Interactive Investor

How much help do you need when investing?

From going it alone to paying for professional advice, Craig Rickman examines the options when seeking support with your investment decisions.

21st May 2024 14:27

by Craig Rickman from interactive investor

Share on

A man scrathing his head

We all need a bit of help with things from time to time, and managing our investment portfolios is no exception.

There are thousands of funds, investment trusts, bonds, and stocks to choose from, which can make for a dizzying experience. And let’s not forget the UK tax system, which can be challenging to get your head around at the best of times.

This complexity is proving a barrier for many people, according to new research.

A survey of 2,000 UK adults, conducted by Opinium on behalf of interactive investor, found that three-quarters of Brits don’t invest – an alarming statistic.

So, what are the reasons for this?Well, the biggest is lack of knowledge and understanding of investing (22%), which I’m sure many can empathise with. The personal finance industry is making decent strides to unpack some of the hideous jargon and create a simpler landscape, but there’s room for improvement.

Other reasons for the low engagement include concerns about losing money (20%), fear of market volatility (12%), and low confidence in the ability to pick the right investments (12%).

But interestingly, the research found that almost half (48%) of those who don’t invest said they would be more likely to do so if help was at hand.

The good news is, whether you’re a seasoned investor or dipping your toes into the stock market for the first time, there are several levels of support available. And these are more nuanced than either ploughing your own furrow or leaving everything to experts.

Let’s run through the options.

1) Go it alone

This is the most hands-on approach, where you build and manage your own investment portfolio.

Given the absence of expert help, this is the cheapest option, although how much you actually pay will depend on several factors. This includes any fund or investment trust charges, trading fees and platform costs. As fees can have a big impact on how much money you make, it’s key to choose wisely here.

Rather than a one-off event, managing your own wealth is very much an ongoing exercise. It’s vital to do your research, keeping top of industry developments, notably tax changes. interactive investor has plenty of tools, analytics, and articles to help you on this front.

Contrary to what you may think, ploughing your own furrow doesn’t mean taking big risks or overcomplicating matters. You can keep things simple, and sometimes this might be a sensible approach, particularly if you’re a relatively inexperienced investor with a modest portfolio.

For those who need some help selecting investments, the ii Super 60 and ACE 40 lists of recommended funds can be a great place to start.

2) Get a ready-made solution

Ready-made investment solutions can be seen as a halfway house between doing it yourself and receiving any form of financial advice or guidance – whether digital or face to face. For this reason, the costs are still low.

Take interactive investor’s new Managed ISA (individual savings account), for example – which directs you to a portfolio tailored towards your financial goals. Importantly, it also flags things you should prioritise before investing, such as clearing debt, and seeks to identify whether the amount you want to invest is affordable.

The process is simple. You answer a few questions about your attitude to risk and investing style and are matched to one of 10 investment portfolios. These portfolios invest in a mix of assets (although mostly shares and bonds with various weightings) and are monitored by experts to ensure the asset allocations continue to remain suitable.

Ready-made solutions are ideal for investors who need some help choosing an appropriate investment portfolio, but either don’t want, or need, to pay for financial advice.

They can also be useful for those who have the knowledge and skills to manage their portfolio but lack the time or inclination to keep on top of things.

self-employed woman 600

3) Seek digital advice

A big fuss was made about robo advice when it first launched. Heralded as the solution to roll out advice to those unable to afford it, digital solutions advise investors where to put their money in a cheaper and speedier way than traditional advice services. However, you typically pay more than if you DIY or choose a ready-made portfolio.

Put simply, robo advice harnesses algorithms to offer investment services. Whether this constitutes advice is a matter of some debate, but you certainly get more support than going it alone.

When the concept first launched there was little to no human involvement in the process, but things are changing on this front. Robo advice mark two, hybrid advice, blends algorithms and a human adviser – although these offerings are not yet ubiquitous.

Most robo advisers should meet UK regulatory requirements, giving you some protection should things go wrong.

4) Pay for financial advice

First, even though there are some similarities, digital and face to face advice are distinct. Yes, both are regulated,but human advice is far more comprehensive, hence the higher costs.

Interestingly, various pieces of research suggest only 8% to 10% of the population take financial advice every year.

There are several reasons behind the low take-up. Some people may be unable to afford it, whereas others prefer to do things themselves and save the fees.

Another is that advice is not accessible for everyone. Many financial planning firms only entertain investors with a certain size of assets to invest, typically somewhere between £50,000 and £100,000. This rules out most younger and fledgling investors who haven’t had the time to accrue wealth.

Financial advice may be the priciest option when seeking to manage your wealth, but it can have enormous value. Even some experienced DIY investors are happy to pay for advice in complex areas to make sure they don’t get caught out.

A financial planner will find out what you want in life and construct a plan to help you get there. This encompasses more than purely investment advice. Protecting yourself and loved ones should you become seriously ill or pass away and making the most of any tax-saving opportunities are also part of the service.

It’s important to be aware of the fees, though. Advisers can charge either fixed fees or as a percentage of your portfolio, and these are usually applied to any initial investments and annually.

Tread carefully when using social media...

The news that nine social media celebrities, including former reality TV stars, have been charged by the Financial Conduct Authority (FCA) in relation to promoting an unauthorised trading scheme is a cause for concern.

This came just a month after the City watchdog fired a warning to firms and financial influencers to keep things above the law when using social media to promote investment products.

The reason for such worry is that more and more people are heading online for money guidance and tips.

Research published in March by Intuit Credit Karma found that a more than a third (36%) of under 25s rely on so-called finfluencers as their core source of financial information. And some 52% of adults said that they already are, or would consider, getting money tips from social media.

We should note that not all money guidance on social media is bad. But those with limited investing experience may struggle to discern what’s helpful and what’s harmful.

This illustrates why it’s so important to make sure you are aware of the help available when it comes to making investment decisions.

If you’re new to the investing game and want the peace of mind that what you’re doing is suitable, then services that guide you towards investments that are sensible and appropriate for you might be worth seeking out.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

Get more news and expert articles direct to your inbox