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DIY investing vs using a Financial Advisor: Which is better?

Lucy Harley-Mckeown 1st Jun 2021 One Comment

Reading Time: 12 minutes

Should you try DIY investing or use a financial advisor?

Knowing whether to try DIY investing or use a financial advisor can be a crucial barrier to even beginning to look at doing something with your money. And with the rise of people dipping their toe in the investment waters during the pandemic there is also a lot of potentially conflicting advice out there right now.

From the free financial advice available online, to the fees that financial advisors charge, it can be a minefield.

One thing is for sure, there are better returns to be had in the world of investments than in a standard savings account from your bank, with interest rates on savings accounts still at rock bottom.

To help you make your money go further and feel more confident about the choices you have made, here’s our guide to the differences between striking out on your own or hiring in help when it comes to making the leap into investing.

What is DIY investing?

DIY investing – i.e. doing your own research and making up your own mind about how you are going to invest your money for the future – can seem like a daunting prospect at first, but it has its benefits.

  • It is essentially a way of putting your money to work in a way that lets you benefit from any profits companies make
  • It also gives access to the dividends those companies pay to their shareholders.
  • It can give you the power to choose assets or funds that will earn you more compound interest in the long-term.
  • It also means that you don’t ‘lose’ money in fees to advisors.

The key idea behind DIY investing is that you have control, and that the returns can outweigh the super-low interest rates you would get on savings accounts.

Of course, even if you use an advisor it’s likely that they wouldn’t advise you to put your money in savings accounts. Who would right now? But you would certainly save on fees.

The availability of online research tools, discount brokerages, and proliferation of free financial advice online, has lead to an increase in DIY investing in recent years, and there are many reasons why someone might choose to bypass traditional advisors.

  • Some people go into DIY investing in order to avoid agency fees.
  • Others use this method because they are dissatisfied with the quality of service or returns from professional investors or brokers.
  • Some just distrust the financial industry in general and want to take control of the investing process.


pros and cons of do It Yourself (DIY) investing

Pros to DIY investing include

  • having more control of what’s happening with your money and avoiding hefty fees that can come associated with advice.
  • You can get more transparency on returns by managing your own portfolio.

Cons can be that

  • You might not get the full range of products that you would be able to access with a financial advisor, who can give exclusive access to different options.
  • Another con is that you could lose money.
  • To make money on your own you need to continually research to know your options.
  • You will also need to keep on top of updates to regulation and rules surrounding tax.

What is a financial advisor?

A financial advisor is a professional who provides information and services to their clients based on their current financial situation.

In the UK, they are regulated by the Financial Conduct Authority (FCA) and must be registered to provide advice legally.

They help clients with a number of tasks including but not limited to:

  • understanding and managing risk
  • setting savings goals for things like pensions
  • avoiding common mistakes
  • advising on costs
  • informing their clients of any changes to regulation that may affect them
  • and assisting in handling and understanding tax.

They can also explain the types of accounts you might need, insurance you should consider and how to manage your estate in general.

The role is to educate people and help them understand what they need to do to meet future savings goals and to grow their current wealth. This can involve insight into complicated financial processes, and deals and topics you wouldn’t otherwise know about as a DIY investor.

Usually, advisors will check in with their clients on a regular basis to make sure they are managing their money in a way they are happy with.

how to find a good advisor

Ask friends and family for recommendations, but make sure you only ask people who are savvy with their money already. Some people could have bad advice from clever but expensive ‘advisors’ for years before they realise that they have lost money.

If you don’t have any good recommendations from people you know, the next best thing is to use Vouchedfor, a website that has reviews and recommendations from people who have used these advisors (and planners).

Many people are put off by the fees charged by financial advisors and planners.One newspaper personal finance editor who asked not to be named said “I find it very difficult to recommend any financial advisors to friends. They are all expensive and not one comes to mind that I could suggest – and sadly that includes the women. The whole IFA thing is not what it was because of regulation and lower returns.”

Alex Whitson of VouchedFor disagrees. “RDR [the Retail Distribution Review] has brought positive changes,” he says. “The onus is on financial advisors to help people understand the value of advice. We’re really keen on encouraging advisors to post their fees on VouchedFor.”

He says that fees can be higher in some regions than others, so it could be worth travelling to a cheaper area to see one. However, he says the average amount you should expect to pay are as follows:

costs of a financial advisor

The sets of fees financial advisors charge will depend on whether you choose to pay an hourly fee, a flat fee or a “commission-style” fee.

The initial consultation where the advisor sets out their stall is often free but it’s always best to check ahead of time if this is the case in case you get landed with a bill.

fee structure

Percentage fees are the most common way for advisors to charge. It’s based on a percentage of the money you want advice on or managed.

You will pay an initial percentage charge for becoming a client and investing your money with them, then an ongoing fee for each year they manage your money.

The initial fees can range from between 0.5% and 5% but a typical initial fee for investment advice is 1.7% of the amount invested.

Then there would be average ongoing annual management fees of.8%.

Fixed-fees are charged per service and will hit each time you go to the advisor for a different product.

This could be linked to consolidating pensions or investing in a new fund.

They are best for people that don’t want ongoing advice.

Hourly rates are pretty self-explanatory. This model has been used in the past by accountants and solicitors and will mean you can get a full breakdown of what they did and how long it took. An hourly charge can range between £50 and £250.

Some will also quote specific rates for different services such as investing in an ISA (around £800) or transferring a pension (£3-5k).

Also remember that financial advisors tend to offer their first meeting for free so you could try out a few to start with to see what you think of them and get free financial advice into the bargain

Most advisors also have a tiered fee structure based on the wealth level being discussed, so if you have £50,000 to invest you will pay a higher percentage than if you had £500,000 stashed away. So if you have a relatively low amount to invest then it could be worth looking for an advisor who works on a ‘fixed fee’ basis.

Alex Whitson from VouchedFor.com says, “every time an IFA gives advice they are taking a regulatory risk. Their insurance is always going up and that impacts their prices. What I recommend people do in that situation is look for advisors who are willing and able to help people on their level of wealth. Quite often the young and newer ones are willing to help people of any level of wealth.”

what is a financial planner?

A financial planner is a type of qualified financial advisor that can help clients with advice on investments, insurance, tax, retirement and estate planning. They facilitate the long-term personal finance needs of their clients.

Their job is traditionally more geared towards achieving long-term goals, however in this day and age many planners and advisors may actually do the same thing.

pros and cons of a financial planneR

  • Having someone that can give you long-term advice can lead to better investment decisions. They can build a relationship with you and will have you in mind when new deals or products come on the market that might suit you.
  • You will benefit from their depth of knowledge and also research they might have done for other clients, too.
  • Having a financial planner can free up the time you might spend combing through the difference between complex products.
  • On the other hand, it can be risky to trust someone else with your money. You need to be careful about choosing someone with your best interests at heart.
  • You can avoid this issue by using a fee-only advisor, rather than using one that gets commission from selling certain products.
  • Like advisors, planners come in varying quality, so be sure to shop around, take recommendations and read reviews.

To find a good financial planner, follow the advice above for finding a good financial advisor.


What is a broker?

A broker is a person or firm who arranges and negotiates transactions between a buyer and a seller for a commission when the deal is executed.

Brokers’ fees either come though:

  • commissions
  • fees
  • or pay from exchanges.

People use brokerages because securities exchanges only accept offers from individuals or firms who are members of that exchange.

As well as executing sales, brokers might also provide clients with research, plans for their money, and market intelligence.

These days, it’s really only people who have a lot of money to spend that use the guys in the City. Most people use online-only brokerages and fund supermarkets to keep costs down.

The move to online brokerages in recent years has triggered an explosion of discount brokers. These allow investors to trade at a lower cost but with less personalised advice.

Meanwhile, full-service brokerages can provide a plethora of options, including tailored advice and execution services.

pros and cons of using a broker

  • One advantage of using a broker is that they may save you a lot of time. Brokers will already be familiar with a range of financial products, which can be tricky and time consuming to get your head around when you’re first starting out.
  • They may also have better access to financial products through different providers. Brokers often give access to deals not available to the rest of the market.
  • A third advantage to using a broker is that they may be able to help you negotiate or waive fees to certain products.
  • On the other hand, it may not be in the broker’s interests to source the best deal for you if they are working with a set of certain clients on a commission basis.
  • The costs can also be uncertain, as brokers often do not guarantee what a fee will be before starting the work.

How to DIY invest?

Getting started with investing is a lot easier than you might think. Here are some steps you can take to dive into the world of DIY investing.

First, research and strategise

The first step will be to do some research. Whether you’re the type of person that wants to check in daily, or you are interested in a less managed approach, it’s a good plan to assess all your options before jumping and think about what it is you actually want to do.

You’ll also need to pick a strategy, whether that involves picking individual stocks or trusting an index-tracking fund or going for actively managed mutual funds. These will make up your portfolio of investments.

A portfolio is your collection of investments that make up your net wealth. Here’s some more information on how to run it.

Putting your money into different asset classes, and having a varied portfolio can be important for a few reasons. You will need to understand what investments carry more risk, meaning more chance of losses, and which are safer “haven” assets.

Once you’re convinced on your strategy and that this is the right move for you, you need to open an account with an investment platform.

read up

Happily there is a wealth of investment information on the web that will help you work out the best way to invest and best products to invest in.

Obviously MoneyMagpie.com has LOADS of free help. Check out our investing section for tonnes of advice. Also listen to our podcasts and attend our investing webinars to get really clued-up. And sign up to the investing newsletter to get information every fortnight.

Also, though, try

  • The Motley Fool website  This website is very much for the DIY investor and is written by people who invest for themselves.
  • Pretty much any other independent money information site, such as the Money Advice Service . They’re all singing from the same hymn sheet. Also, for the same reason, any of the newspaper money pages are worth reading as they are full of useful information, often written in easy-to-digest chunks.
  • Also any money management book you pick up will be worth a read, particularly Jasmine’s one called Beat the Banks!

Know your investment platforms

There are a broad range of DIY investing platforms out there in the market at the moment, and it’s likely to be difficult to decide which to go with.

These make it easy to hold shares, bonds, funds, exchange traded funds (ETFs) and other instruments.

Some platforms will recommend funds or different approaches which could help simplify the process.

Each will have a fee structure so it’s important you understand the costs associated with it before you pay in. There are types of fee: one for using the platform and another for when you buy or make a sale.

Weigh up the pros and cons of each platform before you make the jump and according to how much advice you think you might need.

Execution-only, discretionary or advisory?

An execution-only service will be the one most people use when they start investing. It is the cheapest option available and will buy and sell according to your instructions without giving advice on what you are doing.

Under this model you choose all the investments yourself.

Discretionary is the opposite of this, where the decisions are taken by a broker or wealth manager who might also manage other parts of your finances. It can incur high fees.

Advisory accounts sit in-between execution-only and discretionary accounts. The decision making is left up to you, with a certain amount of advice given as to what your best options are.

Making the trade

If you’re looking at investing in individual stocks through an execution-only model this can take much more time and research to make gains.

Find information on previous profits, the company’s management and what analysts think future gains might be as well as key news events that affect companies to keep on top of it.

You also need to think about the risks you could potentially be taking. If returns from a particular product sound too good to be true, this may well be the case.


How to use a financial advisor

There are a few ways of using a financial advisor or a broker, and Jasmine Birtles suggests going for an independent advisor wherever possible.

Tied investors

A tied advisor only offers specific products. For example, a mortgage broker within your local bank branch is a tied advisor. They will talk til the cows come home about their bank’s mortgage products – and nothing else. This means you won’t get the benefit of a whole of market search.

Independent financial advisors

An independent financial advisor has whole of market access. That means they can also access hidden deals with lenders that you wouldn’t be able to find yourself.

When it comes to things like a mortgage, an independent advisor acts on your behalf. They can negotiate with the lender in a way you can’t. For example, if your credit score looks dodgy but you have capital assets, an independent broker will manually apply for your mortgage. You’d only be able to apply through online channels – and can’t explain your unique situation. A broker increases your chance of being accepted for a mortgage or loan.

And independent advisor must be registered with the Financial Conduct Authority. It’s vital they offer the best option for your circumstances. If they don’t, and your finances suffer as a result of their poor advice, you could have some legal protection.

This doesn’t mean that you can sue them when your stocks take a dive. Investments go up and down by nature! For example, if an advisor told you to put your money in a tax loophole vehicle, and didn’t explain the risks or alternatives, you could have protection when the tax man chases you down.

Expert insight on investing!

Jasmine Birtles’ MoneyMagpie webinars are the perfect place to learn about investing from industry experts, and give you the confidence to start investing your cash. You will learn how to get yourself ready for investing, how to save and how to invest like the City guys!

Some of the topics covered include:

  • how to weigh up risk and reward when considering income-bearing investments
  • dividend-bearing shares and funds
  • bonds and gilts
  • savings accounts
  • peer-to-peer lending platforms

You can bring any questions you like – none are too dumb – and Jasmine will also point you to websites and services that can give you more help and information.

Keep an eye out on the website or social media channels for what’s coming up next.


Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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Rufus McDufus
Rufus McDufus
6 months ago

IFA companies and the managers of the funds they effectively sell make a killing from your cash and you get thrown a measly little bone every now for the priviliege accompanied by lots of slick, smarmy, brillcreemed sales patter. These measly little morsels rarely make much more than a dent in the combined car crash that is inflation, tax and the “I”FAs fee. Complete con artists, the entire lot of them. If you really really want to make money, the only way is to either steal it, run a whorehouse, grow weed, marry it or become a hedge fund manager.… Read more »

Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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