There are many reasons you may need financial advice. Perhaps you are retiring, moving house, looking for a better return on your investments or you simply want to give your finances an overhaul. Whatever the reason, how do you know if you need to consult an Independent Financial Adviser, or research the options yourself?
Let’s start by looking at what an Independent Financial Adviser (IFA) is.
What is an IFA?
An IFA (Independent Financial Adviser) is someone who gives advice on financial products and financial planning. IFAs are independent and usually work by themselves accessing the whole of the financial products market (which means they aren’t promoting any particular company or financial product). Some IFAs only offer advice on specific areas, limited products or a list of specific companies and are known as restricted advisers.
The job of an IFA is to help you with specific requests for financial products and to understand your financial goals. A typical IFA, such as Reeves Financial, can help with long-term financial planning, such as investments, pensions and annuities. They can also assist with inheritance tax planning, estate planning and ethical saving. Some IFAs offer advice on mortgages and life assurance, but not all so check what areas your IFA covers before setting up your initial meeting.
Should you seek the advice of an IFA or research the options yourself?
Whether you need to consult an IFA or not will largely depend on how complicated your finances and personal circumstances are and what type of financial products you are looking for. If you are simply looking to put money into a savings account or a cash ISA, you can probably research this yourself using comparison sites, such as comparethemarket.com or moneysupermarket.com.
However, if the financial products you are looking for are more complex, such as stocks and shares, pensions or annuities, then an IFA may prevent you from buying a financial product that either isn’t the best one or isn’t suitable for your situation at all. For more information on whether or not you need a financial adviser, see the Money Advice Service’s recommendations here.
How to find an IFA you can trust
According to MoneyWeek, one of the UK’s best-selling financial magazines, getting the right help with your finances can be just as tricky as finding a decent plumber. They recommend understanding what it is that you are looking for before you pick an adviser. That way, you can go to the person most qualified to help you. For example, anyone offering advice on mortgages or equity release is required to have specific qualifications.
Most IFAs will offer a free initial consultation so you can see if they are someone you feel you would like to work with. Don’t just go with the first one you find, even if they have been recommended. Check out websites such as Unbiased, and VouchedFor or check the directory of retirement advisers on The Money Advice Service site. You should also check out reviews and testimonials. An established financial adviser will have testimonials going back many years.
While personal recommendations can be a good thing, it’s not always easy to work out if long term financial planning advice has been good until years later.
What to consider when choosing an IFA
There are several things you should consider before choosing an IFA to work with. According to The Pensions Advisory Service, you should think about the following when choosing an IFA:
- What advice are you looking for? Do you have something specific you need help with or is it just general advice about your finances?
- How experienced is your adviser?
- What are the typical clients of the IFA?
- Will you be dealing with one person or a team of IFAs?
- What services does your IFA offer?
- Will they be offering products from the whole market or from a small number of providers?
- What will the IFA charge you for their service?
- Is the IFA registered with the Financial Conduct Authority (FCA)? Check the FCA register here.
How much does financial advice cost?
IFAs must tell you up front how they will charge you for their fees. There are three main ways IFAs charge for their services. These are:
- Flat fees: this usually involves a one-off charge for advice and a flat fee for annual reviews, but fees can vary wildly from one adviser to another, so you might want to shop around before you commit to an adviser.
- Hourly fees: this is a straightforward charge, but may be an incentive for the adviser to work slowly. Again, the hourly rate can vary wildly between advisers.
- A proportion of the money you are investing: this is a percentage of your assets and can be anywhere between 1% and 3%, plus there are ongoing charges, usually between 0.25% and 1%.
What can you do if later on you feel you have been given incorrect advice by your IFA?
You can’t make a complaint against a financial adviser just because your investment doesn’t do as well as expected. However, if you lose money because of bad advice or misleading information you can complain to the adviser who gave you the advice.
If your adviser is registered with the FCA you can take your complaint to the Financial Ombudsman.