Choosing a Financial Advisor?

Economie's advice

what factors should I consider when choosing a financial adviser?

1. Status - Would you prefer an 'independent', 'whole of market', 'multi-tied' or 'tied' financial adviser? The 'Key Facts' documents which a financial critical illness cover adviser must now give to you upfront will spell out whether the advice is offered on products from a single provider, from a limited selection of providers or from the whole market.
* 'Independent' and 'whole of market' advisers - The key advantage of 'independent' and 'whole of market' financial advice is that you have access to all the products on the market. Independent financial advisers research and recommend the most appropriate financial solutions after asking their clients a detailed questions about their circumstances, their financial goals and their attitudes to risk. As they act on your behalf they provide personalised written reasons why they have recommended particular products or a course of action. The difference between 'independent' and 'whole of market' advisers is that the former must offer the option of paying by fee as well as the option of paying by commission.
* 'Multi-tied' and 'Tied' advisers - Many people buy financial products through tied agents, typically working at their bank or building society. When they want a pension or investment product they like the convenience of popping into their bank and are satisfied with the more limited range that is offered through that organisation's relationship with a single life insurer or investment house. In this case the financial adviser acts on behalf of the product provider. Many people buy products this way, usually because they feel more comfortable buying from a big name organisation and they can also benefit from the kinds of discounts that only a large organisation can offer. Tied agents because of the limited range of products they offer also tend to have a very in depth knowledge of those products and the company they work for. Multi-tie arrangements were introduced in December 2004. By giving organisations the opportunity to link up with several providers instead of just one, the Financial Services Authority hopes to create greater choice for consumers who don't want to research the whole market or use an Independent Financial Adviser themselves. Banks and building societies that before had a single tie to a financial product provider are likely to include one or two products from other providers in their range. Customers should check the range of products and providers on offer and decide if the choice of products available is wide enough for them.
* It's important to be aware that an adviser may not give independent advice on every category of product. For example an adviser may offer 'whole of market' advice on mortgages, but may only offer tied advice on investment products. Secondly if you return to an adviser you have used in the past, check they have not changed their status under the new regulations. Some Independent Financial Adviser groups may have given up their independent status and changed to multi-tie arrangements.
2. Charges are important, but this does not mean that cheapest is necessarily the best. Of greater relevance is transparency of charges so you can determine exactly what you are paying. Advisers are now required to give their clients a 'Menu' of the adviser's charges ('Key Facts About the Costs of our Services') the moment they first seek advice. This will make it easier for the consumer to shop around for a competitive service and to know the cost of advice from the outset. Clients can pay for advice in three main ways:
* Fees - By paying the adviser a fee, either at an hourly rate or through a fee for the whole job. This is known as 'fees only' advice. Often the first meeting with an adviser where you can get to know each other is free of charge.
* Commission - By paying indirectly through commission, which is deducted by the product provider from the products the client may take out. Often as well as a commission charged for setting up a plan there may also be annual commissions on top, known as trail commission.
* Fees and Commission - By paying a combination of fees and commission.

In the past the majority of consumers tended to opt for commission, however new regulations may mean that in the future we see a shift towards people paying fees. Independent Financial Advisers now have to offer a choice of payment options, although other advisers may choose to do so. It has been argued that where charges are commission-based there is the potential for a conflict of interests, especially if the most appropriate course of action is for you to do something that does not generate a commission payment.
3. Ongoing service should also be a key consideration. This should include a regular analysis of your portfolio and your circumstances, to make sure that your finances continue to meet your objectives.
4. Location - Is it important to have your financial adviser near your home or workplace?
5. Philosophy - Do you want a financial adviser who specialises in ethical and socially responsible investment?
6. 'Key Facts' documents - New rules recently introduced by the Financial Services Authority (FSA) mean that all UK advisers must provide customers with two 'Key Facts' documents, explaining their status, the services they offer and a menu of their charges when they first seek advice. Remember to carefully read the documents you are given, including the small print, before entering into any agreement.
7. The knowledge and resources of your adviser should be considered. If you deal with an adviser you need to feel that they are competent. This may be demonstrated by their experience and the examinations that they hold. All financial advisers, whether tied or independent, are required to pass the Certificate in Financial Planning before they are allowed to give financial advice. However these exams by themselves are only foundational and you should look for additional experience and qualifications. For example SRI specialists may have taken the Economie SRI Foundation and Intermediate exams. As important is the back-up and resources they have. Individual advisers cannot provide specialist advice in every area of financial planning.
8. Areas of Expertise - Some advisers specialise in particular product areas so ensure you choose the right one for your specific needs. Areas of expertise typically include: investments, taxation & trusts; pensions and life insurance; or mortgages. Some ethical financial advisers' may also have specialist knowledge of subjects such as ethical property investment or financial planning for Muslims. If you know what sort of advice you require, choose an adviser who specialises in that area. If you want advice across a range of products then select one who has strengths across the board.
9. Authorisation - Also check that your financial adviser is authorised. If you need to find out information about an adviser's authorisation, you can look at the FSA Central Register at or phone 0845 606 1234.
10. Personal affinity - Don't be afraid of shopping around for advice. It is particularly important for ethical investors to feel comfortable with and get on with their financial adviser, because they will need to share quite a lot of personal information with them.
11. Recommendation - One of the best ways of finding a financial adviser is often through personal recommendation, but be aware that this can have pitfalls. Your financial circumstances and requirements may be very different to those of the person who made the recommendation. Or they may have misjudged the quality of the financial advice they're receiving.
12. Male or female - Would you prefer a male or female financial adviser? Many clients feel more comfortable seeking money advice from someone of the same sex or vice versa.
13. The adviser's office - Visit the financial adviser's premises to help you judge how professional they are.
14. Internet presence - Is it important for your financial adviser to have a website or to be able


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