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There will be a cost associated with taking financial advice. In the long run, however, it may save you money when making life-altering monetary decisions. You can learn about financial advisors and whether or not you need one by reading this guide. Not to mention the cost.
A financial advisor is priceless when dealing with complex financial products or when making a significant financial decision.
As they can offer products from all providers, you can get the latest advice and products tailored to your specific needs. To make sure you are getting the right advice, check out the full explanation.
Consult an advisor free of charge for an initial fact-finding call. Afterwards, you'll be charged either an hourly fee or a percentage-based charge. See below for more details.
You can find a financial advisor near you by entering your postcode on FinancialAdvisor.co.uk. There are over 15,000 independent and restricted advisors in the network.
Different financial products are likely to be needed throughout your life. Making the most informed decision about the right product for you can be helped by a financial advisor. While some people find the value in paying for an advisor to ensure they choose the right product, even the most money-savvy people feel it makes sense to pay for advice when getting a complex product.
Independent and restricted financial advice are the two types of advice you can get.
Having an 'independent advisor' or a firm advertising that it offers 'independent advice' means that it can advise and sell products from any provider. As a result, you should get the most appropriate advice and products tailored to your needs.
Contrary to that, if an advisor or firm is restricted, it can only suggest a limited range of products or product providers. If you do not understand the nature of the restriction, ask the advisor.
Get professional advice from an IFA if you're planning to get it. This is ideal if you are a newcomer to financial advice since it can be difficult to tell why restricted advisors are restricted. Some providers may impose restrictions on the products they recommend (not always bad), whereas others may impose restrictions on the providers (often bad, as others may offer better deals).
As a result, if you're using a financial advisor always, always make sure they're impartial. You can ask your financial advisor if they're independent or not if you have already got one. Whether they are independent or restricted, and what that restriction is, should be clearly explained.
Some cases may require the use of a restricted advisor. A specialist pensions advisor who can search the entire market, but only within the area where you're interested, maybe your most suitable option. This is if you've done your research and only want advice on a specific product or area, say pensions.
Using a financial advisor isn't necessary. If you do not know much about the investment decision you need to make or do not feel confident, it might be better to get professional advice. The following are some of the main products that financial advisors deal with. It's a bright idea to review what you're getting before you meet with a financial advisor, even if you're planning to use one of these. By doing so, you'll have a greater sense of control.
When you retire, you can trade your pension for an annuity to receive a regular income for the rest of your life. You will likely need an advisor if you choose to take an annuity with all, or just part, of your pension savings. The purchase of an annuity is a big one-off financial transaction, and you cannot change your mind once you've made a decision. Some people simply opt for the annuity their pension provider offers, resulting in the loss of thousands of pounds during their retirement years. For the most suitable annuity with your pension pot, have an advisor search the whole market for you.
Planning your finances and taxes becomes more complex as you accrue more assets and money. Many products are sometimes difficult to understand but are useful at the same time. IFAs can be of significant value in these situations.
Advice is imperative when it comes to mortgages and equity releases, two major financial transactions. Your advisor won't be an instructor, but a knowledgeable advisor. Hence, the most critical thing to remember is to make sure you know the basics first.
First-time buyers and remortgaging: When you're first buying a house or remortgaging unless you get an IFA specialising in mortgages (find out if they're qualified), you're often better off using a specialist mortgage broker, who can search the whole market for you. Mortgage brokers are often free of charge.
There are many exclusions for life insurance, critical illness insurance, and income protection insurance. Choosing insurance can sometimes be done inexpensively without an advisor, but those with less straightforward family arrangements or health issues may benefit from advice.
Private pensions are often as simple as choosing the right provider (or signing up for one offered by your employer). Pensions can be complicated, especially if you wish to transfer a substantial pension from an existing plan. An IFA's opinion may be helpful in this case.
Over the years, IFAs have been paid one of two ways - fees (you pay upfront) or commissions (they take a cut on a product-by-product basis). It was required by law that you had the option of either. Commissions on investments and pensions are now prohibited by IFAs as of 31 December 2012. Rather, they must charge a fee that you agree to.
For life, critical illness, and income protection insurance policies, as well as mortgage broking, all advisors can continue to accept commissions. As long as the advisor holds the product, he or she takes a cut. The money you spend on this may seem free to you, but what you're paying for is still the same thing. It's just spread out over time instead of upfront - and it's a much higher price tag.
There are three types of fees: hourly, flat fee, and commission. In most cases, the first meeting or conversation with a financial advisor is free, but you should ask just in case you get charged.
After that, you will have to pay. Depending on who you choose, you can do this one of three ways:
Most advisors charge this way, perhaps because it is most similar to how they used to charge when they were paid on commission. The fee is based on the percentage of your money you want to be advised or managed. Typically, you will pay a percentage fee for becoming a client and investing your money, and another percentage fee for each year they keep managing your money.
If you are interested in this percentage, ask! It can range from 0.5% to 5%.
Every time you see an advisor for different 'projects, such as consolidating your pensions, or investing, you are charged a fee. If you need help with a specific task and don't want ongoing advice, these are the best.
Many advisors are adopting a model that looks more like that of lawyers or accountants and charge on an hourly basis. Take the time to ask for a detailed breakdown of what they have done and how long it took. You should ask before proceeding because hourly rates can range anywhere from £50 to £250.
Get recommendations from family and friends about independent financial advisors in your area. A good (or bad) experience with them doesn't guarantee a similar one for you, but it's a good place to start.
Alternatively, search on FinancialAdvisor.co.uk with a network of 15,000 independent and restricted whole-of-market advisors. The site will list local advisors based on your postcode. Additionally, you can also search by specialization, advice areas, wealth level, and advisor qualifications. To locate recommended advisors depending on the advice area and value involved, you can utilize their online form*.
FinancialAdvisor.co.uk's advisors offer a 30-minute complimentary consultation to discuss general finances, pensions, investments, and mortgages. A free pension check* for planning your retirement, a free financial health check* to assess your financial health, a free investment check* to help manage your investments or a free mortgage check* for first-time home buyers and remortgaging.
A summary of your financial situation, including savings, debt, incomings, outgoings, and future plans, is a smart way to make the most of any of these checks.
Feel no shame. It's possible you'll be transacting a lot of money with this person, so you should be sure you have all the information you need before making a decision. You are not under any obligation to use them if you are not impressed, or do not 'click' with them during your first meeting. You will be best able to make your decision if you come prepared with the following list of questions (and any others you may have).
It's most appropriate to start with this question as it is likely to be the most pertinent of all. In order to qualify as independent, a financial advisor must have the ability to research the entire market to find you the most suitable product. Restricted advisors are those who cannot search the entire market or are tied to a specific provider. Ask what restrictions the advisor has. Restricted advisors specialize in certain areas, such as pensions, and won't give advice on anything else. The rest are tied to particular providers and can only recommend products from those providers, or none at all if they cannot recommend any products matching your needs. Make sure the advisor you are consulting matches your needs. Independent advisors are always the smart choice.
Ask whether you will receive the advice face-to-face, by phone, by email, or in a written report. Depending on your preference, ask if there are differences in price. If you hire an advisor, they will send you a summary of their recommendations, usually referred to as a 'suitability report'. This should reflect your discussion with the advisor, and it should be clear why a specific product was recommended. Read this carefully.
To ensure firms are qualified and operating above board, the FCA monitors their activities. Look up the FCA's website to see if an IFA is fully authorised before you meet them.
In order to become a licensed IFA, you need to complete a diploma-level qualification, such as the Diploma in Financial Planning (DipFP) (formerly the Advanced Financial Planning Certificate), or ideally the Advanced Diploma in Financial Planning (ADFP). The IFA must pass advanced exams to obtain these. While taxation is a mandatory qualification, students can choose to specialize in other subjects such as pensions and investments. Additionally, the advisor must possess an FCA-accredited Statement of Professional Standing (SPS). This will attest to their qualifications. They will also be listed on the FCA's register. Ask to see it if it isn't displayed in their office. Certified Financial Planner or Chartered Financial Planner are the top qualifications IFAs can get, which puts them up there with accountants.
In the event that you believe you've been misadvised, you should collect as much paperwork as possible. Next, write the firm that sold you the product and explain clearly and concisely why you believe they made a mistake.
The Financial Ombudsman Service, which offers compensation awards, can take your complaint if you are not satisfied with the firm's response. Reclaiming is a free service, so don't pay to reclaim, you'll just lose even more money.
Visit the Financial Ombudsman Service website for more information on filing a claim.
Remember that 'low risk' does not mean 'no risk' when it comes to investing. Losing your money is still a possibility. There are no grounds for complaint if the advisor explains this. However, if they said you couldn't lose money with a product and you did, then they misled you. Basically, you're complaining about the way you were sold investments, not about their performance.
Let's start with an example that isn't financial. Imagine asking for a wifi-enabled TV in a store and telling the shop assistant that's what you want. Then you discover that the TV doesn't connect to WiFi when you take it home and use it. You were mis-sold the TV since it doesn't operate with the features you want it to.
Financial products are no different. You should select an advisor who advises you on products that suit your needs and most importantly, who explains to you exactly what the product does and does not do. Compensation may be available if they don't do this.
If the firm you used has gone bankrupt, you may still be able to get compensation. Financial Services Compensation Scheme (FSCS) - the last resort for compensation - is your best option.