Getting financial advice
If you’re not sure whether investment companies are for you, the right financial adviser can help.
- What types of financial adviser are there?
- What advice do they give?
- What does advice cost?
- Finding an adviser.
- Preparing to talk to your adviser.
What types of financial adviser are there?
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. If an adviser calls themselves independent and does not recommend investment companies, you should ask why.
Advisers must be registered with the Financial Conduct Authority (FCA) and may also belong to a professional body like The Chartered Institute for Securities & Investment (CISI). They need to have minimum qualifications and have a duty to maintain their professional competence.
Some financial advisers call themselves financial planners. This means they are likely to put a lot of emphasis on how you manage your income and expenditure through your life to meet your personal and financial goals.
What advice do they give?
An independent financial adviser’s job is to offer impartial 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 any investment they might recommend.
- By seeing an adviser you are making no commitment to buy anything.
What does advice cost?
Advisers must charge you directly for their advice – they are not allowed to accept commission, which could influence the products they recommend.
The website Unbiased.co.uk suggests that the cost of financial advice can vary from £500 to £5,000 or more depending on the adviser and the type of advice. Frequently, advisers charge a percentage of the assets that they advise on, which could be 1 or 2%.
Many financial advisers are happy to have an initial phone conversation or meeting with you without any charge: however, you’ll need to check this with each firm.
Finding an adviser
There are several organisations which can give you details of advisers in your area. (Because these are not AIC sites we can’t vouch for their accuracy.)
Findanadviser.org is a website run by The Personal Finance Society, the professional body for financial advisers.
Unbiased.co.uk promotes the value and accessibility of independent financial advice to the public.
WayFinder is run by the Chartered Institute of Securities & Investment (CISI), a professional body for securities, investment, wealth and financial planning professionals.
Preparing to talk to an adviser
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.