Finding the right financial adviser can be hard, who can you trust? Should they work on commission or fees? How do you know they will give you the right advice?
It really isn’t easy, which is possibly why many people are put off receiving financial advice in the first place. A recent report by Aviva showed that 75% of 18 – 25 year olds would ask for financial advice from friends and family before consulting a financial adviser. Furthermore only 28% of people over the age of 65 would make an IFA (Independent Financial Adviser) their first port of call when seeking advice.
So just how do you find the right financial adviser?
1. Tied or Independent
Broadly financial advisers are either tied, multi tied or independent.
Tied advisers can only recommend one company’s products, multi tied advisers can recommend products from a limited range of companies whereas independent advisers provide ‘whole of market’ advice.
We would always recommend that you see an independent adviser. We could be accused of a degree of bias here, after all we are IFAs, but we strongly believe that working with an independent adviser is in the best interest of consumers.
2. Draw up a shortlist
Think about the type of advice you want, do you want a full financial review or advice in just one specific area?
Draw up a shortlist of IFAs you want to talk to, to do this speak to friends and family for a recommendation, who have they used? Have they had a long term relationship with their adviser?
The website www.unbiased.co.uk is also a popular way of finding IFAs and can help you add names to your shortlist.
Using social media can also be an interesting way of finding an adviser. Linkedin, Twitter and Facebook all have facilities to help you narrow down your search, by following the adviser and their postings you can sometimes get an impression of whether this is someone you would like to meet.
Check that the adviser is suitably qualified to advise you in the areas that you want them to cover. From the end of 2012 advisers need to have attained a higher level of qualifications, many have already done so, but ask your adviser what their plans are.
3. Check them out with the FSA
This might sound obvious but make sure you check out your shortlist of advisers with the FSA Register of financial advisers (Financial Services Authority).
The search capability on the FSA website is pretty basic, but it will at least confirm that the advisers you are thinking about seeing are indeed registered with the FSA.
4. Think about how you want to pay for advice
IFAs are businesses like any other and need to charge for services to cover their costs and to make a profit, so expect to pay for the advice you receive! Having said that many IFAs will offer a free introductory meeting or indeed a series of ‘get to know you’ meetings when they will not make a charge.
There are essentially two ways to pay for financial advice, commission and fees.
When it comes to pensions and investments the IFA community is moving towards fees in light of new legislation which will be introduced at the end of 2012.
Having to pay a fee can put some people off seeking financial advice but bear in mind a fee does not necessarily have to be paid directly by you, it can often be paid for from a financial product. Some people within the financial services industry believe that a move away from commission towards fees may actually reduce the cost of advice as a greater degree of transparency is introduced.
If you prefer the fee route, ask the IFA how they will charge. Will they bill you an hourly rate or will they work on a capped or fixed fee basis for their advice? How much will they charge you for ongoing advice and what ongoing service will you receive?
If you want your IFA to be paid through commission, ask them how much they will take and whether this is an ongoing amount.
Look at how any commission affects the charges of a financial product and compare this with the same product without commission. You will obviously have to factor in a fee, but the difference between returns of a product with and without commission can be significant..
5. Do some of your own research
Have a think about what you want to achieve financially, if you think you need a way of saving for your retirement do some research into the options available to you before you meet the adviser. This will give you a better understanding of what’s available to meet your need and will probably help you understand their recommendations better.
Also, don’t just think about your goals but also about what you can commit to helping you achieve them, if you have a lump sum how much do you want to invest? If you want to pay a monthly premium, how much can you afford?
Think about how much risk you want to take. Do you want to fully protect your capital from any falls in value? If so are you prepared to put up with the risk that inflation may start to erode the value of your savings? Are you prepared to accept the risk of stock market related investments with some or all of your money in the hope of better returns?
These are all questions that an IFA will ask you and it is helpful to have thought about them beforehand.
6. How do you get on with them?
It is possible that your relationship with an IFA could last for many years, it is therefore vital that you get on with them. This might sound obvious but people often find themselves talking to their adviser about almost every part of their lives.
The relationship between an IFA and their client should ideally be a partnership with the adviser helping the client reach their financial goals and adding value through good quality advice.
7. Do you feel comfortable with their recommendations?
If you feel pressured or the adviser is talking in jargon you don’t understand you are probably with the wrong adviser.
Make sure you feel comfortable not only with the adviser but also with their recommendations. Don’t rush into anything, take your time before making a decision and never be afraid to ask the adviser to explain things again that you don’t understand.
Summary
Finding the right financial adviser to work with is not always easy. Hopefully following our hints and tips will help you find an adviser with whom you can form a partnership over many years.
Our own advisers work with both new and existing clients and if you would like to contact us for a chat about your requirements please do not hesitate to call us on 0115 933 8433 or email info@investmensense.co.uk
