What investment questions should I ask my adviser?

Unlike “the answer to life, the universe and everything” in the Hitchhiker’s Guide to the Galaxy, this question has no simple answer. However, just as a journey of a thousand miles starts with but a single step, here are three questions that will help to get your relationship with your adviser off on a sound footing.

1. What’s my investment philosophy?

There are several investment ‘styles’. To some extent the styles available will depend on your own and your adviser’s investment philosophy. This is why it’s important to choose an adviser who is sympathetic to your needs and objectives and doesn’t try and shoehorn you into something you don’t understand.

At Jones Hill, we see it as our job to work with you to achieve outstanding outcomes. An important aspect is whether you want to limit investments to companies trying to achieve certain moral or ethical standards, for example by specifically excluding companies that invest in tobacco or weapons.

Whatever you decide, flexibility is key so that if events – whether market or personal – take an unexpected turn, you are not stuck with an unsuitable plan.

2. What’s my risk profile?

Before making a single investment your adviser needs to assess your attitude to risk. In a nutshell, the higher the risk, potentially (not always!) the better the return, but also the greater the risk of failure. How much risk can you stand without it keeping you awake at night?

Well, younger people can generally afford to be a little more adventurous as they have longer to recover from any market setbacks. But for those of us who are a little older, we may want to settle for something a bit safer, which provides more stable and predictable returns.  Boring as this may sound, it can be an effective strategy. 

No conversation about risk is complete without mentioning Diversification, the golden goose of finance! In essence, diversification means not having all your eggs in one basket, whether that be stocks, bonds or property. 

The reason being that sometimes one asset class is hot and sometimes it’s not, but it’s unlikely that all asset classes (property, bonds or equities) will all be swinging the same way at any one time. 

3. When can I retire?

The £64,000 question! Why? Because it might be today, in 5 years or 25 years. The problem is, if you don’t know, then you’ll likely just keep plodding on aimlessly when you could have hung your boots up years ago. 

The most significant factor in investments is time. The longer you save, the more your “retirement pot” is likely to contain. Whilst this may seem like a statement of the bleeding obvious, the fact is that most people leave it too late to start serious saving. Get ahead of the curve by knowing where you’re heading and when you need to be there.

In summary, make sure that you prepare for your first meeting with your adviser by thinking through the questions and topics you want to discuss, it will enrich the conversation and allow you to discuss the things that are most important to you.