6 min read

When to think about taking financial advice – and when it’s ok to do it yourself

The advent of the internet means a do-it-yourself approach to financial matters has become increasingly popular, but there are some occasions when speaking to an adviser is best.

A woman and man speak to each other on a leather chair in an office, while flicking through a brochure.

Thanks to search engines and websites, many of us can get in-depth information in the palm of our hand at the touch of a button these days. The internet has made historically complex tasks, such as shopping around for insurance, incredibly easy.

Tech savvy younger people in particular are happy to do most of their financial planning through their smart phone, according to recent research.

A study by Legg Mason Asset Management found that 46 per cent of those aged 18 to 35 like to do their own financial planning through their phone, and 13 per cent of baby boomers, aged 53 and over.

Justin Eede, head of distribution at Legg Mason, says: ‘Services that have traditionally been delivered face-to-face are now becoming more automated and the demand for digital solutions to finance is growing.’

But the vast majority of people – some 84 per cent – would not want to solely rely on technology for their finances.

For those who feel confident enough, there are many occasions when it is easy to take financial matters into your own hands. But, other times, enlisting an expert can pay dividends.

Household Finances? Do it yourself – but check the small print

Whether its renewing the car insurance or getting the best rate on your savings, this is an area where the DIY approach can reap rewards. Staying loyal to an insurer, bank or energy provider often means you’ll pay a premium, but shopping around each year can save hundreds of pounds.

Henrietta Grimston, relationship manager at Seven Investment Management, says: ‘Given the rise of price comparison websites, people really do have power at their fingertips. It is much easier to shop around for the best deal, and that goes for anything from gauging interest on bank accounts through to car hire.’

Whatever you are shopping around for, it is important to remember not to just choose the cheapest option. Read the small print, check what is and is not included, and find out the company’s pay-out ratio (the firm’s track record on paying out on claims).

Starting a family? Ask an expert

Having your first child is a prime example of a time when you might consider enlisting an expert financial adviser. This is a time when you will likely first start to consider making a will and taking out insurance to protect your family if the worst should happen.

While you can compare life insurance policies online, a financial adviser will explain the differences between payment protection insurance, life insurance and critical illness cover, for example, and will make sure you get a policy which meets your needs.

Steve Hudson, senior adviser at Courtiers Wealth Management, says: ‘There are lots of subtle nuances between all the different types of protection insurance, which don’t lend themselves to the DIY approach because they are difficult to compare. You need to make sure you have the right policy in case you are ever unfortunate enough to need to make a claim on it.’

Free resources such as the Money Advice Service and Pensionwise can be useful for those who want a bit of guidance without paying for an adviser.

Picking investments? Do it yourself – at first

Setting up an investment account or stocks & shares ISA can now be done in minutes through an online fund supermarket, and at a low cost too. Investing directly through a big investment house not only means you are limited in which funds you can choose, but often means you will pay higher charges too. Of course, you also have to remember the value of stocks and shares can go down as well as up, so you may get back less than you invested.

The downside to using a fund supermarket is that navigating the 2,000 or so investment funds available to pick can be intimidating; but, many websites offer information to help whittle them down and best buy lists can be useful too. Some websites offer one-stop shop choices, known as multi-manager funds, which comprise a whole range of funds hand-picked by an expert. You simply pick the multi-manager fund based on how much risk you want to take and they do the hard work for you.

Ben Yearsley, director at Shore Financial Planning, says: ‘Generally when you start out, most people are more than capable of selecting a few investments for themselves. But as your financial affairs become more complicated and your savings pot grows, it may be sensible to seek guidance from an expert.’

Tax Troubles? Ask an expert

Henrietta Grimston, relationship manager at Seven Investment Management, says: ‘Tax planning is one area where I would absolutely recommend taking advice.’

Whether it is helping a child with a deposit for their house, withdrawing money from an investment account or changing ownership of a property, tax can be a difficult and murky area to navigate. Tax is not only complicated, the rules change every year and even an innocent mistake could end up in a costly fine.

Mr Hudson says: ‘Taking the DIY approach here could lead to some interesting conversations with Her Majesty’s Revenue and Customs.’ He points out that not only will speaking with a tax expert ensure you pay all the correct taxes, but it could help you save money by highlighting benefits you are entitled to or charges you are exempt from.

Pension Planning? Ask an expert

Retirement and pensions are another area the Government is often tinkering with.

Where historically, the majority of people would simply take an annuity which would pay them a set amount through retirement, recent changes such as the new pensions freedoms mean savers have a far greater range of options.

But not taking advice could mean many people run out of money mid-way through retirement while taking too much out of your pension pot in one go could result in a hefty bill from the taxman.

Mr Hudson says: ‘Those reaching retirement now are confronted with a baffling array of options, thanks to changing pensions legislation and they could do some severe damage to their changes of a comfortable retirement if they try the DIY approach.’

A financial adviser can explain how much you can draw down without triggering a tax bill, and how you can keep your cash invested so that it sees you through retirement while also paying out a steady income.

On the plus side, setting up a pension plan has never been easier. Thanks to auto-enrolment many workers will be automatically opted into their workplace pension scheme and regular contributions taken from their monthly pay packet, while the self-employed can simply set up an online account with any fund supermarket just as they would an ISA.

One thing you can do for yourself is trace any lost pension pots you might have forgotten about from previous employers. You can do this simply and for free through the government website www.gov.uk.

Mr Hudson says: ‘The journey of life has many stages and some of the financial arrangements needed at any given stage might, it could be argued, lend themselves to a DIY approach more than others.

‘Let’s face it, DIY can be useful if you need some shelves put up but serious, life-changing financial planning may benefit from getting the professionals in.’

Written by Holly Black – Financial Journalist

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. The opinions expressed within this blog are those of the author and not necessarily of OneFamily.