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Beginners’ guide to choosing a Financial Adviser

Contents

This guide …

Financial advisers are trained to advise you on a range of financial products. Some advisers specialise in a particular area, for example pensions or life insurance, while others will offer the full spectrum.

Types of Financial Advisers

Financial advisers fall into three camps. You need to choose the one that suits you best:

Independent Financial Advisers (IFAs): An IFA has to research the whole market before recommending a product. They are paid either by the financial firm whose product they’ve recommended - this is called commission - or directly by you, the customer, paying them a fee. You must be given the option to pay either way.

Multi-Tied Agents: A multi-tied agent will have agreements to sell a number of companies’ products. They have to recommend a product from this range and aren’t obliged to scour the whole market on your behalf. The majority will be paid a commission for every product they sell you, although some may offer you the option of paying a fee. Unlike IFAs, they’re not legally obliged to do this.

Tied Agents: A tied agent sells the products of one financial company - and will recommend a product from this range only. The majority will be paid a commission for every product they sell you, although some may offer you the option of paying a fee. Again unlike IFAs, they’re not legally obliged to do this.

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Choosing a Financial Adviser

Firms that give financial advice have to be regulated by the Financial Conduct Authority (FCA), or be the agent of a regulated firm.

The FCA has a Register of all regulated firms at www.fca.org.uk/firms/systems-reporting/register/search. You should check the Register to make sure the firm you’re going to use is authorised to give financial advice.

If they aren’t regulated and things go wrong, you won’t have access to complaints procedures and compensation schemes, for example, the Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS).

Helpful notes

To find a local IFA, you can visit Unbiased's website at www.unbiased.co.uk. Alternatively the British Insurance Brokers' Association (BIBA) also has a list of its members at www.biba.org.uk or you can search on www.mylocaladviser.co.uk.

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Helping you to get the most from your first meeting

Before you have your initial meeting, check that the financial adviser lists the product area you’re interested in as one of their areas of expertise.

During your meeting:

  • Take notes
  • Ask questions about anything you don’t understand and keep asking until it is clear in your mind. If the adviser can’t explain it in a way that you understand, then consider changing advisers rather than pretending everything is clear.
  • Don’t sign anything until you have read and understood it.

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What should I ask?

To help you get the most out of your meeting, we’ve put together a few questions you may find helpful to ask.

Before your first meeting

  • What type of adviser are you? An IFA, multi-tied agent or tied agent?
  • Are you regulated by the FCA?
  • Do you specialise in the product area/areas I’m interested in?
  • How long have you been advising clients?
  • Do you often advise people in my earnings bracket?
  • Can you show me references from satisfied clients?
  • Do you charge a fee for the initial consultation?
  • Do you charge fees for advice or take commission from the provider? – How much?
  • Where and when will meetings take place?

During your meeting

  • What’s the potential return on this investment and how long does it run for?
  • What are the charges and how do they compare with those of similar products?
  • Why is this product the best for me?
  • How does it fit in with the other financial products I already have?
  • What happens if I need my money earlier than planned?
  • What are the risks?
  • What is the tax position with this product?
  • What if I can’t keep the payments up?
  • Can I have the Key Features document for this product?

At the end of the meeting

  • Don’t feel pressurised to sign up for anything if you’re not ready to.
  • Take as much time as you need to consider or read any proposals and Key Features documents.
  • Arrange a follow up meeting.