IFA - choose carefully
First, understand that Tied Advisers (e.g. work for your bank) and Multi-Tied Advisers (similar) are different from Independent Financial Advisers. By definition, Tied Advisers do not have access to the whole market, so they’re unlikely to be in a position to give you the best advice. We’re only considering Independent Financial Advisers (IFAs) here.
Second, realise that choosing the right IFA matters. You’re entrusting this person to align your financial goals with the financial products you need to achieve them. They need to get it right, and you need to be able to trust them.
There are 2 ways that an IFA can earn their living, and it’s important to understand the difference:
- They charge a fee, typically £100 to £300 for an hour long consultation and associated follow up (which can be extensive and time consuming).
- They’re paid by commission, so will earn a fee from the providers of the products that you buy
Which you choose is up to you. It may be important to you to avoid an upfront fee, but you should be aware that doubts have been raised about the true independence of advisers who are paid by commission.
Next there’s qualifications to consider. The bare minimum is the Financial Planning Certificate (FPC) which is required by law, but the best IFAs probably also have the Advanced Financial Planning Certificate (AFPC), and additional qualifications according to their area(s) of specialisation. Most advisers are general, but some specialise in mortgages, investments, pensions or inheritance tax. Think about this if you’re seeking specific advice now, because when your needs change, you may not want to change adviser.
Is your adviser part of a larger team? In other words, do they have back-up in the form of administrative support, and other advisers?
You should feel completely comfortable discussing all these questions with potential advisers. You need to be sure that their fees, qualifications, specialisms, processes, and deliverables meet your needs.
Tell-tale signs that you haven’t found the right IFA (yet):
- You feel like you’re being sold to
- Financial summaries produced by hand or simple spreadsheets, and not from a professional system
- You feel rushed, or your questions aren’t answered to your satisfaction
- You’re not given a thorough financial review
At the end of the day, there’s no substitute for a personal recommendation, but without one, you need to use your common sense, and most importantly, find someone you can trust.
Advice Forum gives you the opportunity to ask any question you like to a fully qualified IFA, specialising in your area of interest, without any commitment at all – you don’t even need to leave a phone number. Just ask.
. So what should you do? Here’s my suggestion:
