Independent Financial Advisers
Independent Financial Advisers – The Only Way To be Sure
Currently there is a very bewildering number of financial
products on the market. If you have money to invest, you may
feel very confused about the best way to deal with it. If you
ask for advice, how do you know the adviser is acting in your
interests rather than in the interests of his/her company? So
you will have all sorts of questions in your mind.
Can’t I just go to my bank? If you go to your bank, you will
probably find yourself speaking to someone called a “financial
adviser”. There was a time when you could rely on your friendly
bank manager to give you impartial advice, but banks have become
much more competitive. The “financial adviser” at your bank is
not an independent adviser but a “tied adviser”. That is, he/she
is employed by the bank to sell the bank’s products – thus there
is no guarantee that the products will be exactly right for you.
So how can I know what kind of adviser I’m getting? When you
first consult a financial adviser, he/she has to show you a
Disclosure Document, which will clearly indicate whether he/she
offers products from a particular company (tied adviser), a
limited range of companies (multi-tied adviser) or the whole of
the market (Independent Financial Adviser). If you want to be
sure of finding the right product, your best plan would be to
look for an Independent Financial Adviser (IFA).
If I do decide I want an IFA, how do I find one? It’s often a
good idea to ask friends, colleagues or relatives if they have
used an IFA. If nobody can point you to one, you can look on the
Financial Services Authority web site (www.fsa.gov.uk/register)
and search by postcode for an adviser in your area.
How do I know if an
Independent Financial Adviser is any good? It’s always a good idea
to meet your adviser for an initial discussion. Ask them what
qualifications they hold and when the qualifications were
obtained. If they qualified more than two years ago, how have
they kept up to date? How do they earn their money – ask for a
breakdown of amount earned by fees versus amount earned by
commission. If your questions aren’t answered clearly and in a
friendly manner, find someone else whom you can have confidence
in!
What will the Independent Financial Adviser do? The IFA will spend time with you checking
your entire financial circumstances, including your earnings,
financial commitments, savings and tax situation. He/she will
also build up a profile of you as a person – your hopes and
aspirations, what is your attitude to risk (very important),
when you want to retire, etc. You should be willing to answer
these questions and fill in any forms required, as this is how
the adviser can find the right product for you. The adviser will
then scan the entire market using a computer database, to find a
product that meets your requirements.
What will it cost me? Some products pay commission to the
adviser, which is added to your bill. The adviser has to offer
you the choice of whether you wish to pay by commission or by a
direct fee. The fee is usually based on an hourly rate and can
vary from around £80 per hour to around £200 per hour. You will
be provided with details of fees and charges at your
introductory meeting.
Finding the right Independent
Financial Adviser can seem like a daunting task.
However it is well worth spending time and effort looking for
the right one. It can save you money, time and disappointment in
the long run.
EB May 2008