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Making an informed decision

It is said that you can only judge the quality of an investment when it comes to an end. I decided to fund my mortgage in 1986 with a low-cost endowment. The maturity cheque arrived this week. The target was £20,000; the maturity value was £17,500.

Now, this is not a catastrophe. On the plus side, I made about £2,000 when the company demutualised. When I moved house 13 years ago I took out a bigger mortgage, with the balance on repayment, so at most I am probably looking at an additional six months’ payments. However, I think there is a bigger lesson to be learnt from my experience.

In 1986, I had a choice of two options. Only one could give the best result but at that point no one could predict which one it would be. I chose the wrong one. I did not seek advice since (allegedly) I knew what I was doing. If I had been a layperson and sought the help of an adviser, the one thing I know for certain is they would have recomm-ended one option. This leads to a significant question. If you cannot be sure of the outcome, is it appropriate to make any recommendation?

It seems to me that a core part of the advice process is to help the client understand what we know and what we don’t know. When we come to a point where there is a choice, we need to make it clear that as the outcome is uncertain then they must make the final decision. Our role is to help them make an informed decision.

Selling involves certainty. I have identified your needs, I have identified a solution and I will try to persuade you to accept my recommendation. Advice starts with the principle that the future is uncertain. There are a number of options that could meet your objectives but I cannot tell you which one will be the best. What I can do is give you the knowledge to make an informed decision.

John Trayner

Audley Financial Training

Cambridgeshire

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