July 10, 2025 • 22 mins
If you’d like to discuss your finances with a professional, you can connect with Anick here: https://www.viderefinancial.com/contact
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Your financial future deserves more than a menu of investment products. But how can you tell whether the advice you are receiving is truly in your best interest or just a surface-level recommendation?
In this episode, Certified Financial Planner Anick Sharma unpacks the confusing world of financial advice, explaining the real difference between financial advisors, wealth managers, and financial planners. While Independent Financial Advisors (IFAs) offer a broader range of products across the market, many others operate under restrictions, recommending only from a limited panel, often at higher cost and with narrower relevance.
We discuss why wealth management typically focuses on investment portfolios alone, often overlooking key life goals and broader financial context. In contrast, true financial planning takes a holistic approach, mapping out a clear route from where you are now to where you want to be and ensuring your money supports what matters most in life.
Anick also highlights one of the most dangerous misconceptions: that “low-risk” portfolios are always the safest choice. In fact, if they fail to outpace inflation, they may quietly erode your financial future. As Anick puts it, “There’s no point going to the grave with a great big stack of money. You're just going to make the kids rich, not necessarily yourself fulfilled.”
So how can you tell if your adviser is offering genuine financial planning or simply selling a product? Ask the right questions, like “When can I retire?” and “What assumptions are you using to get there?” and see if they can answer with evidence and clarity, not just jargon.
Whether you are at the beginning of your financial journey or planning your exit strategy, this episode will help you ask better questions, demand better answers, and take more confident control of your financial future.
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Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Dr James (00:00):
A lot of us have financial advisors or we're
considering financial advice,but what do we need to know to
be able to tell when we'regetting a good deal versus not
getting a good deal?
I'm joined today by Mr AnickSharma, financial planner.
We're going to be talking aboutthe ins and outs of what you
need to know when it comes tothe terminology of financial
(00:20):
advice, what you can use and sayin order to figure out if your
financial advisor is giving youan amazing deal and giving you
the deal that they should be,and also give you some specific
questions right at the end ofthe podcast that you can use and
ask your financial advisor sothat you know that they're on
the ball.
(01:07):
I think it's important todistinguish between the terms
financial advice, financialplanning and wealth management,
because this is something that Isee people conflate and it
doesn't always mean the samething, right?
Anick (01:20):
Yeah, 100%.
So I think the starting pointis most people seek out
financial advice.
They want to take recommendedadvice what they should do,
based on their financial affairsand to get to a certain point
in the future.
Now the avenues to explorethere are a lot, essentially.
(01:41):
So, from the top, most peoplewill know the term independent
financial advisor, ifa.
So in a traditional IFA will,let's say, you, james, come to
me, you want help with a pensionor investment.
So if I'm an independentfinancial advisor, I say, okay,
I can look at the whole market,I can give my unbiased view of
(02:03):
what you should do and I willrecommend a certain product or
an investment strategy.
So that's one form of financialadvice.
There's a slight offshoot offthat you can have restricted
financial advisors.
So again, you might come to mesaying you want help with your
pension or investments, but Iwork for a certain national firm
(02:24):
or some big national firm and Ican only give advice based on
their range of products.
So it's really narrowed andrestricted there.
That can often come with highercosts and you could argue it
doesn't have your best interestat heart.
Now, within that financialadvice or within that
(02:47):
independent financial advisorspace sorry, you can then have
some financial advisors who goon to become wealth managers.
So a wealth manager will lookat a integrated strategy,
typically between the investmentside look a bit more at tax but
the best way to think aboutwealth management is it's a
sub-sector financial advice withmore of a emphasis on the
(03:10):
investment portfolio, where theywill look at things such as
asset allocation, investmentstrategy, portfolio management
and rebalancing.
So we've covered independentfinancial advisors so far,
wealth managers, financialplanning is.
It sort of ties it all intogether.
So financial planning is acomprehensive process and
(03:34):
journey.
It's essentially life planningand goal setting over short,
medium and long terms.
Your listeners I'm sure ifthey've heard me before, will
know about point a and point band mapping out the differences
um.
And that's what financialplanning is.
It maps out where you're at themoment point a and where you
want to get to point b um andbased on that it looks at the
(03:59):
strategies and interventionsthat may or may not be required
to get there.
Financial planning isencompassing.
It looks at that holisticperspective and so financial
planning includes wealthmanagement but addresses wider
financial needs such asbudgeting, saving, investment,
investment management strategies, retirement planning, tax
(04:20):
planning, risk management,estate planning, planning, tax
planning, risk management,estate planning, monitoring,
reviewing and more and thenwithin risk management you can.
Dr James (04:30):
There are so many different pieces there, so
hopefully that gives you a bitof a flavor of the differences
it does, and then to pull thatinto practical terms that people
experience, I suppose, wheneverthey're going on their
financial advice, financialplanning journey Wealth
management, in other words iswhen the advisor takes your
(04:51):
money, invests it in a portfolioof assets that they've worked
with you to select.
However, the planning componentis more along the lines of okay
, we've had all this money,we've had all this growth, now
how can we think about how to betax efficient, as you were
saying a second ago, and how canwe also think about drawing
some sort of recurring incomefrom these assets whenever we
(05:15):
hit retirement age?
Anick (05:17):
Yes, in a nutshell.
Dr James (05:21):
It's another way of saying it right, because this is
the thing.
Obviously, it's one thing to beable to grow someone's money,
and really that's where it canbe argued that someone can
potentially handle some of itindependently if they feel
comfortable.
Of course, not financial adviceor anything along those lines
but where it really is worthgetting a professional pair of
eyes is when you get closer andcloser to retirement age and
(05:45):
you're thinking to yourself okay, cool, now I need to think
about how things are structuredas much as anything else and
begin to draw some sort ofincome from my assets, some sort
of residual income, becausethat is a whole, entire
different kettle of fish.
That's more an art rather thana science.
And here's the thing I mean.
Whenever it comes to anytransaction, you want to be on
(06:07):
the better side of the dealbefore you say yes to it.
I mean, in that situation, afinancial planner will be able
to generate you so much more inreturn that it's just not worth
the effort.
So therefore, it can be a goodidea, of course, a good
financial planner as well.
Just emphasizing that.
Have I got that right?
Anick (06:23):
yeah.
So there's a.
There's a load of research thatdemonstrates the value of
holistic financial planning andit can make such a huge
difference.
You made an interesting pointthere about additional returns.
Like someone who just focuseson the, the traditional
financial advice piece willspeak about returns and growth,
(06:45):
which is, you know, we need thatportfolio to power the plan.
But I'd flip that on its headand say, okay, I've had
situations where clients come tome and say I think I want one
million pounds of my pension.
Okay, fine, no problem at all.
We can create a strategy.
Look at the asset allocation,rebalancing, contribution
amounts, all these sort ofthings.
But but what are you going todo with that £1 million?
(07:06):
Because most people don'tactually care about how much is
in the pension or whether it's apension or some sort of account
or what the investment is.
It's about what they do with it.
How will that £1 million helpyou, mr Clines, to achieve the
life you want?
To take the kids on holiday, totravel around the world, to go
on cruises, to take thatonce-in-a-lifetime safari trip,
(07:28):
whatever it might be, becausethat's where the juicy life bits
happen.
Let us do all the geeky, nerdythings about calculating rates
of returns and all those sort ofthings Interesting.
Dr James (07:40):
And then you know one other thing, just to circle back
to something that I was sayinga second ago yes, Interesting.
And then you know one of thethings, just to circle back to
something that I was saying asecond ago, yes, I mean, here's
the thing, Denison Invest isvery much set up with
encouraging people or helpingthem or demonstrating at least
that you can go down the path ofmanaging your investments,
potentially in some situationsindependently.
But you know what I've learnedsince then?
(08:01):
I mean in practical terms,because most people are so busy.
From experience, I mean,whenever I look into people's
portfolios, whenever it kind ofcomes up in conversation, it's
probably about 5% to 10% of thetime that I think to myself
right, this person has actuallynailed it, Like they've really
understood this, it can be done.
But you just have to weigh upto yourself Do I, in practical
(08:25):
terms, have the time to be ableto invest, to learn how to do
this, and that's where it canmake sense to at least get an
opinion, regardless of whatstage you're at on your
financial journey.
That was something that Ilearned, because back in the day
when I figured out how to put atracker fund in my ISA when I
was like 25 and I was like, oh,it just makes so much sense, and
I thought that everybody woulduh, get it.
(08:46):
But what I have to remember isprobably took me like two years
to figure out how to do that inand of itself.
So listen, what I'm saying isit's food for thought.
It's definitely not black andwhite and, at the very least,
it's better to make someprogress rather than none at all
.
And if you're gonna do it, thendo it right.
One thing I was also going toadd on as well I think a big
misconception I'm interested tohear your take on this, Anick
(09:08):
big misconception.
People think that if you havethe wealth management side of
things, that's fine, as insomeone's investing money and
assets in your behalf.
They think that the planningpiece on top will cost more
because it's more service.
But that's not always the caseat all.
Right.
Anick (09:24):
Yeah.
So it depends on how it'sstructured in terms of the that
person's charging fee.
So let's take a step back amoment.
Traditional financial advice,your wealth managers, your
traditional ifas well, they willgive or ask product-based
(09:46):
questions such as which pension,which investment, which
insurance policy, wherever itmight be.
Now, financial planningessentially aligns capital with
what's most important to you.
By capital, I mean time, money,energy and attention.
So financial planning willanswer those questions, but they
do so within life's biggerquestions, such as when are you
(10:08):
going to be financiallyindependent?
Are you on track?
Are you saving enough?
Do you have enough?
What even is enough?
Will it all be okay?
Because, fundamentally, time'sour most precious resource and
life, and our financialdecisions should be about
getting us closer to a morefulfilled life and getting us
(10:31):
close to that point.
Really, money is just the fuelfor that journey, but not the
end goal itself, and it's a toolto get there.
Real wealth is all that time,memory, moments with those that
mean the most to us.
So, by creating that financialplan first, which, using a cash
flow model, typically chart yourtrajectory into the future and
(10:51):
come back into the present,which tells us how we should
allocate our time and resources.
Essentially, life isn't arehearsal, so getting that right
is it's critical.
I've spoken about it before.
But that financial planningpiece, coming back to your
question, james it's a bit likesetting off on a car journey
(11:12):
from London.
You know you want to getsomewhere at some point, but if
you haven't taken the time tofind that route then it's so
easy to become lost.
And if I don't know, you set upGoogle Maps and your phone dies
.
There's life throws, there'sinevitable curveballs.
A road diversion happens by notchecking in regularly.
It's really easy to become lostand off track.
(11:33):
So, within the context of youknow you mentioned financial
planning and then the investmentpiece.
It's so important to do theplanning first because the I
said it momentarily ago theportfolio powers the plan, so we
need to set our stall up wherewe want to get to and then make
sure the tools are adequate toget there.
Now, in terms of planning costs, do more.
(11:55):
Quite a lot of professionalswill attribute their fees to the
financial planning, but in theinvestment management side of
things it is.
It comes along with it, andthat's why it's really important
to understand the differentstructures.
Some people charge fixed feeversus percentage base, so
there's no fee attributedtowards those assets under
(12:16):
management.
Dr James (12:16):
Essentially, it's just something to be mindful of and
to watch out for just on theplanning piece you're referring
to just a second ago and howhaving a goal and objective is
so important.
There's a quote by Seneca thatI absolutely love, and that
quote is if a man knows not towhich port he sails, no wind is
favorable.
Heard it?
(12:43):
maybe one or two times have, Ihave I said it before the
forecast, I probably have.
I've only got so many quotesand uh, yeah, maybe I should
freshen up and get a few more inmy repertoire.
But there you go, I really yougo.
I really liked that one, Ireally liked that one.
Worth saying again if I've saidit before, that's for sure.
Anick (12:58):
Anyway, you're right, sorry A hundred percent, unless
we take the time to define thatpoint and and think to ourselves
what does ideal look like?
What, what future do we want tohit?
It's so easy to get caught upin in the grind, essentially I.
(13:19):
It's so easy to get caught upin the grind, essentially, of
I've got to do X, y and Zbecause everyone else is talking
about it.
But look, we've spoken aboutsituations before where people
have been caught up and they'vebeen able to retire, but they
haven't taken the time to definethat point B of what the future
looks like.
And the time is so importantwe're not getting any of it back
um, so we can't afford to waitto see what may happen cool.
Dr James (13:40):
Let's talk about the regularity side of things,
because I believe financialadvisor is a protected term, but
financial planner isn't rightyeah.
Anick (13:50):
So to give financial advice you need to be on the FCA
register.
So that basically means you'vebeen signed off and you're
allowed to give regulatedfinancial advice.
So someone embarking down thisjourney, at the very least, if
you come across someone youmight want to work with, check
(14:14):
them out on the FCA register.
If they are not on there, thatis one gigantic red flag.
Yep, um, check thequalifications too.
Um, most financial advisorswill have a thing called a
diploma.
That basically means they'vepassed a few exams to give
advice.
Others out there might bechartered, certified, fellow,
(14:39):
etc.
It doesn't necessarily meanthey are better than a diploma,
but it's just things to look outfor.
Now the regulation comes withinactually giving advice some
well, financial planning usingcash flow modeling and not all
(15:00):
people do that and unfortunatelyit's not like regulated by the
FCA.
Yet I've been.
I actually wrote an articleabout this in the Financial
Times a few months ago because Ithink it should be regulated.
I love cash flow modeling.
I love the assumptions andgoing to town with all that
granular detail.
Um, it just needs more of awidespread awareness of how
(15:24):
sensitive those inputs can be.
Um, so just make sure peopleare doing cash flow modeling.
If you go down this journey,make sure they are an fca
register qualified to giveregulated advice.
Have a look at their approachesto investing.
Um, ideally, you don't wantsomeone who's making active
speculations or knee-jerkreactions to market movements.
(15:45):
Um, an evidence-basedinvestment philosophy.
Uh bases an approach on NobelPrize winning academic
literature.
Look at people's approaches tolife as well.
So our view is that we want tosee the Czechs take a bounce at
age 100, because that's a lifefulfilled and a load of good
(16:07):
stuff happening.
There's no point in going tothe grave with a great big stack
of money.
You're just going to make thekids or the next generation rich
and it's not really fulfilledlife.
Essentially.
Dr James (16:19):
I like that.
One more thing just to roundoff on this, just popped into my
head while we're talking Canyou give the audience some
questions that they can asktheir financial planner slash
financial advisor so that theyknow that they're getting a good
deal, some things that they canask to basically suss out
what's going on.
Anick (16:39):
Yeah, if someone's nearing retirement, ask them
when can I retire?
Dr James (16:45):
Because if someone's just giving financial advice, I
mean it probably does sort thewheat from the chaff right 100%.
Anick (16:53):
If someone's just giving financial advice product-based
there's no way you can know theanswer to that without the
context of a financial plan andcash flow model.
And someone who does that forcash flow modeling piece should
be able to say we think you canretire at this point.
If they ask that question, thenfollow it up by saying what are
(17:15):
the assumptions you're basingthat on and tell me how reasoned
they are.
Because if they start tapdancing and can't evidence their
assumptions, then that's a hugered flag and something to be
mindful of.
Dr James (17:26):
there they're probably the two biggest ones they're
the biggies right, and even eventhough those seem fairly,
fairly obvious, like an answerthat they might have at hand,
it's, I mean until, as you say,until someone conscious of
numbers, which doesn't happen asmuch as it should do.
There's just a whole lot ofpeople who are receiving advice,
(17:48):
but only receiving the wealthmanagement component, right when
they're investing their moneythat they can't possibly know,
even though that you would, youwould, it would be implied that
that is their job, right?
Anick (17:59):
A hundred percent and then ask about fees as well, if
they.
They should be absolutelytransparent about it.
Some will charge a percentageas a initial fee.
Some will charge a percentageongoing.
Ask them how much that's goingto be If you're going to set up
regular contributions.
Ask them in pounds and penceand in percentage terms how much
(18:20):
that's going to cost you,because as the pot gets bigger,
proportionately so does your fee.
Is that fair?
It's not for me to say, butit's for someone to do some
analysis and see what they thinkabout it.
Have a look at those thatcharge a fixed fee.
Ask them how they operate.
Dr James (18:36):
Um, yeah, there's another one I chuck on top as
well when it comes to riskinverted commas, risk in the
portfolio because this number ofpeople I see who are miles off
from retirement like 30 years inlow risk portfolios, and I get
that.
The financial advisor slashwealth manager, slash wealth
(18:57):
planner.
Financial planner does theirdue diligence beforehand and
they fill out the riskquestionnaire as part of their
assessment right, and a lot ofpeople are sitting in low to
medium risk inverted columnportfolios, which really means
low to medium volatilityportfolios, which actually means
low to medium returns as well.
(19:19):
Right, and really, you wantyour investment portfolio to
outpace inflation by thegreatest margin possible, but
also be invested in assets thathave a lot of historical data to
demonstrate growth.
So therefore, if someone is ina low risk portfolio, it's also
a low returns portfolio, whichmeans that your retirement, your
(19:40):
money, is quite literally noteven like pacing inflation
sometimes in terms of growth,which means that you'll never
get to retire.
So, in a weird way, the lowrisk portfolios are actually the
high-risk portfolios, becauseif we define risk as never
achieving retirement, that's themost likely to cause you to be
in that scenario by the end ofit.
Anick (20:00):
James, you're going to trigger me here because I have
such a bugbear with theprofession.
So anytime people open first ofall, thanks, yeah, great
reminder.
Anytime people open aninvestment account, they might
be greeted with a question thatsays what sort of investor are
you?
And throw out meaninglessdescriptors such as safe,
cautious, adventurous,moderately adventurous.
(20:22):
Me as a professional.
I look at this and think atface value initially.
So any human thinks I don'twant my money to be aggressive,
so what am I doing there?
But then I put my financialplanner hat on and say you know
what?
They're, attributing their riskto volatility I how much the
market goes up or down over aperiod of time.
So, using their definitions, ifI stuck everything as cash in
(20:47):
my pension for 30, 40 yearsbecause I've taken a safe and
for those listeners I said safein inverted air commas there
over the next 30, 40 years, thenthat's fine.
My retirement fund's sorted,absolutely not.
Inflation is going to rip it anew one over that time.
If cash is paying threeinflation's at four money's
(21:07):
going backwards by 1 percentevery year, compounding over 30
odd years, that's a giganticnumber.
All of a sudden I'm now inretirement.
My money can't fund myretirement peak earning years
have gone and it's in a reallytricky situation.
Volatility is a function ofmarkets and capital markets
reward long-term discipline.
Really important to get that onboard.
(21:31):
If you're going down thisjourney, ask your financial
professional how do you definerisk?
Because that is so important.
If they just use aquestionnaire, alarm bells would
be going off in my head.
Using a three-pronged approachto risk is a portfolio selection
so important.
(21:51):
So risk need looks at what isthe mathematical return.
We need to deliver our plan andthat's the most important
construct without a doubt,because it's objective.
Once you map out point B, youcan come back to the present and
say I need to target return ofX to achieve this future
Fantastic.
The second is risk capacity, andthat's our ability to withstand
(22:12):
short-term losses, and thatdepends on the short, medium,
long-term goals if you've gotcertain things to plan for.
So that needs to be factored inas well.
And the third is how we feelabout volatility.
It's all well and good to becreating the perfect portfolio
on a spreadsheet, but if you'renot sleeping every night because
you're worried about it, thenthere's a conversation to be had
and typically that third pieceis a questionnaire.
(22:34):
It's psychometric but that hasthat has flaws in itself.
If you've just had a hugeargument with someone before
doing this questionnaire, you'regoing to be not in a good mood
and it might reflectpessimistically in your answers,
which then might impact yourportfolio selection over the
next 40 or 50 years.
(22:55):
So yeah, just just be carefulwith that sort of thing.
A lot of us have financial advisors or we're
considering financial advice,but what do we need to know to
be able to tell when we'regetting a good deal versus not
getting a good deal?
I'm joined today by Mr AnickSharma, financial planner.
We're going to be talking aboutthe ins and outs of what you
need to know when it comes tothe terminology of financial
(00:20):
advice, what you can use and sayin order to figure out if your
financial advisor is giving youan amazing deal and giving you
the deal that they should be,and also give you some specific
questions right at the end ofthe podcast that you can use and
ask your financial advisor sothat you know that they're on
the ball.
(01:07):
I think it's important todistinguish between the terms
financial advice, financialplanning and wealth management,
because this is something that Isee people conflate and it
doesn't always mean the samething, right?
Anick (01:20):
Yeah, 100%.
So I think the starting pointis most people seek out
financial advice.
They want to take recommendedadvice what they should do,
based on their financial affairsand to get to a certain point
in the future.
Now the avenues to explorethere are a lot, essentially.
(01:41):
So, from the top, most peoplewill know the term independent
financial advisor, ifa.
So in a traditional IFA will,let's say, you, james, come to
me, you want help with a pensionor investment.
So if I'm an independentfinancial advisor, I say, okay,
I can look at the whole market,I can give my unbiased view of
(02:03):
what you should do and I willrecommend a certain product or
an investment strategy.
So that's one form of financialadvice.
There's a slight offshoot offthat you can have restricted
financial advisors.
So again, you might come to mesaying you want help with your
pension or investments, but Iwork for a certain national firm
(02:24):
or some big national firm and Ican only give advice based on
their range of products.
So it's really narrowed andrestricted there.
That can often come with highercosts and you could argue it
doesn't have your best interestat heart.
Now, within that financialadvice or within that
(02:47):
independent financial advisorspace sorry, you can then have
some financial advisors who goon to become wealth managers.
So a wealth manager will lookat a integrated strategy,
typically between the investmentside look a bit more at tax but
the best way to think aboutwealth management is it's a
sub-sector financial advice withmore of a emphasis on the
(03:10):
investment portfolio, where theywill look at things such as
asset allocation, investmentstrategy, portfolio management
and rebalancing.
So we've covered independentfinancial advisors so far,
wealth managers, financialplanning is.
It sort of ties it all intogether.
So financial planning is acomprehensive process and
(03:34):
journey.
It's essentially life planningand goal setting over short,
medium and long terms.
Your listeners I'm sure ifthey've heard me before, will
know about point a and point band mapping out the differences
um.
And that's what financialplanning is.
It maps out where you're at themoment point a and where you
want to get to point b um andbased on that it looks at the
(03:59):
strategies and interventionsthat may or may not be required
to get there.
Financial planning isencompassing.
It looks at that holisticperspective and so financial
planning includes wealthmanagement but addresses wider
financial needs such asbudgeting, saving, investment,
investment management strategies, retirement planning, tax
(04:20):
planning, risk management,estate planning, planning, tax
planning, risk management,estate planning, monitoring,
reviewing and more and thenwithin risk management you can.
Dr James (04:30):
There are so many different pieces there, so
hopefully that gives you a bitof a flavor of the differences
it does, and then to pull thatinto practical terms that people
experience, I suppose, wheneverthey're going on their
financial advice, financialplanning journey Wealth
management, in other words iswhen the advisor takes your
(04:51):
money, invests it in a portfolioof assets that they've worked
with you to select.
However, the planning componentis more along the lines of okay
, we've had all this money,we've had all this growth, now
how can we think about how to betax efficient, as you were
saying a second ago, and how canwe also think about drawing
some sort of recurring incomefrom these assets whenever we
(05:15):
hit retirement age?
Anick (05:17):
Yes, in a nutshell.
Dr James (05:21):
It's another way of saying it right, because this is
the thing.
Obviously, it's one thing to beable to grow someone's money,
and really that's where it canbe argued that someone can
potentially handle some of itindependently if they feel
comfortable.
Of course, not financial adviceor anything along those lines
but where it really is worthgetting a professional pair of
eyes is when you get closer andcloser to retirement age and
(05:45):
you're thinking to yourself okay, cool, now I need to think
about how things are structuredas much as anything else and
begin to draw some sort ofincome from my assets, some sort
of residual income, becausethat is a whole, entire
different kettle of fish.
That's more an art rather thana science.
And here's the thing I mean.
Whenever it comes to anytransaction, you want to be on
(06:07):
the better side of the dealbefore you say yes to it.
I mean, in that situation, afinancial planner will be able
to generate you so much more inreturn that it's just not worth
the effort.
So therefore, it can be a goodidea, of course, a good
financial planner as well.
Just emphasizing that.
Have I got that right?
Anick (06:23):
yeah.
So there's a.
There's a load of research thatdemonstrates the value of
holistic financial planning andit can make such a huge
difference.
You made an interesting pointthere about additional returns.
Like someone who just focuseson the, the traditional
financial advice piece willspeak about returns and growth,
(06:45):
which is, you know, we need thatportfolio to power the plan.
But I'd flip that on its headand say, okay, I've had
situations where clients come tome and say I think I want one
million pounds of my pension.
Okay, fine, no problem at all.
We can create a strategy.
Look at the asset allocation,rebalancing, contribution
amounts, all these sort ofthings.
But but what are you going todo with that £1 million?
(07:06):
Because most people don'tactually care about how much is
in the pension or whether it's apension or some sort of account
or what the investment is.
It's about what they do with it.
How will that £1 million helpyou, mr Clines, to achieve the
life you want?
To take the kids on holiday, totravel around the world, to go
on cruises, to take thatonce-in-a-lifetime safari trip,
(07:28):
whatever it might be, becausethat's where the juicy life bits
happen.
Let us do all the geeky, nerdythings about calculating rates
of returns and all those sort ofthings Interesting.
Dr James (07:40):
And then you know one other thing, just to circle back
to something that I was sayinga second ago yes, Interesting.
And then you know one of thethings, just to circle back to
something that I was saying asecond ago, yes, I mean, here's
the thing, Denison Invest isvery much set up with
encouraging people or helpingthem or demonstrating at least
that you can go down the path ofmanaging your investments,
potentially in some situationsindependently.
But you know what I've learnedsince then?
(08:01):
I mean in practical terms,because most people are so busy.
From experience, I mean,whenever I look into people's
portfolios, whenever it kind ofcomes up in conversation, it's
probably about 5% to 10% of thetime that I think to myself
right, this person has actuallynailed it, Like they've really
understood this, it can be done.
But you just have to weigh upto yourself Do I, in practical
(08:25):
terms, have the time to be ableto invest, to learn how to do
this, and that's where it canmake sense to at least get an
opinion, regardless of whatstage you're at on your
financial journey.
That was something that Ilearned, because back in the day
when I figured out how to put atracker fund in my ISA when I
was like 25 and I was like, oh,it just makes so much sense, and
I thought that everybody woulduh, get it.
(08:46):
But what I have to remember isprobably took me like two years
to figure out how to do that inand of itself.
So listen, what I'm saying isit's food for thought.
It's definitely not black andwhite and, at the very least,
it's better to make someprogress rather than none at all
.
And if you're gonna do it, thendo it right.
One thing I was also going toadd on as well I think a big
misconception I'm interested tohear your take on this, Anick
(09:08):
big misconception.
People think that if you havethe wealth management side of
things, that's fine, as insomeone's investing money and
assets in your behalf.
They think that the planningpiece on top will cost more
because it's more service.
But that's not always the caseat all.
Right.
Anick (09:24):
Yeah.
So it depends on how it'sstructured in terms of the that
person's charging fee.
So let's take a step back amoment.
Traditional financial advice,your wealth managers, your
traditional ifas well, they willgive or ask product-based
(09:46):
questions such as which pension,which investment, which
insurance policy, wherever itmight be.
Now, financial planningessentially aligns capital with
what's most important to you.
By capital, I mean time, money,energy and attention.
So financial planning willanswer those questions, but they
do so within life's biggerquestions, such as when are you
(10:08):
going to be financiallyindependent?
Are you on track?
Are you saving enough?
Do you have enough?
What even is enough?
Will it all be okay?
Because, fundamentally, time'sour most precious resource and
life, and our financialdecisions should be about
getting us closer to a morefulfilled life and getting us
(10:31):
close to that point.
Really, money is just the fuelfor that journey, but not the
end goal itself, and it's a toolto get there.
Real wealth is all that time,memory, moments with those that
mean the most to us.
So, by creating that financialplan first, which, using a cash
flow model, typically chart yourtrajectory into the future and
(10:51):
come back into the present,which tells us how we should
allocate our time and resources.
Essentially, life isn't arehearsal, so getting that right
is it's critical.
I've spoken about it before.
But that financial planningpiece, coming back to your
question, james it's a bit likesetting off on a car journey
(11:12):
from London.
You know you want to getsomewhere at some point, but if
you haven't taken the time tofind that route then it's so
easy to become lost.
And if I don't know, you set upGoogle Maps and your phone dies
.
There's life throws, there'sinevitable curveballs.
A road diversion happens by notchecking in regularly.
It's really easy to become lostand off track.
(11:33):
So, within the context of youknow you mentioned financial
planning and then the investmentpiece.
It's so important to do theplanning first because the I
said it momentarily ago theportfolio powers the plan, so we
need to set our stall up wherewe want to get to and then make
sure the tools are adequate toget there.
Now, in terms of planning costs, do more.
(11:55):
Quite a lot of professionalswill attribute their fees to the
financial planning, but in theinvestment management side of
things it is.
It comes along with it, andthat's why it's really important
to understand the differentstructures.
Some people charge fixed feeversus percentage base, so
there's no fee attributedtowards those assets under
(12:16):
management.
Dr James (12:16):
Essentially, it's just something to be mindful of and
to watch out for just on theplanning piece you're referring
to just a second ago and howhaving a goal and objective is
so important.
There's a quote by Seneca thatI absolutely love, and that
quote is if a man knows not towhich port he sails, no wind is
favorable.
Heard it?
(12:43):
maybe one or two times have, Ihave I said it before the
forecast, I probably have.
I've only got so many quotesand uh, yeah, maybe I should
freshen up and get a few more inmy repertoire.
But there you go, I really yougo.
I really liked that one, Ireally liked that one.
Worth saying again if I've saidit before, that's for sure.
Anick (12:58):
Anyway, you're right, sorry A hundred percent, unless
we take the time to define thatpoint and and think to ourselves
what does ideal look like?
What, what future do we want tohit?
It's so easy to get caught upin in the grind, essentially I.
(13:19):
It's so easy to get caught upin the grind, essentially, of
I've got to do X, y and Zbecause everyone else is talking
about it.
But look, we've spoken aboutsituations before where people
have been caught up and they'vebeen able to retire, but they
haven't taken the time to definethat point B of what the future
looks like.
And the time is so importantwe're not getting any of it back
um, so we can't afford to waitto see what may happen cool.
Dr James (13:40):
Let's talk about the regularity side of things,
because I believe financialadvisor is a protected term, but
financial planner isn't rightyeah.
Anick (13:50):
So to give financial advice you need to be on the FCA
register.
So that basically means you'vebeen signed off and you're
allowed to give regulatedfinancial advice.
So someone embarking down thisjourney, at the very least, if
you come across someone youmight want to work with, check
(14:14):
them out on the FCA register.
If they are not on there, thatis one gigantic red flag.
Yep, um, check thequalifications too.
Um, most financial advisorswill have a thing called a
diploma.
That basically means they'vepassed a few exams to give
advice.
Others out there might bechartered, certified, fellow,
(14:39):
etc.
It doesn't necessarily meanthey are better than a diploma,
but it's just things to look outfor.
Now the regulation comes withinactually giving advice some
well, financial planning usingcash flow modeling and not all
(15:00):
people do that and unfortunatelyit's not like regulated by the
FCA.
Yet I've been.
I actually wrote an articleabout this in the Financial
Times a few months ago because Ithink it should be regulated.
I love cash flow modeling.
I love the assumptions andgoing to town with all that
granular detail.
Um, it just needs more of awidespread awareness of how
(15:24):
sensitive those inputs can be.
Um, so just make sure peopleare doing cash flow modeling.
If you go down this journey,make sure they are an fca
register qualified to giveregulated advice.
Have a look at their approachesto investing.
Um, ideally, you don't wantsomeone who's making active
speculations or knee-jerkreactions to market movements.
(15:45):
Um, an evidence-basedinvestment philosophy.
Uh bases an approach on NobelPrize winning academic
literature.
Look at people's approaches tolife as well.
So our view is that we want tosee the Czechs take a bounce at
age 100, because that's a lifefulfilled and a load of good
(16:07):
stuff happening.
There's no point in going tothe grave with a great big stack
of money.
You're just going to make thekids or the next generation rich
and it's not really fulfilledlife.
Essentially.
Dr James (16:19):
I like that.
One more thing just to roundoff on this, just popped into my
head while we're talking Canyou give the audience some
questions that they can asktheir financial planner slash
financial advisor so that theyknow that they're getting a good
deal, some things that they canask to basically suss out
what's going on.
Anick (16:39):
Yeah, if someone's nearing retirement, ask them
when can I retire?
Dr James (16:45):
Because if someone's just giving financial advice, I
mean it probably does sort thewheat from the chaff right 100%.
Anick (16:53):
If someone's just giving financial advice product-based
there's no way you can know theanswer to that without the
context of a financial plan andcash flow model.
And someone who does that forcash flow modeling piece should
be able to say we think you canretire at this point.
If they ask that question, thenfollow it up by saying what are
(17:15):
the assumptions you're basingthat on and tell me how reasoned
they are.
Because if they start tapdancing and can't evidence their
assumptions, then that's a hugered flag and something to be
mindful of.
Dr James (17:26):
there they're probably the two biggest ones they're
the biggies right, and even eventhough those seem fairly,
fairly obvious, like an answerthat they might have at hand,
it's, I mean until, as you say,until someone conscious of
numbers, which doesn't happen asmuch as it should do.
There's just a whole lot ofpeople who are receiving advice,
(17:48):
but only receiving the wealthmanagement component, right when
they're investing their moneythat they can't possibly know,
even though that you would, youwould, it would be implied that
that is their job, right?
Anick (17:59):
A hundred percent and then ask about fees as well, if
they.
They should be absolutelytransparent about it.
Some will charge a percentageas a initial fee.
Some will charge a percentageongoing.
Ask them how much that's goingto be If you're going to set up
regular contributions.
Ask them in pounds and penceand in percentage terms how much
(18:20):
that's going to cost you,because as the pot gets bigger,
proportionately so does your fee.
Is that fair?
It's not for me to say, butit's for someone to do some
analysis and see what they thinkabout it.
Have a look at those thatcharge a fixed fee.
Ask them how they operate.
Dr James (18:36):
Um, yeah, there's another one I chuck on top as
well when it comes to riskinverted commas, risk in the
portfolio because this number ofpeople I see who are miles off
from retirement like 30 years inlow risk portfolios, and I get
that.
The financial advisor slashwealth manager, slash wealth
(18:57):
planner.
Financial planner does theirdue diligence beforehand and
they fill out the riskquestionnaire as part of their
assessment right, and a lot ofpeople are sitting in low to
medium risk inverted columnportfolios, which really means
low to medium volatilityportfolios, which actually means
low to medium returns as well.
(19:19):
Right, and really, you wantyour investment portfolio to
outpace inflation by thegreatest margin possible, but
also be invested in assets thathave a lot of historical data to
demonstrate growth.
So therefore, if someone is ina low risk portfolio, it's also
a low returns portfolio, whichmeans that your retirement, your
(19:40):
money, is quite literally noteven like pacing inflation
sometimes in terms of growth,which means that you'll never
get to retire.
So, in a weird way, the lowrisk portfolios are actually the
high-risk portfolios, becauseif we define risk as never
achieving retirement, that's themost likely to cause you to be
in that scenario by the end ofit.
Anick (20:00):
James, you're going to trigger me here because I have
such a bugbear with theprofession.
So anytime people open first ofall, thanks, yeah, great
reminder.
Anytime people open aninvestment account, they might
be greeted with a question thatsays what sort of investor are
you?
And throw out meaninglessdescriptors such as safe,
cautious, adventurous,moderately adventurous.
(20:22):
Me as a professional.
I look at this and think atface value initially.
So any human thinks I don'twant my money to be aggressive,
so what am I doing there?
But then I put my financialplanner hat on and say you know
what?
They're, attributing their riskto volatility I how much the
market goes up or down over aperiod of time.
So, using their definitions, ifI stuck everything as cash in
(20:47):
my pension for 30, 40 yearsbecause I've taken a safe and
for those listeners I said safein inverted air commas there
over the next 30, 40 years, thenthat's fine.
My retirement fund's sorted,absolutely not.
Inflation is going to rip it anew one over that time.
If cash is paying threeinflation's at four money's
(21:07):
going backwards by 1 percentevery year, compounding over 30
odd years, that's a giganticnumber.
All of a sudden I'm now inretirement.
My money can't fund myretirement peak earning years
have gone and it's in a reallytricky situation.
Volatility is a function ofmarkets and capital markets
reward long-term discipline.
Really important to get that onboard.
(21:31):
If you're going down thisjourney, ask your financial
professional how do you definerisk?
Because that is so important.
If they just use aquestionnaire, alarm bells would
be going off in my head.
Using a three-pronged approachto risk is a portfolio selection
so important.
(21:51):
So risk need looks at what isthe mathematical return.
We need to deliver our plan andthat's the most important
construct without a doubt,because it's objective.
Once you map out point B, youcan come back to the present and
say I need to target return ofX to achieve this future
Fantastic.
The second is risk capacity, andthat's our ability to withstand
(22:12):
short-term losses, and thatdepends on the short, medium,
long-term goals if you've gotcertain things to plan for.
So that needs to be factored inas well.
And the third is how we feelabout volatility.
It's all well and good to becreating the perfect portfolio
on a spreadsheet, but if you'renot sleeping every night because
you're worried about it, thenthere's a conversation to be had
and typically that third pieceis a questionnaire.
(22:34):
It's psychometric but that hasthat has flaws in itself.
If you've just had a hugeargument with someone before
doing this questionnaire, you'regoing to be not in a good mood
and it might reflectpessimistically in your answers,
which then might impact yourportfolio selection over the
next 40 or 50 years.
(22:55):
So yeah, just just be carefulwith that sort of thing.
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