The relationship with your financial adviser is no different from one that you may have with any other professional in life such as a doctor, accountant or lawyer. As with any relationship, trust is a major factor in making the relationship a success. In choosing an independent financial adviser, an individual must be completely satisfied in putting their trust in that person to manage their finances in the most efficient manner. We have put together ten questions that people should ask a prospective adviser before engaging with them.
1. Are You Independent?
There are three kinds of financial adviser available to provide you with financial advice; tied, multi-tied or Independent. A tied financial adviser can only advise on products from their own company, whilst a multi-tied adviser can advise on products from a small range of providers. An independent acts on behalf of their client and can access products from the whole market.
We recommend that an individual should always go for independent financial advice. A single company is unlikely to be the most competitive in all areas of financial planning and so the ability to be able to select from every product/company is a minimum starting point for good financial advice. Multi-tied advisers might purport to represent the ‘best’ products in the market but they will not have the same level of choice as an Independent financial adviser. Furthermore, tied advisers only have access to a limited number of financial strategies and solutions. An independent will always adapt a financial strategy which is tailored your own financial needs.
2. How long have you been a financial adviser?
Experience isn’t everything, and the back-up and strong support of a committed team within the firm may be as important. However, you may have more confidence in an adviser who is not a new entrant to the retail financial services market and has at least some experience under their belt. You can check out the background of an IFA on the Financial Services Authority (FSA) register at www.fsa.gov.uk/register.
3. What qualifications do you hold?
The basic minimum qualification requirement to provide financial advice is the Certificate In Financial Planning or Certificate Of Financial Advice (CeFA). It must be noted that both these sets of qualification are of the very minimum standards required to provide financial advice and do not reflect any particular expertise or knowledge.
For the highest standard of advice, you should seek an adviser who holds more advanced qualifications. The highest levels of qualification are the Certified Financial Planner licence and Chartered Financial Planner status. There are very few advisers in the UK who hold either of these qualifications, but they do represent the highest technical standard.
Many advisers include the anagram ‘CFP’ in their title. It is important to establish whether they merely hold a Certificate in Financial Planning or are fully qualified and hold Certified Financial Planning licence / Chartered Financial Planner status.
4. How do you charge me for what you do?
Always seek an adviser who offers you the choice of paying a fixed fee for their services. Many advisers work on a commission basis which does not allow for true impartiality as some advisers may be inclined to ‘punt’ high commission earning products. Other advisers may charge by the hour and are therefore incentivised to maximise time. You should request a document illustrating services provided and the way they these will be charged at your first meeting with your prospective adviser.
5. Who is your typical client?
It is a good idea to gain an understanding of what kind of client the prospective adviser already deals with. This will give an indication of whether or not they are familiar in dealing with your financial circumstances. You may find that the firm you are looking to deal with only engages with a specific type of client, may be too big or too small, and are unable to tailor a financial plan to meet your objectives. Where possible, obtain client references.
6. What level of ongoing service do you offer?
Service standards will vary from firm to firm; however, if an adviser is going to be receiving ongoing remuneration for the servicing of your financial plan, you should expect to receive a good level of service in return. You should ensure that agreed service levels are set in the early stages of your discussion.
At least one good quality review should be carried out on an annual basis. At a very basic level this should be to update the advisers’ understanding of your financial position and to enable them to review any products or investments that you have. Good quality practices will offer quarterly reviews and be on hand to answer your queries upon giving them a call.
7. Will your advice be focussed on one area or will you provide an overall review?
You may or may not require a complete review of your financial position. It is important to note the difference between a financial adviser and a financial planner. Many advisers operate on a transactional basis, offering one off advice on only one or two areas. Financial planners offer a complete wealth management solution, grouping together your existing financial products, and designing a comprehensive strategy to meet your personal and financial objectives throughout life. Establish whether the individual is an adviser or planner and what exactly you will get for your money.
8. How do you work with other professionals?
A good financial adviser should be able to work closely with your solicitor and accountant, providing a complete wealth management service. The advice that they provide should complement the advice from your other professional advisers. Ensure your financial adviser is comfortable working with other professionals and find out how they will charge for doing so.
9. Are you a member of any professional bodies?
A limited number of advisers belong to a professional body, such as the Institute of Financial Planning (IFP). Being a member of a professional body indicates that the adviser has committed themselves to following a code of professional conduct and they are likely to be striving towards improving their level of professional qualifications.
10. How will you keep me up to date with changes in the world of financial planning?
At the very minimum, an adviser should be providing you with a regular newsletter, keeping you up to date with financial news and developments. You should also find out if they have an informative website or if the adviser has written any recent press articles.