A Which? investigation has shown that independent financial advisers are better at giving advice than those who work for banks and building societies.
More than two thirds of the tied financial advisers failed to pass all the benchmarks for giving good advice
Just a third of tied advisers passed all the benchmarks – one in two independent financial advisers (IFAs) passed our test.
Tied advisers can only recommend products from a small number of providers, unlike IFAs who can recommend products from the whole market.
Thirteen of the 19 tied advisers made misleading statements about costs.
While seven of the tied advisers made misleading statements about the providers they could recommend, giving the idea that the choice was much larger than it was.
Which? visited 40 advisers – 21 independent financial advisers (IFAs) and tied advisers from Abbey, Barclays, Bradford & Bingley, Co-operative Bank, Halifax, HSBC, Lloyds/TSB, Nationwide, NatWest and the Royal Bank of Scotland.
Based on the scenario presented to them, half of the 40 advisers tested overall, didn’t recommend paying off debts before investing.
Fact finding about the individual, their circumstances and their financial needs is a vital part of the advice process, but fourteen advisers, out of a total of 40 overall, failed to carry this out to the expected standard.
More than a quarter failed to establish attitude to risk correctly.
Shocking number failed
Which? is the only consumer organisation to test the quality of financial advice in this way and has been reporting on it for over 20 years. The pass rate has improved slightly since 2006, when 34 per cent of IFAs and just 16 per cent of tied advisers passed overall.
Neil Fowler, Editor of Which? magazine, said:‘For more complex financial products such as investments, mortgages and pensions you really should see an adviser unless you’re confident that you understand the market, but with a shocking number of advisers failing our test it’s clear that you need to choose your adviser very carefully.’
On the whole you’ll get better advice from an independent financial adviser, as you’ll have more choice – but be clear about the advice you need, contact at least three advisers and check their qualifications and charges upfront.