At some point in your life you may need to seek out the expertise of a financial adviser. But how do you go about finding a decent one and avoid being ripped off? Well I’ve compiled a list of 12 things (I know the title said 10 but I’m feeling generous) to check when looking for and choosing the right financial adviser:
How to choose a Financial Adviser
- Get a recommendation – the best way of finding a good independent financial adviser (IFA) is via a personal recommendation. But in the absence of a recommendation there are a number of organisations, such as unbiased.co.uk, that can provide details of IFAs in your area.
- Authorisation – before doing business with an IFA the most important thing to check their authorisation. All financial advisers have to be authorised by the Financial Services Authority (FSA) in order to provide financial advice. You can check whether an individual is authorised by searching the FSA’s authrorised register.
- Qualifications – there are a host of qualifications that advisers could and should take in order to ensure that they are competent to give financial advice. While the industry standards are constantly changing I personally wouldn’t do business with anybody who hadn’t at least attained the Diploma in Financial Planning (DipPFS), formerly known as the Advanced Financial Planning Certificate (AFPC).
- Experience – qualifications are one thing but experience is also important. Some people prefer an adviser with a few grey hairs as a sign that they’ve ‘been around the block’. However, the financial advice industry is one in desperate need of some youth given that the average age of an IFA is 58. While experience counts it should not be at the expense of access to the latest innovations and developments.
- References – ask to speak to a couple of the IFA’s existing clients to get an idea of the level of service they’ve received. It may not be particularly insightful given that the IFA can chose the people you talk to but if an IFA refuses your request then you might ask yourself why?
- Location – it goes without saying that you should meet anyone who is transacting business on your behalf, so make it easy by choosing an IFA near to you.
- Size matters – in order to get the best service from your chosen IFA you need to matter to them. Ask them about the general size of their existing client portfolios as well as the number of clients they look after. If an IFA looks after a large number of clients, far wealthier than you, you need to be reassured that you won’t be at the bottom of the pile. By seeking an IFA whose existing clients’ needs are similar to your own should help ensure that your needs are also met.
- Area of speciality – You may want advice in relation to a specific area such as inheritance tax mitigation. So find out the IFAs level of expertise in the area in question.
- Rapport – it may sound crazy but being able to trust someone and build a rapport is an important part of the advisory process. If you don’t feel comfortable discussing your finances with your chosen IFA then how can you trust or value their advice?
- Costing – make sure you have a clear understanding as to how and what you will be charged. If an IFA is paid via commission from certain products (mortgage or insurance) that they sell make sure you fully understand how this works because despite what they may tell you, you ultimately foot the bill. The recent RDR means that advisers have to be more transparent about what they now charge you for giving financial advice. But make sure you understand how much you are paying and what services you will get in return.
- Service proposition – find out what service standards you can expect. How often will you receive valuations or have review meetings?
- Independence – not all financial advisers are independent. Some are tied to banks and building societies. Therefore they will only sell their own products which may be inferior to those on offer elsewhere. Independent Financial Advisers on the other hand can sell you any products on the market.
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