Financial Advisors

Sound Advice

There is plenty of financial advice around but guidance from a truly trustworthy independent financial advisor can be harder to come by. Not everyone who gives out financial advice is independent and even some of those that purport to be independent have a hidden sales agenda that runs contrary to their stated aims of providing objective advice.

Muddling along by yourself can seem like the simplest option but with pressures on your time and a lack of expert input, things can often go wrong. If you make an incorrect decision which has repercussions, there’ll be no one to blame but yourself. However, if you’ve consulted a financial advisor, often you’ll be eligible to claim some form of compensation.

Finding Financial Advisors

So how do you go about finding a trustworthy financial advisor? Most banks and building societies will give out financial advice but you should be aware that they will only be able to promote a particular set of products and services so you won’t necessarily be getting the full picture.

The beauty of independent financial advisors (IFAs) is that they can sell products from any supplier. However, many IFAs do make their money through commission, so they can be tempted towards pushing products which will earn them the greatest commission. In the worst-case scenario, they will sell you a product which pays high commission, like an investment bond, rather than one which pays low commission, like an ISA.

The only way to feel truly confident you are getting truly fair advice is to choose a fee-based IFA. Although it is not a cheap option at the outset, it can be more cost-effective than commission and you can also be more confident of receiving balanced financial advice. A number of good IFAs now offer a fee-based option and many countries have brought in regulations ( or are about to ) that insist that IFAs must offer both fee and commission options in order to legitimately advertise themselves as independent.

So where can you find an IFA who will give you the right advice and great service?

First Steps

As with many professional services, the best way to find a good IFA is a recommendation from someone that you trust. In most countries, there are usually a number of organisations that can provide the details of local IFAs. They are not necessarily termed ‘Independent Financial Advisors’ - depending on which country you live, these financial advisory professionals may be known by different titles. In the United States, for instance, they are commonly known as ‘financial planners’.

You can also find a list of these professionals through IFA membership organisations. Although membership of such an organisation doesn’t guarantee that the advice will be superior, it shows that the IFA is adequately trained and serious about operating in a professional manner.

Choosing A Financial Advisor

Shortlist three or four IFAs and visit them in person or speak by phone before choosing the one that’s right for you. Most fee-based IFAs are happy to offer a free half-hour initial consultation.

To make the most of this opportunity, make sure you take as much relevant financial information as you can and think through what your financial aims and objectives are so you can communicate this during the meeting.

Being prepared in this way will help IFAs outline what they can offer you and the approach they would take. Don’t be afraid to ask questions or ask for clarification where necessary – this will show you how well you can work with the IFA and whether you feel comfortable – key factors in whether they are right for you.

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Questions to ask

Prepare a list of questions to ask the advisor in these first sessions. You’ll want to ask about issues such as professional qualifications and what any recommendations will be based on. If there is a particular area you want help with, such as investment or inheritance tax planning, ask about the IFA’s specific expertise in this field.

Ask about how the arrangement will work on a practical level – what ongoing services will you receive? Will things be reviews annually? What is their hourly rate and can they give you an estimation of expected fees? It can also be worth asking whether the IFA is happy for you to speak to any of their existing customers to get their feedback – clearly they won’t pass on the details on someone they know is unhappy with their services but you will at least get an outside perspective.

What To Expect Next

Once you have selected the advisor that’s right for you, you’ll need to provide detailed information on your financial position. Advisors are legally bound to get as much information as they can before they can outline your requirements – they will need information on your income, outgoings, insurance coverage, debts, savings and more.

They will also want to know more about your plans and goals in the short and longer term so that they can evaluate your financial circumstances and make recommendations on suitable actions and potentially products. The advisor may also ask you about your attitude to risk as this will also inform their recommendations.

The IFA is likely to talk to you about allocating your assets across different classes such as cash, property, forestry and equities etc. before they make any product recommendations. Eventually, the IFA will create a report for you detailing their recommendations and the basis for them. You can then make a decision on whether you wish to proceed. If you do go ahead with them, you’ll need to keep records of all the paperwork. If in doubt, it’s wise to seek a second opinion.

When discussing investments nowadays, advisers are likely to talk about the importance of asset allocation - spreading your investments across the different asset classes: cash, property, equities and fixed interest securities - before recommending any actual products. The adviser should then write you a report setting out his recommendations and his reasons for making them. After that it is up to you to decide whether to go ahead. If you agree, keep copies of all the paperwork. If you are not happy, seek a second opinion.

Financial Advisors

Independent Agent Application Form
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Independent Agent Agreement
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