As an IFA and Chartered Financial Planner, there are ten questions that I
always suggest people ask when they are looking for an IFA. Sorry for such
a lengthy reply, but I hope that you will find this useful!
1 -
Are you independent?
Until quite recently, there were only two
kinds of financial adviser - tied or independent. A tied financial adviser
could only advise on products from their own company whilst an independent
financial adviser acted on behalf of the client, and was able to access
products from the whole market. Recent changes have increased the types of
advisers to include independent, whole of market, multi-tied and tied
advisers.
Always go for independent financial advice. A single
company is unlikely to be the most competitive in all areas of financial
planning so the ability to select from every available product/company is a
minimum starting point for good financial advice. Multi-tied advisers might
purport to represent the 'best' products in the market but they will not
have the same level of choice as an independent financial adviser.
2 - How long have you been a financial adviser?
Experience
isn't everything, and the back-up and strong support of other IFAs within
the firm may be just as important. However, you may have more confidence in
an adviser who is not a new entrant to the retail financial services market
and has at least some experience under their belt. You can check the
background of an IFA on the Financial Services Authority (FSA) register at
www.fsa.gov.uk/register.3 - What
qualifications do you hold?
The basic minimum qualification
requirement for an IFA is the Certificate in Financial Planning or
Certificate of Financial Advice (CeFA). Both of these sets of
qualifications are a minimum standard and do not reflect any particular
expertise or knowledge. You should shop around to find an adviser who holds
the Diploma or Advanced Diploma in Financial Planning (previously known as
the Advanced Financial Planning Certificate - AFPC).
For certain
areas of advice you should seek an adviser who holds more advanced
qualifications. The highest levels of qualification are the Certified
Financial Planner licence and, more recently, Chartered Financial Planner
status. There are relatively few advisers in the UK who hold either of
these qualifications, but they do represent the highest technical
standard.
4 - How do you charge for your services?
Always seek an adviser who offers you the choice of paying a fee for
their services, rather than working on a commission basis. This is the only
way you can ensure complete impartiality. You should request an engagement
letter after the first meeting that sets out the services that will be
provided and the way these will be charged. Fee-based advice is
still often paid for by way of commission that is generated by the sale of
a financial product.
5 - Do you have any specialists within your
firm?
Very few financial advisers have expert knowledge in all
areas of financial planning. Ensure that the adviser can refer you to other
specialists within the firm, and that that are willing to do so when
needed. They may also need to refer you to specialists outside of their own
company for certain areas of advice, and they should explain to you when
this would be necessary.
6 - What level of ongoing service do
you offer?
The answers to this question are bound to vary from
firm to firm. If the adviser is going to be receiving ongoing remuneration
for the servicing of your policies, you should expect to receive some
service in return. Advisers will offer different levels of ongoing service,
and you should ensure that this is agreed in the early stages of your
discussions. Some firms charge a monthly, quarterly or annual fee for this
ongoing service and advice.
A good quality review carried out
once a year almost always makes sense. At a very basic level this should be
to update the advisers' understanding of your financial position and to
enable them to review any products or investments that you have.
7 - How do you work with other professionals?
A good financial
adviser should be able to work closely with your solicitor and accountant.
The advice that they provide should compliment the advice from your other
professional advisers. Ensure that your financial adviser is comfortable
working with other professionals and find out how they will charge for
doing so.
8 - Are you a member of any professional bodies?
There are a number of professional bodies that a financial adviser
can belong to. These include the Personal Finance Society (PFS) and the
Institute of Financial Planning (IFP). Being a member of a professional
body will mean that an adviser has committed themselves to following a code
of professional conduct and they are likely to be striving towards
improving their level of professional qualifications.
9 - Will
your advice be focused on one area or will it be a complete review?
You may or may not require a complete review of your financial
position. Some people seek financial advice to simply obtain
recommendations on one particular aspect of their financial lives. Our own
company offers two services - focused financial solutions for people who
need advice on one or possibly two financial areas; and wealth management
solutions for people who need a holistic financial planning review.
Establish exactly what the financial adviser is offering to you in terms of
the scope of their recommendations.
10 - How will you keep me up
to date with changes in the world of financial planning?
At a
very minimum the IFA should offer you a regular newsletter to keep you up
to date with financial news and developments. You should also find out of
they have an informative website and a blog with regular updates on
different areas of financial planning.
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