Regardless of whether you have built up assets from working for many years in a profitable career, earned a lump sum from the sale of a home or business, or perhaps received a substantial amount of inheritance from the recent passing of a family member, your wealth is now providing you with the opportunity to gain even more financial growth.
Due to the amount of healthy competition on the market, investors are awash with options to help keep their costs down, and their returns up. In the past, anyone that invested money may have been caught out by big adviser or management charges.
This guide will help you to better manage your investments, whilst saving on costs.
No more hefty commission fees
These days the law states that financial advisers are no longer allowed to be paid a commission for their services through new products that they recommend, although they are still allowed to do so for anything sold before the cut-off date (31st December 2012).
Trail commissions, to give them their proper name, were made available for the purposes of covering the cost for reviewing investments every year, but in reality they were just used by financial advisers as lucrative rewards for selling particular investments.
The majority of trust funds and open-ended investment companies would charge an annual management fee of say 1.5%. 0.75% would go to the trust fund manager, 0.5% as trail commission to the financial adviser, and the rest to the investment platform.
In April 2014, new legislation comes into force that will also ban commission going to the investment platform too.
Should you manage your wealth investments yourself?
It is often tempting to just dive into the deep end and manage your wealth investment portfolio yourself. In fact, many seasoned investors do just that. But in the majority of cases, this can be a bad idea.
Bad investments – many people who self-manage their wealth investment portfolios that aren’t particularly experienced in doing so are more likely to make bad investments. This ultimately results in you losing a lot more money than just your commission payments! A wealth management company is better placed to make wise and sound investments on your behalf, leaving you with one less thing to worry about;
Bad asset allocation – related to bad investments is bad asset allocation. Simply put, this relates to the practice of putting all of one’s eggs in one’s basket. In other words, rather than spreading your money across different investments to minimise any bad investment risks, you would put all your money within one investment;
Sparse monitoring of investments and risk – if you self-manage your investments, you are unlikely to monitor the movement of your investments on a regular basis. A wealth management company on the other hand will religiously monitor and track your investments so that you don’t have to, and of course so you don’t have to worry about whether you are going to lose a lot of money or not.