Types of advisers
Financial advice is available from a wide variety of sources in the UK and all recognised providers are regulated by the Financial Services Authority (FSA).
Financial advisers can be categorised into two basic groups: tied advisers and independent advisers.
Tied advisers either work for one company and can only give advice on the financial products that company provides, or they offer advice from a range of companies (these are termed multi-tied advisers). Tied advisers are remunerated on a commission basis by the financial companies whose products they
sell. This group includes advisers from banks, building societies etc.
Independent financial advisers (IFAs) are not tied to any particular company and can give advice on the full range of financial products, although some advisers will specialise in particular areas, i.e. an accountant will likely be strongest on tax issues. IFAs can still be remunerated by commission on the products that they sell but must also offer you the option of paying a fee for their advice instead.
What can they do for me?
Financial advisers can help with advice on just about any aspect of your personal finances, including mortgages, pensions, tax, life insurance and investments.
Before dispensing any advice, an adviser will build a picture of your financial situation by conducting a fact-finding interview.
This will focus on:
Your current financial situation: earnings, outgoings, dependants, income tax rate, how much you can afford to put aside etc.
Your financial goals: what are you seeking to achieve with the investments you make and when do you want to achieve them? For example, if you are saving to pay for a child to go to university then you have a fairly specific time constraint and also a rough idea about the amount of money you will need to have saved.
Your appetite for risk: what level of financial loss are you willing to accept in exchange for the possibility of a higher return?
Once the adviser has all of this information they will create a financial solution that is tailored to your needs. It is therefore important that you give them accurate information on you finances and goals.
Benefits of using an adviser
Financial advisers are investment professionals who have access to a huge amount of information on financial products and have sophisticated tools at their disposal to help analyse this information and find the appropriate financial products for you.
Tips for choosing an adviser
Is the investor tied/multi-tied or independent?
As mentioned above the type of advisor will determine the range of products available for them to recommend to you.
What qualifications do they hold?
As with any profession, areas of expertise vary. It is important to find an adviser that can offer the appropriate advice on the products you are interested in.
How is the advice paid for?
Is the adviser paid on a commission basis from the products they recommend or do they charge a fee or a combination of both.
Ask around
If a friend, family member or colleague has had financial advice that they think is good they may be able to recommend an adviser, although it is important to consider that your financial needs may be different to theirs.
