10 min Read
04 Jul 2018

Written by Liam

Over 30 years experience in financial services, residential lettings and property sales. Director of a leading national estate agency chain, until leaving in 2008 to pursue other commercial interests. Vast experience in new business development, business change, management development and business strategy.

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What are the best questions to ask a financial adviser?

Best questions to ask a financial adviserAt some stage in your life you will likely need to engage the services of a financial adviser to help you through the complicated world of financial planning.

Although there is a lot of information available free of charge through websites such as Moneytothemasses.com there are often personal requirements or complex issues that need a more in-depth analysis and recommendations to resolve.

You can find a financial adviser by reading our article '10 tips on how to find a good financial adviser'. However, before you engage the services of a financial adviser it is important that you ask the right questions to asses their suitability.

Below we provide the most relevant financial adviser questions that you can use to help assess their suitability:

Best questions to ask a financial adviser

Are you an independent financial adviser?

Independent financial advisers are professionals that offer independent advice to their clients and recommend suitable financial products from the 'whole of the market'. This term means that independent financial advisers are able to recommend products across all available providers, therefore offering their clients the best products available.

If you are not an IFA are you a restricted adviser?

A restricted adviser can only recommend certain products, product providers, or both.

A restricted adviser should clearly explain the nature of their restriction which could be one of the following:

  • The adviser works for one product provider only and only offers that provider's products (AVOID)
  • The adviser can offer products from several providers but not from the whole market
  • The adviser can offer some types of products but not all products

In most cases it would be preferable to use an independent financial adviser rather than a restricted adviser as they can continue to advise on your requirements as your financial planning needs increase or change over time. In addition, you can be assured that the financial advice they give is truly independent.

However, using a restricted adviser is sometimes worth considering if they are providing a service such as arranging a mortgage where the restricted products offered are competitive.

What financial adviser qualifications do you have?

All financial advisers have to have some relevant qualifications with a minimum of Level 4 of the Qualifications and Credit Framework. Most advisers will have attained higher qualifications particularly if they are specialising in certain areas of financial planning. As well as qualifications they also need to obtain an annual Statement of Professional Standing as proof of their ongoing ability to practice. Ask to see this.

Are you approved by the FCA?

All financial advisers must be regulated and approved by the FCA (the Financial Conduct Authority) and you can check the Financial Services Register to ensure that they are. The register is being revamped by the FCA as it is currently not very user-friendly.

What Financial Adviser services do you offer?

Most financial advisers will provide a written financial plan or recommendation report which will provide an overview of your current personal financial situation together with recommendations to reach your agreed future goals. Services provided may include pension planning, estate planning, mortgage arrangement, investment planning, business protection, cash flow planning and more. Some of these services can be complex with some financial advisers specialising in certain areas. If you are aware of the services you require then question financial advisers on their ability to provide the services needed. Pay particular attention as to how they invest your money. Do they outsource or choose funds and investments in-house? In either case what process do they use to arrive at their recommendations? Ideally, you want to avoid financial advisers who just pick funds from a best-buy list and who do not carry out robust research themselves or who do not have robust processes in place.

When assessing a financial adviser always ask for an example of the financial plan they provide for their clients. It is possible for them to do so on an anonymised basis.

What fees do you charge and how are they structured?

Since 2013 financial advisers providing advice on pensions, investments and annuities can not receive commission from the product provider. Some products such as mortgages, life insurance, property and travel insurance are not covered under the 2013 legislation so advisers can still receive commission on these products.

Since financial advisers do not receive commission on most products they recommend they will instead charge their clients a fee. The fees charged by financial advisers do vary considerably with a recent survey by the financial adviser comparison website VouchedFor illustrating this. VouchedFor asked advisers featured on their site to publish their charges. A total of 423 advisers, representing 263 firms, have done so. The website found the average initial fee was 1.72% and the average annual ongoing charge was 0.69%. Hourly fees ranged from £125 to £250 with an average of £178.  For investment advice initial fees drop sharply the more money a client invests. On average, someone with a portfolio worth £100,000 would be charged 2.06%, while an investor with £500,000 would pay 1.24%.

The way fees are structured also varies so it is worth asking a financial adviser what options are available, the following are typical examples.

  • An hourly fee for work carried out or
  • A set fee for a piece of work or
  • A monthly fee, either a flat fee or percentage of the money invested and...
  • An ongoing fee for an ongoing service provided such as investment reviews

The method of paying these may also vary from upfront payment, monthly payment or a deduction from money invested and managed by the financial adviser. So check how much their financial advice fees are and how they expect to be paid.

What fees do you charge for the first consultation?

A large number of financial advisers will not charge for the first consultation as this is seen as a meeting to assess whether both parties want to continue with the partnership. Always look for a free first consultation to enable you to asses the financial adviser on their suitability.

How do you assess that the ongoing risk level of my investments fits with my risk profile?

Investing money always has an element of risk and you will need to discuss the level of risk you are comfortable with your financial adviser. Risk assessment should be ongoing so it is worth asking a financial adviser a question about their ongoing risk monitoring process and how they plan to review the suitability of their previous recommendations to you in the future.

How often do you review a client's finances and how do you communicate with them?

It is important to regularly review your personal finances as life events unfold and circumstances change. Most financial advisers will tailor their communication process to suit their clients' needs but it is important to check the process to ensure that you understand what to expect.

Do you have any customer reviews available?

A recommendation is often the best way to find any professional service and customer reviews are a good source of information. Customer reviews that are displayed on their own company website are fine but be aware that these will only be good reviews as it is unlikely that they would put a poor review on their own website. Instead I would use a website such as VouchedFor which hosts over 60,000 client reviews of financial advisers across the UK. The site is simple to use. Just enter a postcode and you will be shown a list advisers nearby together with full details (often including fees) and customer reviews as well as contact details.

Other useful articles

How to find a good financial adviser you can trust

10 tips on how to find a good financial adviser

Looking for a financial adviser near you?

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