Getting financial advice
- What types of financial adviser are there?
- What advice do they give?
- Do you pay for the advice?
- Finding an adviser
- Preparing to talk to your adviser
Since 1 January 2013, financial advisers can either be ‘independent’ or ‘restricted’.
- An independent adviser (IFA) must consider a wide range of suitable investment products (including investment companies) to determine which bests meets your needs.
- A restricted adviser can only recommend a limited range of investments, or only those from one provider.
You should ask any adviser about the range of investments they recommend and why.
An independent financial adviser’s job is to offer impartial advice about a comprehensive range of financial products to help you find ones that fit your lifestyle and your goals.
- IFAs are qualified. An independent financial adviser is a qualified professional who has passed relevant exams and usually has some years of financial services experience. Advisers must be registered with the Financial Conduct Authority (FCA) (formerly the FSA) and may also belong to a professional body like the Institute of Financial Planning (IFP).
- IFAs are independent. An independent adviser doesn’t represent the interests of any one company or product. They shouldn’t have any ulterior motives in making you pick one product or another.
Independent financial advisers can give you advice on anything from tax planning to investments to insurance.
- They give advice that’s specific to you – their first task is to understand your particular financial situation and goals.
- They help you plan for the future and make the most of your opportunities.
- They’ll explain the best way for you to make the investment
- By seeing an adviser you are making no commitment to buy anything.
Before 1 January 2013, many advisers were paid by commission from the investment they recommended. As not all investments paid commission, and some paid more than others, there was concern that recommendations were being influenced by the amount of commission rather than what was in your best interests.
Though advice paid by commission was sometimes seen as free, in reality it was paid for through higher product charges.
From 1 January 2013, financial advisers can no longer receive commission for recommending an investment product. Instead, you will have to pay for their services directly. This may make it easier for some advisers to recommend investments, like investment companies, which did not pay commission.
There are several organisations which can give you details of advisers in your area. (Because these are not AIC sites we can’t guarantee they’re completely accurate.)
unbiased.co.uk (formerly IFAP) promotes the value and accessibility of independent financial advice to the public.
Find an adviser through unbiased.co.uk
- Institute of Financial Planning (IFP)
IFP promotes the profession and practice of financial planning.
Find an adviser through IFP
Findanadviser.org is a website run by The Personal Finance Society, the professional body for financial advisers.
Find an adviser through Findanadviser.org
Financial advisers can't make your decisions for you, or take away the risk of investing. They can only give you the facts as clearly as possible, help you to clarify your own thinking and give you advice.
Ultimately it's your money and your choice. That's why it's a good idea to do some preparation before you meet.
- Know why you're investing. Are you looking for an income or do you want to build a lump sum? Do you want a specific amount of money at a defined date, e.g. for school fees?
- Know how much you can invest and when. How much have you got to invest? Will you be adding to the amount regularly? When will you need the money?
- Know what financial commitments you have. That includes debts, savings, life insurance, personal health/critical illness insurance, pensions and mortgage. You should know the amounts involved in each.
- Prepare some questions first. Here are a few questions you may want to ask:
- What services do you offer?
- What will your services cost?
- What investments do you generally recommend?
- Do you recommend investment companies?
- What are the pros and cons of each suggested investment?
- What risks are involved with each suggested investment?
- What am I committing myself to?
- What are the problems if I change my mind or need the money earlier than anticipated?
- Don't feel pressurised. Remember that you don’t have to decide there and then. Plan on giving yourself time to consider. If you’re still unsure, you can get a second opinion – but you may have to pay extra for the advice.
What to expect when you meet your adviser
After you contact an IFA, he or she will usually make an appointment to meet you face to face. When you meet you’ll discuss why you’ve decided to invest and what you’re hoping to get out of investing, and your attitude towards investment risk.
- You’ll need to describe your financial situation, usually by completing a questionnaire.
- Your independent financial adviser will look carefully at your finances, your commitments and your objectives, and will explain your options.
- They’ll give advice about which investment products would suit you, and whether investment companies could be your best option.
- You can ask as many questions as you like.
If you decide to follow the advice, your adviser can also help you decide on the best way to arrange your investment.