Why annual financial reviews matter
Most people understand the importance of regular health check-ups, yet many leave their finances untouched for years at a time. While pensions and investment plans are often built with long-term goals in mind, they should never be left on autopilot.
An annual financial review is one of the most important aspects of effective financial planning. It provides an opportunity to revisit important questions such as are your investments performing as expected? Does your attitude to risk remain the same? Are your retirement plans still achievable? How have tax or legislation changes affected you? Do your existing products continue to represent good value?
Regular reviews can also help identify potential problems before they become significant financial losses. In some cases, they may reveal evidence of unsuitable financial advice or financial mis-selling that would otherwise have gone unnoticed.
Financial planning is not a one-off event but an ongoing process that evolves with changes in your life, goals and global financial markets. Regular reviews enable you to respond to new opportunities, navigate challenges and ensures your money continues to work towards your long-term objectives.
Life changes can affect your financial plan
Even the most carefully designed financial plan can become outdated. Over the course of a year, significant events may occur that affect your financial priorities, including:
- Changes in employment or income – A promotion, career change, business sale or redundancy may alter your investment capacity, retirement objectives or protection requirements.
- Family developments – Marriage, divorce, the birth of children or becoming a grandparent can all influence your financial priorities and long-term planning.
- Retirement planning adjustments – Retirement is rarely a fixed date. Many people choose to retire earlier, later or transition gradually. A pension review can help determine whether your retirement strategy remains on track.
For example, a client approaching retirement may discover during a review that market growth has improved their position, allowing greater flexibility around retirement timing. Without a review, that opportunity may be missed.
The risks of leaving pensions and investments unchecked
One of the greatest risks in financial planning is inactivity. Leaving pensions and investments unchecked for several years can create a range of issues, including:
- Asset allocations drifting away from intended risk levels.
- Investment funds consistently underperforming their benchmarks.
- Excessive charges reducing long-term returns.
- Outdated beneficiary nominations.
- Pension arrangements no longer aligned with retirement objectives.
Consider an individual who transferred a pension ten years ago and has not reviewed it since. They may be unaware that the underlying investments are no longer suitable for their age, objectives or attitude to risk.
Regular investment reviews help ensure that your portfolio remains aligned with your goals and that any emerging concerns are identified early.
How regular reviews can identify unsuitable advice
Annual reviews are not only about investment performance. They also provide an opportunity to assess whether previous recommendations remain suitable. In practice, unsuitable financial advice does not always become obvious immediately after it is given. Some issues only emerge years later, such as:
- Excessive investment risk.
- Inappropriate pension transfer recommendations.
- Unsuitable investment products.
- Poor diversification.
- Excessive fees or charges.
- Advice that failed to consider a client’s circumstances properly.
For example, an investor may discover during a review that they were advised to invest heavily in high-risk assets despite having a cautious attitude to risk. While the recommendation may have initially appeared suitable, subsequent reviews may reveal that the strategy was inappropriate from the outset.
Similarly, some individuals only become aware of a potentially mis-sold pension when a later adviser examines the original recommendation and identifies concerns regarding suitability.
Eric Kurtz Partner and Head of Financial Mis-selling, says,
“Regular financial reviews do more than track investment performance… They can help uncover issues that may otherwise go unnoticed. We regularly speak to people who only discover years later that a pension transfer or investment recommendation may not have been suitable for their needs and objectives. Identifying those concerns early can make a significant difference to the options available.”
Regular reviews create valuable opportunities to ask questions and challenge assumptions before losses escalate.
When should you seek a second opinion?
While many advisers provide excellent service and appropriate advice, it is sensible to seek a second opinion if:
- You have not had a review for several years.
- Your adviser is no longer actively reviewing your arrangements.
- You do not fully understand the recommendations you received.
- Your investments have performed significantly worse than expected.
- You were advised to transfer out of a defined benefit pension scheme.
- You are concerned that risks were not explained properly.
Obtaining an independent assessment can provide reassurance or identify issues that warrant further investigation.
How we can help
Our Independent Financial Advisers help clients build and maintain robust financial plans through ongoing reviews, pension reviews and investment reviews.
We also work closely with our specialist financial mis-selling team, which investigates claims involving unsuitable pension and investment advice.
Our lawyers have extensive experience assisting individuals who may have suffered financial losses as a result of unsuitable financial advice, including pension advice claims and cases involving potentially mis-sold pensions.
Where concerns arise during a review process, our teams can help clients understand their options and determine whether there may be grounds for further investigation.
The earlier potential issues are identified, the greater the opportunity to protect your financial position and seek appropriate redress where necessary.
