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How to get the most out of your financial adviser

Tahmina Mannan
Written By:
Tahmina Mannan
Posted:
Updated:
24/11/2013

As this year’s Financial Planning Week kicks off, we take a look at how you can get the most value out your financial adviser.

Today marks the beginning of Financial Planning Week (FPW), a national consumer awareness campaign aimed at highlighting the benefits of financial planning.

This year’s FPW is arguably the most important ever as it is the first to take place within the new regulatory landscape for financial intermediaries.

It has been nearly a year since the introduction of the Retail Distribution Review (RDR), which made it compulsory for consumers to be explicitly charged for financial advice.

This change to the fee structure left many people questioning the value of advice and whether the benefits outweigh the costs.

However there is plenty of value to be had in seeking advice, as long as you ask the right questions.

What are the different types of advice?

Since 1 January 2013, financial advisers have been split into two categories – ‘independent’ or ‘restricted’.

Whether your adviser offers independent or restricted advice can have a big impact on the type and range of advice they can offer.

Independent advice

Advisers that provide ‘independent’ advice are able to consider all types of retail investment products which could meet your needs and objectives
Independent advisers can also consider products from all firms across the market.

Restricted advice

‘Restricted’ advisers can only recommend certain products, product providers, or both. This means they might only offer products from one company, or just one type of product.
Your adviser should make it clear to you if you are receiving restricted advice and what that means in practice.

How much should I be paying my adviser?

As mentioned above, the new regulatory landscape means you will have to pay your adviser a fee for the advice they give you, but what you pay and when you pay this varies between advisers and services.

Jacqueline Lockie from the Association of Investment Companies (AIC) says consumers should consider: how much they pay their adviser and whether it is it per hour, a flat fee per job, or a percentage of their assets under management.

If you are paying your adviser as a percentage of your assets, does that include all assets e.g. cash and other assets they don’t actively manage?

How do you actually pay it? Will you be sent a detailed statement?

How can I negotiate the fees?

Fees may vary depending on the adviser’s location and qualifications, so it is important you shop around. You can negotiate with the adviser on the amount you pay depending on your advice needs – but remember that you need to do research first before you suggest the fee you are willing to pay. Call a few advisers who offer the same service first to try and gauge what the advice would cost.

Make sure you are comfortable with whatever you end up paying as it needs to be manageable in the long term.

And make sure that before you meet with an adviser, you ask them to confirm whether they offer independent or restricted advice and what their costs will be. Don’t be afraid to negotiate – because if you don’t ask, you don’t get!

 

What credentials should my adviser have?

You should ask you adviser what level of qualification they have before you sign up for advice.

Under the RDR rules, all financial advisers must have a qualification at Level 4 or above of the national Qualifications and Credit Framework.

In addition, they must hold a Statement of Professional Standing, which confirms that they are suitably qualified, that they subscribe to a code of ethics and have maintained competence through continuing professional development.

If you have any doubts about your adviser’s qualifications, check with the relevant body named on their paperwork.

Make sure your financial adviser is registered with the Financial Conduct Authority (FCA). Regardless of the type of advice an adviser gives, independent or restricted, anyone recommending investments must be registered with the FCA, and must be approved to offer advice – not just to offer information.

Please note that if you use a financial adviser who is not approved by the FCA, you won’t have any right to complain should things go wrong with the advice process.

What should I be asking my adviser about on a regular basis?

• Ask what savings have been made for you from your adviser’s financial planning – e.g. income tax or Capital Gains Tax.

• Compare the performance of your funds over the last 12 months with sector averages, and ask your adviser for some perspective on this.

• Contact with your adviser: How often, and in what form, should you make contact with your adviser? Can you just phone up out of the blue – what’s included in your fee?

• How does the adviser show your progress towards your objectives? Do they compare last year’s plan with this year’s plan? How do they explain it all to you?

• In meetings who does most of the talking? You or the adviser? A long term relationship is a balance but it should be the client saying how they feel and what they aspire to achieve and the adviser explaining how they are going to get you there.

• What types of products do you currently recommend and why?

• Private investors considering an adviser, or possibly changing their current adviser, can find more tips at the website of the IFP, using the booklet, ‘Questions to ask when choosing a financial planner’.