Managing money – getting the basics right

If you are an Attorney or Deputy you will inevitably be faced with the challenge of deciding if the money you are now  overseeing is invested properly.  You have to do something.  You cannot do nothing – it is a key part of your role.

So have you inherited a financial advisor that has looked after your Mother’s affairs for years?  Are they any good?  What do they charge?  Is that reasonable?  What are their qualifications?  How is their performance judged against others?  A starter for ten – do you know the difference between a chartered, certified or holder of a certificate of financial planning?

In 2009 the Review of Financial Studies published a report.   It pointed out that the cost of investing in British funds is higher than anywhere else in the developed world other than Scandinavia and Canada.  The average British mutual fund charged 2.21% of its clients’ assets in annual expenses, compared with 1.04% in the U.S.

What does all this mean?  The money you are safeguarding could be being walloped by fees and commissions that you probably do not have much of  a chance of understanding.  Some funds charge larger hidden commissions than others.  Is that why the advisor has recommended them to you?  Well, maybe.

One of the things I am regularly asked to do is try and help steer financial deputies and attorneys through the maze of jargon, figures and statistics designed to bamboozle, reassure and baffle.  I meet so many Attorneys and Deputies who are inclined to just do nothing.  They are simply overwhelmed.  The problem is that the cost of the financial or investment advice is often so corrosive that it really does impact on the return that you are meant to be managing and safeguarding.

The next time you receive the financial report maybe think again.  The 2.2% charges on your investments charged annually by your advisor may mean your investments are actually not even keeping up with inflation.  You can’t afford to do nothing.

Next year the Retail Distribution Review will be introduced by the FSA.   A post for another day.

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