If you think you need a financial adviser, be sure to ask these 10 questions.
However, before you ask a financial adviser any questions, you will get better results if you know exactly what help are you looking for?
Do you …
Just need to get started investing for my financial goals.
Or do you want more specific detailed financial planning advice?
Or do you want a local adviser who you can meet face to face?
So here are my top 10 questions to ask an adviser to find out if you are both a good fit.
- Are you independent?
There are broadly speaking 2 types of advisers. Independent or tied to one provider.
An independent adviser has a regulatory requirement to provide advise that is in your best interest and has access to the entire marketplace of financial solutions. This means that they act for you in a fiduciary capacity.
A tied adviser works for one provider and as such can only advise you on what is best for you based on what their company has to offer ONLY. They do not have access to the entire market to advise you.
2. How do you earn your fees?
Since the end of 2012, commission has no longer been payable to financial advisers.
The financial advice world in the UK now operates on a fee charging basis agreed with you at the outset. There will be no fee payable to the adviser that you would not be informed of.
The fees that you pay may still be paid from the product, however this must be agreed with you in advance.
NO pension or investment provider can pay commission direct to the adviser by LAW.
3. What will the total costs be?
Always ask the adviser for an indication of how much their fees are likely to be before you get into specific detail.
Some adviser work on a percentage basis and some on a monetary amount. Wither way, it is important to understand this clearly as there is a significant range in the cost of advice ranging from initial advice fees of 1% up to 5%.
4. What are the advisers qualifications?
Every adviser in the UK must be qualified up to a minimum level and many have even a higher level of qualification. The minimum benchmark qualification is DipPFS or DipFA.
The highest level of qualification is either a Chartered Financial Planner or a Certified Financial Planner.
Anyone claiming to be an adviser that does not have any of these qualifications should be avoided as you will have no protection from the Financial Conduction Authority.
5. Is the adviser a holistic adviser?
Some advisers only provide advice on what would be the most appropriate pension or investment or life insurance.
However, many advisers focus on creating a lifelong financial plan for you to help you achieve your long-term goals. This is known as holistic financial planning.
This type of planning is now regarded as the gold standard of financial advice.
6. How will the relationship work with the adviser?
It is important to understand what an adviser will do for you, how they will communicate with you, and how often.
Do they only provide advice digitally or face-to-face meetings or a combination of both?
How will they manage your pensions and investments for you?
7. What is the adviser investment philosophy?
Most advice firms offer a range of risk assessed investment portfolios. Ranging from cautious to aggressive investors.
There are various alternative ways that your pensions and investments can be managed, so it important for you to know how the adviser firm will work.
Some advisers have their own in-house investment proposition and others outsource this to a third paid. The type of proposition will have an impact on the overall cost of owning pensions and investments.
8. Does the adviser only recommend regulated Investments?
This is very important.
Only regulated investments are covered by the regulatory system. Any unregulated investment will not provide you with any protection either from the Financial Conduct Authority, the Financial Ombudsman Service, or the Financial Services Compensation Scheme.
Most adviser will not be prepared to give advice on Unregulated investments due to the risks.
9. What type of people does the adviser work with?
Some advisers are generalists and will work with anyone.
Others specialise in a specific niche and become experts at helping people that fit this niche.
We personally specialise in helping business owners retire financially worry-free. Most of our clients are either running an SME business or are now retired from running a business.
Other advisers specialise in the medical profession for example.
It is good to find an adviser that understand the issues that you wish to deal with and in many situations, they will understand the problems better than you, as they are niche adviser.
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10. How does the adviser invest their own money?
I have left one of the most important questions until the end. If the financial adviser investments their own money in a completely differently way to the advice that they give to you, it is important to understand why. If they do not have a good reason, you should probably not use them as your adviser.
Schedule a Call with us today – if you are looking for a financial adviser.
As with any investment, there is no guarantee that the target return will be achieved, and investors may get back less than the amount they invested. Past performance and forecasts are not reliable indicators of future performance. Tax treatment depends on individual circumstances and is subject to change.