Serving up the right financial advice

Which? Money published a good explanation of the new regulations for financial advisers in their magazine this month and Informed Choice chartered financial planner Martin Bamford was pleased to have contributed to their research for the article.

As well as describing the new rules for qualifications and adviser charging, it provided a useful guide to how to choose the right financial adviser.

Which? Money, with help from Martin, suggested the following attributes. The headlines come from the Which? Money article, with the descriptions of the tips from us.

1 – Avoid your bank and go for an IFA

We always recommend that investors seek independent financial advice and avoid seeking financial advice from their banks, at all costs. Bank advisers tend to be tied to a single range of (often expensive) products, and usually lack the experience and qualifications needed to give suitable advice. They also tend to be more commercially motivated to sell products.

2 – Make sure they are authorised

This is a simple check that every investor should do before seeking advice. Visit the FSA Register (www.fsa.gov.uk/pages/register) and make sure the firm and individual you are dealing with are authorised and regulated by the Financial Services Authority.

3 – Go for experience and qualifications

It is important that your independent financial adviser has both relevant experience and relevant qualifications to deliver suitable advice. Look for an adviser who can demonstrate experience in the areas of advice applicable to you and who holds advanced financial planning qualifications, rather than the current minimum required GCSE level qualifications.

4 – Look for professional membership

The IFA you select should be a member of a professional body, such as the Personal Finance Society (PFS) or Institute of Financial Planning (IFP). This will mean that, in addition to abiding by FSA regulations, they will have to sign up to a code of conduct and ethics.

5 – Compare costs

All financial advisers must tell you at outset how they charge for their services and what the likely costs will be. Commission is being abolished from the end of next year, but many IFAs still operate on this basis. Whether you pay for advice via commission or fees, there is no such thing as a free lunch and you always pay the cost, either directly or indirectly. For this reason, paying fees for advice will often work out cheaper. It is certainly more transparent than the commission route.

6 – Fill in a ‘fact find’ first

Before a financial adviser can deliver suitable advice, they need to understand your current financial position, goals and objectives. The best starting point is to fill in a confidential financial questionnaire, or ‘fact find’, document to record all of the ‘hard’ facts about your circumstances and objectives. This can then be followed up with a meeting where you spend time discussing ‘soft’ facts and getting answers to any questions you have about the services on offer from the IFA.

7 – Know what to expect

Service delivery differs between IFAs, so find out in advance what you can expect in terms of ongoing service. Under the current rules, there is no regulatory requirement for a financial adviser to deliver an ongoing review service in return for ongoing remuneration, although this is set to change at the end of next year. If you are paying your adviser, either through fees or commission, then make sure you are getting good value in return for this money.

8 – Get recommendations in writing

Always ask your financial adviser to put their recommendations in writing, in the form of a report or extended letter. This will give you the opportunity to consider what they are recommending before implementing their advice, or even to get a second opinion from another adviser first. When you are making important decisions with your money, this step is vital in giving you the breathing space to consider what is being recommended.

Here at Informed Choice, we would be happy to explain how we meet each of the criteria described in this blog. Do get in touch to arrange an initial meeting, at our expense and with no obligation.

Photo credit: Flickr/Martin Bamford