Why advisers should never work alone

Financial advisers are often asked to be all things to all people. They are required to perform the roles of tax planner, pensions expert, life assurance adviser and investment professional. There is a strong argument for advisers to move away from this current practice, and instead to specialise. Working together with other professionals, financial planners are well placed to deliver a comprehensive wealth management proposition to their clients. Investment management is a good place to start. Equity funds have been performing badly for several years. While much of this can be blamed on the market, the questions still need to be asked. For example, how many intermediaries are skilled in the theory of portfolio construction and investment management? Are they able to be pro-active in their ongoing advice to clients? The UK regulators require intermediaries to provide “best advice,” suitable to a client’s needs, taking into account risk tolerance, investment horizon and income requirements. Advisers are generally good at establishing clients’ needs, as well as technical issues of pensions and tax planning. However, without comprehensive research, it is impossible to be aware of all the economic issues that determine investment strategy, while at the same time continually appraising the ever-changing universe of investment funds. This is why we have seen the sale of fashionable products, including exposure to global privatisations, emerging markets, high yield bonds and technology funds. In addition, few financial advisers are authorised to provide discretionary investment management. Therefore each alteration to a portfolio must be on an advisory basis, leading to greater administrative burden on the adviser. With many clients now aiming for absolute, rather than benchmark-linked returns, advisers must consider newer alternative investments, including hedge funds and structured products. Many of these employ complex techniques, which need to be properly explained by advisers. The unique skills of financial advisers mean they are well positioned to provide technical advice and to co-ordinate delivery of wealth management services. I believe that it is possible to improve the current offering if advisers concentrated on their area of expertise and delegated other areas, including investment management, to specialists providing both traditional and alternative strategies. This would leave advisers free to consider longer-term planning issues, such as tax efficient holding structures for investment and pension portfolios. Christine Ross is head of financial planning at SG Hambros in London