a spouse, change of employment, redundancy etc. They could relate to changes of legislation or new products coming on the market. They could also relate to problems with investments or a change of attitude to investment risk.
No matter how detailed an initial plan is, it cannot take into account something which was not contemplated at the time. I cannot stress enough the importance of regular reviews, especially with pensions where the legislation is changing on what seems like a daily basis.
Many such plans are set up in such a way that the adviser actually receives an annual commission so effectively the annual review is already paid for. However, even if you do have to pay a small fee it is often money well spent.
At Oakwood we have actually implemented new technology which enables you to see at any time how your finances are progressing on your mobile phone. This is very new and does not replace the regular review, but it does help to have the facts at your finger tips.
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Sunday 12 February 2012
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