I don’t need a financial adviser: I can do it myself.

One of the great joys of the internet is the power it puts at your fingertips. You can watch videos of the eye-watering effects of eating a Scotch bonnet chilli. And you can find out anything, from how to fix a leaky tap or roof to how to choose your investments.

But the fact that there are online guides to fixing taps and roofs does not mean DIY is always the best way to go, as many a kitchen-sink drama or badly botched roof has proved.

There are similar risks around DIY investing and financial planning. Making a short-term DIY investing decision now could have a serious long-term effect on your finances.

According to research, around 6.6 million adults have cash savings in excess of £10,000 but no investments. This is a worrying statistic, given that high inflation is currently eroding the buying power of cash. It suggests many of us could potentially be unaware of the effects of inflation on cash holdings or, for whatever reasons, are unwilling to invest elsewhere.

Moreover, three fifths (61 per cent) of people with a pension say they are either not on track to reach their pension goals or do not know if they are. This was revealed by the Schroders Personal Wealth (SPW) Money and Mind Report 2022.

Delayed retirements

Meanwhile, SPW’s The Impact of Inflation II report of August 2022 revealed that nearly 85 per cent of us do not have a financial adviser. That seems curious, as the same report said that, against the backdrop of today’s cost of living crisis, more than 30 per cent of us will have to delay our retirement by four or more years. For any of these people, not taking advice seems counterintuitive, to say the least.

Perhaps confident DIY investors who have chalked up some successful decisions will think they do not need a financial adviser. But a series of good decisions is not the same as the long-term plan a financial adviser can provide.

For example, energy companies performed very strongly in 2022.* So investors who had a good feeling about energy (or a bad feeling about other assets) in January 2022 may well have been celebrating their investment prowess in January 2023.

Amid the celebrations, though, they also faced some tricky decisions. Sell or wait for more growth? Sell and move into what else? What about the rest of the portfolio? Should the balance change between ‘adventurous’ holdings and more cautious holdings?

Even for those happy to make these decisions, it is important to realise that these are choices about where to allocate our investments, not financial planning. They do not address the bigger, longer term questions about why and how you invest and save.

Advisers can create long-term plans

Are you hoping to buy a holiday house or to retire in your fifties? Are you trying to make up for the time you lost by starting a pension relatively late in life? Do you expect to get an inheritance or plan to sell a business? Do you want to make sure your dependants can cope financially if something happens to you tomorrow?

The internet may well tell you the prospects for different assets for the next 12 months, and even for longer term investment horizons. But general online advice is not tailored to your individual circumstances. These circumstances could include your likely earning power in two or five years’ time, the age of your dependants, your existing assets or insurance arrangements, your unique tax situation and your appetite for taking financial risks.

This is where a trusted financial adviser can step in. With the experience of putting long-lasting strategies in place for many different clients, an adviser can help you choose the products that are right for you. Some advisers can also add tailored cash flow modelling, which is used by financial planners to forecast your future finances. This could show you such things as: how large a nest egg you may want in order to retire at 60; how you might be able to save towards your children’s education; and how a pension plus an ISA pot could support your retirement plans.

An adviser’s task is to help you fit together all the moving pieces – dreams, income, outgoings, and an uncertain economic landscape – to create a cohesive plan that aims to help you achieve your goals.

If you still have a taste for making your own DIY decisions, seeking financial advice does not rule that out. An adviser who understands you, your family, your appetite for risk and your financial life goals can build a plan that aims to take care of the basics, while allowing you the freedom to pursue a personal investment plan.

*edition.cnn.com, ‘Wall Street’s biggest winners and losers in 2022’, 29 December 2022.