The cost of not investing in financial advice - United Advisers Marine

19th Oct 2020

The cost of not investing in financial advice

There are many reasons why people shy away from using a financial adviser. There is a lot of information online about how to manage your money and how to invest. Another reason is cost; many crew believe using a financial adviser is expensive and is reserved for the wealthy.

Often Superyacht crew, especially those just starting out in the industry, believe they don’t have enough assets to invest and to offset the cost of using a financial adviser. However, those same crew members don’t realise there is a cost involved in doing it yourself. For example, online investment platforms will take a commission on dealing instructions or ask for an annual fee.

Researching investment options takes time

When it comes to investing, you need to spend time researching the best options based on your situation and your financial goals. You need an investment strategy that meets your current financial needs as well as helping you to progress. But where do you even start? You need to learn about investment vehicles, your tolerance for risk and diversification.

Investment vehicles simply refers to any method or product you can invest in to, ideally, grow your money. There are many different types of investment vehicles, such as certificates of deposit, stocks or exchange-traded funds (EFTs) and each carry different levels of risk.

Your risk tolerance is essentially the degree of uncertainty you are willing to take on to achieve potentially greater rewards. In other words, your ability to withstand ‘pain’ when it comes to investing. It’s dependent on various factors such as your investment goals and experience, how much time you have to invest (your investment horizon), your financial resources and your ‘fear’ factor.

Holding different types of investment in a portfolio minimises risk because a portfolio of diverse assets will, on average, yield higher long-term returns. You do, however, need to understand the risk of any investment vehicle you choose.

No two investment vehicles are the same

Don’t make the mistake of comparing investment vehicles that aren’t equals. It’s like comparing apples and oranges. For example, an ETF trading platform is completely different to a rental property investment paid over 30 years.

Financial advisers can help clarify the differences between investment vehicles and demystify the various fees, charges and possible returns associated with different options.

Selecting the best investments is time-consuming

Once you have done your research, buying individual stocks is time-consuming. If you were to invest in stocks or bonds on your own, you would need to buy them individually and pay a fee for every transaction. Alternatively, you could invest in an exchange-traded fund (EFT), which is a type of security that involves a collection of securities such as stocks, for which you would need to pay a commission.

It’s not possible to time the market

One of the biggest mistakes that investors make is thinking they can time the market. It’s just not possible and you can lose valuable time even trying. Also, the longer you wait to invest, the less chance your money has to grow.

A good financial adviser will tell you that short-term market moves aren’t as important as sticking to a strategy and that it’s important to avoid the urge to sell when markets are low.

Attempting to time the market is also a costly exercise. Investors who continually try to time the market are buying and selling more often, which increases the amount they must pay in fees and commissions.

The benefits of working with a financial adviser

Financial advisers help by selecting investments that fit your goals. They can assess your current financial situation, your goals and your needs to develop the most appropriate portfolio and investment strategy that will aim to grow your money over time. Financial advisers can also help you invest in the most advantageous ways from a tax perspective.

As well as the tangible benefits, there are valuable intangible benefits of working with an adviser such as gaining greater clarity around goals. A good financial adviser will make it comfortable for you to talk openly about your wants and needs and provide a path forward to achieving your desired financial future.

They will also hold your feet to the fire and keep you accountable for your financial decisions. This leads to you having greater peace of mind and the ability to enjoy your life today knowing you are making progress towards your future.

While working with a financial adviser doesn’t fully alleviate you from the responsibility of overseeing your personal finances, it can remove some of the worry knowing your investments are being managed by someone with the right expertise and experience.

Investing on your own

If you decide to go ahead and manage your own investments, make sure you are in a position to make the best decisions for your situation. Do you have the time and energy to deal with handling money and investments? Are you disciplined enough to spend time doing your research and due diligence on different investment options?

Also, don’t move forward without a solid foundation in place, which includes understanding and managing banking, savings and taxes.

A good indication for when you should speak with a professional is when you feel overwhelmed by the amount of information but you’re not sure who to listen to. Another is when you know you’re ready to invest but aren’t sure where to start.

While you may pay less fees if you manage your investments yourself, you may end up paying for it in the former of lower returns. As a result, it’s also possible that reaching your financial goals will be more difficult.

The most important things to ask yourself are: will you reach your goals with or without a financial adviser, and what is the cost of not investing in financial advice?

What you get from working with us

UAM our time and what we do

Learning how to invest, making the best investment decisions and structuring your portfolio takes time. It’s not impossible, but when you are busy working onboard, ask yourself whether you have the time and energy you need.

Most crew who come to us for advice do so because they are either short on time or short on knowledge. Sometimes it’s both. That’s why we work exclusively with Superyacht crew because we understand the unique challenges you face as well as the financial opportunities.

Our bespoke service means we have the time to research your best investment options and manage your portfolio on your behalf using our experience, knowledge and expertise.

What you get from UAM over managing your investments on your own is someone who works with you to understand your affordability to invest and to keep you accountable.

Note that we can be remunerated by fees, commissions or a combination but to find out more, speak to us.

Next steps

If you’re keen to learn more about investing and how we can help develop a financial strategy that works for you, get in touch.