Few things worry people more than how they should best manage their finances.
Many of us are working longer in life, changes to pension laws have given us greater and earlier access to funds and we may have lots of equity tied up in property. At the same time, we also have ongoing living expenses and the need to provide for the future.
It’s a complex equation and not an easy one to resolve, even for those of us who are usually fairly good with figures!
That’s why increasing numbers of people are turning to specialist financial advisers for help.
If you’re asking yourself questions such as “how to find a financial adviser”, it’s worth noting that finding one is typically pretty easy. Finding one that’s right for your needs requires a little more thought.
Financial information and Independent Financial Advisers (IFAs)
As a first step, it’s important to note that there is an important difference between an IFA and general undefined “financial advice” from someone. This position has also changed following legal redefinitions in 2012/13.
Someone working in an organisation, such as a bank, who is not a formally registered IFA (see below for what this means) may offer “information” and in some cases, “advice”. In many cases, you might find such help to be very useful.
However, by law now, such advisors must clearly describe their ‘advice’ as “Information Only” or more commonly “Restricted”.
This is important because:
- someone providing “restricted” advice is indicating that they are looking at a potentially limited range of options in terms of addressing your needs. They may also obtain benefit from their recommendations, in terms of commissions from other companies or salaries, bonuses and promotions, should you go forward with an investment/purchase through them;
- by contrast an IFA, since the end of 2012, is now forbidden to accept commissions from companies selling financial products. They are obliged to charge you a fee for their advice and this indicates that they are not tied to a particular provider’s financial products and solutions.
So, if you’re wondering, “how do I find a financial adviser”, be sure you’re clear what you’re looking for and why.
What is an Independent Financial Adviser (IFA)?
As far back as the 1980s, the government recognised the need for the consumer to be able to gain access to truly independent financial advice and guidance – i.e. advice not linked in any way to a company providing financial products and services. The term “IFA” was coined to describe an individual offering such advice.
The full history needn’t concern us but evolution over time has led to this role being defined by an individual or company with the following characteristics:
- to achieve approval by the FCA, they must meet stringent and highly demanding professional standards for qualifications and expertise in financial services through formal exams;
- as stated above, they must not benefit from any product/services they recommend to you. They obtain their income directly from you through fees.
Typically, the financial adviser concerned must have achieved professional excellence in areas such as insurance, banking, investments, taxation and pensions etc.
It could potentially be an offence for someone or their employer to use the term “IFA” if they were not qualified to do so.
Choosing your financial advisor
The advice you might receive from both sources could be highly beneficial to you.
In terms of choosing between the two, a lot might depend upon your attitude to fees and the complexity/size of your financial situation. Here’s a very general summary:
- if you want total objectivity in terms of broad market review recommendations, you can get that from an IFA;
- the fees charged by IFAs can be high, subject to the sums involved in your position. The advice from financial institutions is typically free.
There are sites available for helping to find a financial adviser. Another option is to use one of the media’s financial advisor location services based on your postcode etc.
There is no ‘right’ or ‘wrong’ in terms of which approach you adopt. Just be clear as to what advice you’re getting, ensure that it’s from a highly qualified and reputable source, and don’t dismiss IFAs out of hand just because they charge a fee! Their fees may be small potatoes in the overall scheme of your financial world.