It’s time we debunk one of the longest-running myths in financial services: that advisers manage your investments.
The reality today? Investments manage themselves.
Whether you access investments through an adviser or go direct, you’re typically ending up in low-cost, globally diversified, auto-rebalancing funds designed to maximise your return for a given level of risk. Take Vanguard LifeStrategy funds, for example—by far the most popular choice for both advised and direct investors on platforms like AJ Bell. Why? Because they do exactly what’s needed, efficiently and at minimal cost.
So, if you think you’re getting investment management from your adviser, what you’re really getting is the same investment management—minus the advisory fee. Which begs the critical question: what else are you getting for that extra cost?
Your adviser will likely list things like behavioural coaching, tax planning, estate planning, and cashflow modelling. But here’s the rub: these are generic advice services, sitting outside the FCA’s regulated advice perimeter. They’re available for a fixed fee from any generic independent financial adviser, without the ongoing percentage drain on your assets.
It then becomes a straightforward value-for-money exercise: a fee comparison between assets-under-management (AUM)-based charges versus fixed fees. Which actually delivers better value?
Cue the inevitable protest from advisers boasting about their “specialised” Centralised Investment Propositions (CIPs) and claiming superior performance outcomes. Really? Let’s talk benchmarks. What you should be benchmarking against are the same low-cost, globally diversified, auto-rebalancing funds that are available direct to consumers. When you do—and after fees are accounted for—advised solutions almost always underperform.
Advisers might claim otherwise, but even if they happen to outperform by coincidence, the famous “luck versus skill” question comes into play. It would take 22 years of persistent outperformance to confidently say the result wasn’t down to pure chance. Meanwhile, underperformers stay silent—fueling the persistent myth that you simply need to find the “right” adviser to unlock better returns.
The truth? Investing directly is no longer a chore. It’s as simple as opening an online bank account. Buy the fund. Forget about it. Let it work in the background.
This is, in my view, one of the biggest cons in today’s regulated adviser space. And yet, when I point this out to investors, I hear the same tired refrain:
“You are aware from conversations last year that I have no desire, or time, to start managing my own pension. I prefer to pay a trusted adviser to look after it, and now I have one.”
More fool you.
The financial planning profession has a duty to be transparent about what value it really adds. It’s time consumers wised up—and stopped paying over the odds for services they don’t actually need, or can easily access for a fraction of the cost.
Risk Warnings:
- The value of investments can go down as well as up, and you may not get back the amount you originally invested.
- Past performance is not a reliable indicator of future results.
- This article is for informational purposes only and does not constitute financial advice. You should consider seeking independent advice before making any financial decisions.
- Tax treatment depends on individual circumstances and may be subject to change in the future.
- All investments carry risk, and the suitability of any investment or strategy depends on your personal circumstances, financial goals, and risk tolerance.
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