Wednesday, December 16, 2020

Finding a financial advisor - what to look for

how to find a financial advisor

There are two basic questions that arise when looking to make an important financial decision:

  1. Should I use a financial advisor or try to do the financial work and decision-making on my own?
  2. If I do decide to use a financial advisor, how should I choose which one to use?

The first question usually revolves around perceptions of cost and trust. How much will the advice cost? How can I trust that the advice I receive is the correct advice?

It's important to recognise that all financial advisors in the UK are authorised and regulated by the Financial Conduct Authority (FCA). The FCA was set up to protect consumers and the integrity of the UK financial system, and it promotes effective competition in the interests of consumers. The FCA helps to ensure that financial markets are honest, fair and effective so that consumers get a fair deal. The FCA regulates the conduct of nearly 60,000 businesses.

There is research to show that those who take financial advice tend to be better off. For example, according to joint research from Royal London and the International Longevity Centre, individuals who take advice on their investments can end up almost 40% better off in terms of liquid assets compared to those who receive no advice.

Then there is the non-quantifiable peace-of-mind from the security of knowing that your financial situation has been professionally reviewed, and that you have taken the right financial decisions.

Those who do choose to seek financial advice may find the choices bewildering but if you do need help with a financial decision it’s worth persevering. A good adviser can save you money and a great deal of stress in the long run.

Which brings us to the second consideration. How to find a financial advisor. There are two basic types of financial advisor; tied and independent. Tied advisers are restricted in the type of products they offer, or the number of providers they choose from whereas independent advisers can recommend all types of financial products without restriction. In addition, financial advisors will often specialise in particular areas of advice, for example, retirement, tax planning or income protection. The qualifications required to specialise in different types of advice will also vary and so its always a good idea to check an advisor's qualifications and experience in their specialist area of advice.

Then there is the cost to consider. Financial advisors often have a range of charging structures dependent on the type of advice and amount of work required. If you pay an ongoing fee to an advisor then there should be an ongoing service to justify the fee. Costs and the charging structure should always be discussed in advance and an advisor will provide an estimate of the cost and work involved before you decide whether or not to proceed. Most advisors offer an initial, no-obligation one-hour meeting so you can discuss your financial situation and objectives without committing yourself.

In summary, when looking for an advisor its useful to consider the following key points:

  • What services do they offer?
  • How long have they been giving advice?
  • What qualifications do they have?
  • How do they charge and what is the likely overall cost of the advice?
  • What range of financial products can they offer?
  • Do they have client reviews and feedback?

Of course, you may have other questions to ask but it always pays to do you own background homework to ensure that you get the very best advice for your own personal situation.

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