What can a financial adviser do for me?
Financial advisers provide guidance and recommendations on complex financial products. These include:
- Life and health insurance
- Tax and inheritance planning
- Mortgages and equity release
- Long-term care planning
If you're looking for something pretty straightforward, such as a savings account or cash Isa, the Which? Money Compare tables let you search hundreds of savings accounts and cash Isa deals from providers large and small so that you can find a good home for your nest egg.
But for more complex products, such as pensions and investments, getting expert advice can be crucial, so that you don't end up with something unsuitable. That's where a financial adviser comes in.
A financial adviser can scour the market to find investments and products that are tailored to your circumstances, and help you personally plan for the things you want to do with your money in the future.
Financial advisers are regulated by the Financial Conduct Authority (FCA) and have a strict code of conduct and rules to stick to.
Once you've decided you need the help of a financial adviser, the next step is selecting one.
How do I find a good financial adviser?
The Which? Money Helpline is available to all Which? members, and our team of qualified experts can help with how to choose a financial adviser, or any other financial matter.
The following resources can help you find the best adviser for you. It's best to draw up a shortlist of at least three financial advisers and ring them all before deciding on one.
- The Financial Conduct Authority register – the FCA's register lets you check whether your adviser is properly authorised.
- Society for Later Life Advisers – a searchable directory of advisers that specialise in later life advice
- Personal Finance Society – a searchable directory of PFS members, who could hold certifications including Chartered Financial Planner.
- The Chartered Institute for Securities & Investment (CISI) – a trade body for financial advisers. Use its Wayfinder tool to search for financial planning firms by post code that hold CISI accreditation.
Other comparison services included Unbiased.co.uk, Vouchefor.com and Moneyadviceservice.org.uk's Retirement Adviser Directory.
Types of financial advice
There are all sorts of financial advisers out there, and they are governed by different rules. Mortgage advisers, for example, can still be paid by commission, as can those that offer advice on general insurance and life insurance.
From January 2013, new rules under the Retail Distribution Review have applied to financial advisers offering advice on all 'retail investment products', from stakeholder pensions to unit trusts.
All financial advisers will have to have a minimum qualification equivalent to an undergraduate degree, regardless of the type of advice they provide.
Independent financial advice
If an adviser says they are independent, their advice must be:
- based on a comprehensive analysis of the market
- unbiased, with no influence from product providers
Platforms and model portfolios
Some advisers use platforms, which are online services that feature a range of investments in one place. As long as advisers are using them to benefit their clients, platforms are an acceptable part of independent advice. However, advisers should use more than one platform.
Some advisers use model portfolios. These are pre-constructed collections of investments, a bit like chocolate selection boxes. Each model portfolio meets a specific investment risk profile, so one could be high risk, one low risk and one intermediate.
Before recommending a model portfolio, advisers must ensure each investment suits their client – like making sure you like every individual chocolate in the box.
Independent advisers can use model portfolios, but only once they have considered options outside them. They should not use just one model portfolio.
Restricted advisers will either focus on just one subject area, like pensions, but look at the whole of the market, or could recommend investments from all providers, but just for one type of products, such as only recommending unit trusts.
Other types of restricted advisers may give advice on more than one area, but will only have access to a limited number of providers. This means you won't be getting recommendations from the whole of the market. If you visit a restricted adviser, it is essential that the adviser explains exactly what service he or she is providing to you.
Simplified advice services are typically automated, and on straightforward products, such as Isas.
The same rules apply though, so advisers offering a simplified service must still meet the same standards for suitable advice, charges and professionalism as those providing independent and restricted advice.
Financial adviser qualifications explained
All advisers now have to meet QCF level 4 – the equivalent of the first year of a degree.
The Financial Services Skills Partnership has also created new Appropriate Exam Standards (AES), which awarding bodies use to develop new qualifications.
Under QCF level 4, the subject areas IFAs must be qualified in are:
- regulation and ethics
- investment principles and risk
- personal taxation
- pensions and retirement planning
- financial protection (Level 3)
- financial planning practice
Further financial adviser qualifications
Certified financial planner
Probably the most rigorous of the credentials we looked at, with only 22% of advisers passing the exam and only 8% passing the required case study.
Achieving the qualification requires an extremely close look at a very technical case study.
Chartered financial planner
To achieve chartered status, an adviser must pass at least four specialist exam, be a member of the Personal Finance Society (PFS), and provide evidence of at least five years of experience.
Being a member of the PFS means they must adhere to a code of professional ethics and do a certain amount of continued professional development each year. Of the six exams available, there was a pass rate of just 60% in 2016.
The chartered seal is a well-respected quality mark in financial advice and other professions.
Society of Later Life Advisers (SOLLA)
Meant for advisers who specialise in helping clients close to retirement, SOLLA doesn't require an exam.
Instead, advisers must work to maintain a high level of later-life financial planning knowledge and demonstrate the ability to communicate clearly in a one-to-one interview.
If you want an adviser who aspires to a standard recognised internationally, the International Organisation for Standardization (ISO) offers a further qualification.
The ISO22222 certificate involves an 'at work' assessment of the adviser, designed to measure their ability to perform as a financial planner.
If an adviser holds this qualification, you can be confident that they are able to carry out their role to an objectively measured standard.
Advisers re-certify annually, and undergo a three-year cycle of reviews regarding different aspects of their business.
The ISO qualification also requires advisers to sign up to an ethical code of conduct.
What should I look for when choosing a financial adviser?
Our step-by-step guide can help you understand what to look out for when you choose a financial adviser.
1. Figure out what you need
If you need retirement advice, it might be best to go for an adviser who specialises in pensions.
If you need a complete financial plan, go for an adviser who offers the whole package rather than just focusing on, say, investment advice.
2. Check their qualifications
Although the Retail Distribution Review (RDR) legislation requires that all advisers are qualified to a certain level, it's worth checking that they actually are. Look out for extra qualifications too, as that will show they’ve gone the extra mile.
3. Negotiate fees
Don't take the fee the adviser quotes as gospel. If you think you should be paying less, discuss it with them. Find out more in our guide to how to pay for financial advice.
4. Get it in writing
Ask for a hard copy of the adviser's recommendations in case anything goes wrong. If you don't understand something, ask the adviser to explain it.
5. Make sure it's a personalised service
Be sure you're not receiving generic advice that could apply to anyone – ask questions about the suitability of the recommended products with your situation.
6. Make sure you can forge a relationship with your adviser
You're trusting this person with one of the most important things in your life – your financial wellbeing – so they need to be right for you.
7. Do the fact find in advance
This will prepare the adviser for what you're like and save time at your first meeting. Ask your adviser to send you the form before your first meeting.
What is the process of getting financial advice?
You'll start with an introductory meeting, where the adviser spends about an hour finding out what you’re looking for and explaining their services.
They should also give you something called a 'key facts document', outlining their fees and what you can expect from your relationship.
If you are happy to use the services of a financial adviser, they will carry out a 'fact find'. This provides the adviser with information about your finances, goals and attitude to risk.
They'll use this to recommend suitable products to you. This will be followed by a full financial plan, including product recommendations and any tax benefits available to you.
Once you have agreed with a financial adviser's recommendations, and the cost of using his or her services, the plan that they have put forward will be implemented. You may get the option of an ongoing review.
It's essential that you find the right adviser to meet your needs.
Can I still buy complex financial products without a financial adviser?
Investing your money is a complex business, and you're putting your cash at risk, so many investors prefer the peace of mind that comes from receiving advice. But if you feel confident enough, there are many services and products that can work for DIY investors.
These are online shops that allow you to buy investment products directly. By foregoing a financial adviser you can cut the costs of investing. For more on the leading brokers in the market, see our fund supermarket reviews.
Self-invested personal pensions (Sipps)
Using a fund supermarket or pension company, you can build up savings for your retirement in a product that gives you access to a wide range of investments and the tax relief that is provided to all pension savers. Learn more in our guide to Sipps.
Building a portfolio
Which? has developed a unique set of investment portfolios that can help you pick the right mix of investments based on how much money you're comfortable losing. Use our portfolio builder tool to find the portfolio that hits your needs.
You can get cheaper premiums by buying life insurance through a broker. Learn more in our comprehensive guide to buying life cover.
What if things go wrong?
Financial advisers are regulated by the FCA, and this gives you access to redress should anything go wrong with your advice through the Financial Ombudsman Service (FOS).
This means that you can complain to the FOS if you're unhappy with any advice you've been given or if you think you've been mis-sold, and the FOS will take the appropriate action – for example, ordering your adviser to pay compensation.
The FCA has the power to fine financial advisers who have broken regulations.
Remember, when it comes to investments, you're not covered if your investments lose you money - that comes as part and parcel of putting your money on the stock market.