Know what you want
The first step to finding good financial advice is to decide what advice you actually need. Think about what you want from the advice process before you look for an adviser. What is it you expect your adviser to do? How much can you afford to pay? What do you want the end result to be? If you ask yourself these questions first, you can quickly tell whether the adviser is coming up to scratch. If they fall short – find someone else.
What is financial advice?
Financial advisers describe their services in dozens of different ways. However, the key thing to find out is whether your adviser is providing regulated financial advice or simply providing information or guidance. Unfortunately, it’s not always obvious which type of service they offer but there is a big difference in how much protection you have if things go wrong.
If an adviser offers regulated financial advice they must follow certain rules laid down by the financial regulator – the Financial Conduct Authority (FCA). For example, they must make sure they find out enough information about you to recommend a product that is suitable for your needs. They must also tell you whether they offer an independent or restricted service (see below). If they sell investments, pensions or annuities, they can’t receive commission from the companies whose products they sell, but must charge a fee for their advice. Advisers who sell mortgages or insurance products like life insurance or income protection can still be paid by commission.
If an adviser sells a particular product or service and gives you regulated financial advice, you are protected by consumer law and can make a complaint if the product or service proves unsuitable for your needs. If the complaint is rejected by the adviser, you can take your case to the Financial Ombudsman Service.
Non-advice or Execution-only
But be careful. What can look like a regulated advice service, may just be guidance, information or help. If you buy a financial product through this route (known as ‘execution-only’) you won’t get the same level of protection as if you bought the product with ‘advice’. You are treated as if you chose the product or service yourself and therefore you can’t complain if it turns out to be unsuitable for you.
What types of financial advisers are there?
Financial advisers and companies are not allowed to sell or recommend regulated products in the UK unless they are authorised by the Financial Conduct Authority (FCA). You can find out if your adviser is authorised by going to the official register.
Regulated products include investments, pensions, mortgages, general insurance (such as home, car and travel insurance) and protection insurance (such as life and income protection insurance). Before you buy any of these products from an adviser (or direct from a company), check their registration. Never buy financial products from an unregulated adviser or firm. Reputable advisers who do business in the UK are used to proving who they are and that they are properly regulated.
Regulated financial advisers never cold call and try and sell you investments (or any other type of product) over the phone. If you get an unsolicited call from someone trying to sell you financial products it’s likely to be a scam, so put down the phone.
Financial advisers recommending investments, pensions and annuities now have to offer either ‘independent’ or ‘restricted’ advice and explain what this means for you.
Advisers that provide ‘independent’ advice are able to recommend all products from any provider or firm. They can therefore give you the widest choice.
Advisers that provide ‘restricted’ advice can only recommend certain products, or certain product providers – or both. This means they might only offer products from one company or just one type of product. As the name suggests, your choice will be restricted. Restricted firms are not allowed to use ‘independent’ to describe the advice they offer.
Many financial advisers specialise.
If you know what type of advice you want, a specialist can be a good idea as you may get a more focused and cost-effective service. For example, if you are looking for a mortgage then a mortgage broker is clearly the way to go. There are also advisers that specialise in protection insurance, equity release, long-term care planning and annuities.
How much will it cost?
The cost of financial advice varies enormously. However, there are good independent advisers who can offer a range of services for different costs.
The more complicated the advice, the more it will cost, but there are ways to keep charges down. Discuss fees early on with your adviser and if you have a budget, tell them. See our guide on paying for advice for more help.
Tips for finding a good financial adviser
- Be clear what advice you need and what you expect from the process. This way meetings are focused and no time is wasted.
- Ask your adviser to send you a 'fact find' to complete and return so that when you meet you can get straight to the advice.
- Talk to at least three financial advisers before committing to a meeting. It's much easier to say 'no thanks' by phone than face to face.
- Ask each firm if they offer actual advice or just guidance or information.
- If you think the fees are too high, try negotiating.
- Ask the adviser about their qualifications, how long they have been in business and whether they specialise in any particular areas. Look for firms that offer a good personal service but have back up should your adviser retire or leave the business. Above all check they are regulated.
Where to look for an adviser
Unbiased.co.uk: Provides a list of over 15,000 professional advisers searchable by location/post code, payment option and qualifications.
Institute of Financial Planning: Fee-based advisers qualified as Certified Financial Planners. Advisers put their CVs and qualifications on the website.
Personal Finance Society: Look for advisers who have Chartered Financial Planner status.
Society of Later Life Advisers (SOLLA): Advisers that specialise in dealing with older people and have the Later Life Accreditation awarded by the Financial Services Skills Council.