Recently moving house got me thinking about the function and value of financial advice at critical junctures in life. I learned some interesting lessons in terms of financial planning.
The value of professional services
The fee for selling our house was an eye-watering amount based on its sale price. Arguably, an estate agent’s commission aligns them with their client’s interests to a greater extent than a financial adviser’s ad valorem fees (or commission) does with theirs.
The more I got for my house, the more I paid the agent. That is true for a financial adviser’s annual value based fees but less the case for the up-front costs or even the early years of looking after a client.
As it turned out, I think it was probably worth it. I was able to make a direct comparison of the service with an internet-based estate agent that charged a tiny fraction of what my national firm took from me.
The internet service was perfectly adequate but my expensive agent paid for themselves and more when it came to negotiations with potential buyers. It was a labour intensive and personal service (worthwhile in this part of the market), although backed up by lots of technology.
Robo-service and robo-advice is making big inroads at the bottom end of the market but not so much with more expensive property.
Moving house is one of the most stressful moments in anyone’s life, particularly if you have not done it for years. It is on a par with retirement, death or divorce (and was occasionally in danger of causing all of these eventualities).
With this in mind, it is good to have professionals around to encourage and reassure you. We had all kinds of fears, both real and imagined: Would the buyers change their minds or be forced to pull out? Would they really have the money? Are we making the right decision?
The period before exchange of contracts was particularly tense because, in England, there is no commitment at all until this point. They order these things better in Scotland and indeed many other countries. Even after exchange, the tension did not evaporate, with the same thoughts haunting the purchase side of the transaction.
Investment and financial planning also involves stress. Advisers would do well to remember that clients are dealing with major issues they have probably seldom, if ever, considered before. They will also often be undergoing major changes in their lives, such as retirement, death in the family or a divorce. Clients may be vague about what they are expected to do and what might happen to their investments.
Planning the move
We had forgotten what buying, selling and moving were like, and in any case a lot has changed. With this in mind, we needed more practical guidance and handholding than we first expected. A few simple guides explaining what was going to happen would have helped and more checklists might have led us to avoid some of the more obvious mistakes we made.
Lawyers and estate agents could be better at this. One would hope that advisers are pretty competent at explaining their recommendations and subsequent processes but I suspect they still assume too much knowledge by their clients of the investment world generally and the jargon in particular.
Just getting it done
One of an adviser’s biggest roles is to make sure clients shake off their natural lethargy and just do it. The lawyers and estate agents made sure we got on with some of the essential but boring steps when we were dragging our feet. Of course, we turned out to be very slow and indolent about arranging things that did not directly concern the professionals, so we ended up moving much of our 31 years of household detritus rather than sorting it out in advance. A really good adviser would have discovered we might do that in the fact find and pressed to make sure we just got it done.
Danby Bloch is chairman of Helm Godfrey