Arranging and prioritising your personal finances can be
complicated and time-consuming. An Independent Financial Advisor (IFA) will
be able to make your life easier by helping you choose your investments and
watching them for you.
You could get financial advice from your bank, but it won’t be impartial
because each institution only offers its own products. Never use your bank
or building society to advise you on money – they are just there to sell
you products.
The next thing to consider is whether you need financial planning or financial
advice. Seek advice when you want a specific product, such as a pension, life
assurance or a mortgage, and you don’t know which one to choose. Always
be aware that you will be paying for this advice and you should always use
a fee-based adviser wherever possible.
Financial planning is a different ball game – and is much more focused
on helping you achieve your long term financial goals; a financial planner
is a bit like a life coach for your money; they will sit down with you each
year and help you keep track of your financial life-plan, and they’ll
also help you choose the savings and insurance policies to help you achieve
those objectives. Most planners will work on a fee basis, because they don’t
always expect to sell you a product, and so just charge for their time.
Fees versus Commission
Commission will always impair the sales process, and that applies to any industry.
Therefore the commission offered by the insurer will affect the quality of
advice from an advisor. If it didn’t make any difference and he was completely
impartial then why would insurers and investment companies offer different
levels of commission to advisors? An advisor’s objective is to satisfy
your requirements and earn a living; the problem is that he earns more the
more you invest or save and so it is in his interests for you to tick all the
options on a life assurance policy, or to select the waiver insurance with
your pension payments because these options will increase your premium and
this will increase his income. That’s why you should always use a fee-based
advisor – because at least his advice will not be impaired by how much
you pay him.
How to interview your financial advisor
In taking on a financial advisor you are employing someone to work for you.
Therefore you’ll need to interview them, and this will mean that you’ll
need to learn what you need to ask them. You can find out quite a bit about
their qualifications online, but really you’ll need to simply put trust
in your judgement, much like you would when employing a solicitor or a cleaner.
That’s why, as with those people, recommendations from friends of colleagues
will be by far the best source of information. You can also use organisations
such as the Institute of Financial Planning (financialplanning.org.uk) to source
fee-based financial planners.
Ian Williams is MD of Cavendish Online
www.cavendishonline.co.uk
How to choose a financial adviser