People come into money in many different ways. For some, it is by working hard to build up their savings; for others it can be a windfall from an inheritance, an unexpected gift or the sale proceeds from a property; and for those aged 55 and above, perhaps a tax-free lump sum when cashing in a pension on retirement.
Once that money is in your bank account, what can you do next. The obvious, risk-free option is to put it in an interest-earning deposit account with a high street bank and leave it there. But there are many other investment options available.
So how do you approach making an investment decision and who should you trust for advice? How do you choose a financial adviser that is right for you?
How can a financial adviser help you?
There are many reasons for choosing a financial adviser to help you navigate the investment options available to you.
The role of a financial adviser includes understanding your financial goals and objectives and knowing the level of risk that you are comfortable with. This information enables the financial adviser determine the right financial path for your needs and helps you to make an investment decision.
A financial adviser can help with retirement planning; choosing appropriate financial and savings products; offering different investment options for a lump sum gift or inheritance; and they can also help with planning school fees or even arranging a mortgage.
A financial adviser will make recommendations about specific investment products and individual savings accounts (ISAs) that are aligned with your financial needs, objectives and risk profile.
What type of adviser should you use?
When choosing a financial adviser there are two types of adviser to consider: independent financial advisers (IFAs) and restricted financial advisers.
IFAs give impartial advice about a variety of financial products from a range of different companies; whereas restricted advisers offer advice on a limited range of investment products.
Restricted advisers may specialise in just retirement planning only or could be tied to a specified financial institution (like a bank) which offer their own in-house range of financial products.
Restricted advisers can be ‘whole of market’ advisers who specialise for example in pensions but offer financial products from all companies.
In general, it makes more sense going with an IFA as they offer the widest range of advice and financial products, across the whole market. Their recommendations could also be cheaper and more suited to your circumstances.
A restricted adviser is not obliged to tell you about similar, cheaper products that might be available through other companies.
Regulation of advisers
All regulated financial advisers should be registered with the Financial Conduct Authority (FCA) whose role is to regulate the financial services industry and protect consumers.
Registered financial advisers are authorised and regulated by the FCA which means they must meet appropriate standards and you are protected if you receive poor advice or false and misleading information.
If you encounter a financial adviser who is not registered with the FCA then you can complain to the FCA. You can check the register here. In addition to being registered with the FCA, financial advisers also need to be able to produce what is known as a Statement of Professional Standing (SPS).
The SPS confirms that financial advisers have signed a code of ethical standards and have completed at least 35 hours of continuing professional development (CPD) training each year. SPS certificates must be renewed annually so before choosing a financial adviser, request an up-to-date SPS from the adviser.
Checklist: Choosing a financial adviser
Before choosing a financial adviser, what should you expect from them?
- Confirm the adviser’s qualifications, SPS and registration on the FCA register.
- Check whether they are independent or restricted financial advisers.
- Confirm that any financial products they recommend are affordable, appropriate for your risk profile, reflect your investment time horizon (short vs long-term) and understand your tax position
- When meeting your financial adviser, always take notes of what you discuss; confirm their fees and how they are paid; and understand how they manage your personal information.
- Following the meeting, you should receive a key facts document containing the following information:
statutory details like name, address, contact points; confirmation of their FCA authorisation; their fees and how they are paid; recommended financial products; a summary of your consumer rights (for example, to change your mind within a defined timescale or how to complain of you are unhappy with their advice).
Financial adviser fees
IFAs can charge fees in many different ways, depending on the nature of advice given. So, before choosing a financial adviser, it is important to understand how much you will pay for that financial advice and when. This will allow you to make a meaningful comparison between different advisers.
IFA fees can be levied on the basis of an hourly rate; a fixed fee for specified advice or a percentage commission on the sum of money invested.
If an IFA recommends a certain type of financial product, then ask what the arrangement fees will be on that product as it may be cheaper to obtain it elsewhere or to buy it directly from the investment manager.
Discuss with your IFA whether fees will be paid separately, upfront or taken as a deduction from the money invested by you
Where to find a financial adviser
There are a number of online platforms that list the various types of financial advisers available, depending on the nature of advice you need:
Money Advice Service: Find out more by clicking here.
Unbiased: Find out more by clicking here.
SOLLA: Find out more by clicking here.
The Personal Finance Society: Find out more by clicking here.
VouchedFor: Find out more by clicking here.
Making a complaint about your financial adviser
If you believe you have suffered a financial loss because of poor advice, unsuitable product recommendations or you have received incorrect or misleading information, then you can make a complaint to the adviser, in the first instance, by following their complaint procedures.
If the response is unsatisfactory, and the adviser is regulated and authorised by the Financial Conduct Authority (FCA) then you can file a complaint with the Financial Ombudsman.
If you received financial advice from a solicitor or accountant authorised by the FCA to give financial advice, then you may need to make your complaint to the professional body regulating them.
If you have taken financial advice from someone who is not authorised and regulated by the FCA then you may need to contact the Financial Ombudsman or the Financial Conduct Authority helpline to understand what your options are.
Please note that you cannot file a complaint if your investment has simply not performed as well as you had expected.
