The Consumer Financial Education Body (CFEB) lay out the benefits of using a financial advisor in order to help manage your money…

CFEB is responsible for helping people understand money matters and manage their finances better. Its website, Moneymadeclear™ (www.moneymadeclear.org.uk), has a wide range of impartial information and tools which can help you work out what’s right for you, and answer questions you might have. For example, should you consider speaking to a financial adviser in order to help manage your finances?

There are many benefits to using a financial advisor in order to help manage your finances. Joseph Walsh, the manager of CFEB’s Financial Capability programme for the Ministry of Defence, explains below the aspects you should consider if you are looking for professional advice – from the types of investment advice available, through to how to find a financial adviser and then preparing to meet them.

Planning Ahead With Your Money

You can get professional financial advice to help you plan ahead and make the most of your money from a variety of sources, including banks and building societies, insurance companies, financial advisers and planners, mortgage brokers and stockbrokers. Professional financial advice is when a financial adviser assesses your personal circumstances and recommends specific financial products or services which are suitable for you. The adviser will then give you a recommendation in writing.

If you do decide to see a financial adviser, they can give you advice about managing your money as a whole, or help you with specific needs or goals. You may decide you want professional financial advice if, for example, you:

- want to start saving for a pension or to get a mortgage;
- are considering protecting your family in the event of accident, illness or death;
- inherit a lump sum of money; or
- are coming up to retirement and want help converting your pension fund into retirement income.

Getting Professional Financial Advice

You don’t have to see a financial adviser when you’re buying a financial product, but if you don’t, you may choose something that isn’t suitable for you and you’ll have fewer grounds to make a complaint.

A financial adviser will assess your personal circumstances and recommend financial products that are suitable for you. You will generally have to pay for this service and it’s important to understand the costs to you (see the section below about paying for professional financial advice).

You can search for an adviser in your local area and one that specialises in what you want to buy. Firms giving advice on certain products (for example, most mortgages, insurance and investments) must be authorised and regulated by the Financial Services Authority (FSA), the UK’s financial services regulator, or be the agent of a regulated firm. They have to meet certain standards set by the FSA.

You can check if the firm is authorised by checking the FSA Register at: www.fsa.gov.uk/register

If things go wrong when dealing with a regulated adviser, provided certain conditions are met, you will usually have access to complaints and compensation schemes. It’s best to contact the firm or organisation straight away and ask them to put things right. They will usually have a procedure to follow to resolve matters with you. Read more about this on our website: www.moneymadeclear.org.uk/publications.

Types Of Investment Advice

There are three types of investment advice.
1. Independent advice – where advisers make recommendations on products after researching the whole market and offer you the opportunity to pay by fee for their advice.
2. Multi-tied advice – where advisers are able to recommend the products of a limited selection of providers.
3. Tied advice – where advisers can only advise on the products of one provider.
The scope of advice a firm offers may vary between different products, for example a firm may offer mortgages from the whole market but only offer investments from a limited number of providers. So think about the range of products you want and ask advisers what they offer.

Paying For Professional Financial Advice

There are three main ways of paying for investment advice.
1. Fees – by paying the adviser a fee, either at an hourly rate or a set fee which may be subject to VAT.
2. Commission – by paying indirectly through commission, which is deducted by the product provider from the product(s) you invest in. As well as the initial commission charged when the product is taken out, there may also be annual commissions, known as trail, fund based or renewal commission.
3. Fees and commission – by paying a combination of fees and commission.

Not all advisers offer all three payment options. Make sure the adviser offers the payment option that you want. Ask the adviser to explain what you’re paying for, how much it will cost and how you will pay for it. If you want to pay by commission, ask your adviser how this will be calculated. Make sure you understand and are comfortable with the payment arrangements before proceeding. If you’re getting investment advice, ask your adviser if the costs include a review of your investments from time to time or if you must pay for that service separately.

Preparing To Meet A Professional Financial Adviser

The adviser will ask you questions about your financial circumstances and your future goals, assess your personal situation and recommend financial products that are suitable for you. Before meeting an adviser it is a good idea to:

- get together the information you may need to give the adviser, such as details of any partners, children or other dependants, how much you earn, what income tax rate you pay and details of any financial products you already have;

- think about your financial goals and how much you think you can afford to set aside to reach them; and

- consider how you feel about risk – is it important that you don’t risk losing any money you put in, or are you willing and able to accept the risk of a possible loss if it gives you the chance of a bigger return?

What To Expect

The adviser will give you details of the service they offer and the range of products they can advise about. They’ll also give you details of how you can pay for this service. Use the information from different firms to help you shop around and compare the range of products and types of services that are being offered.

Once they’ve discussed your goals with you they’ll give you a written recommendation of which products are suitable for you. They’ll also give you information about the product which should answer questions about:

- its aim;
- your commitment;
- how your payments are invested;
- the main risks; and
- the tax position.

The adviser will also tell you about the fees and charges and how they will affect your investment. Read this information to make sure that the product is right for you, and always ask questions if you don’t understand anything.

Adviser Qualifications

Advisers may hold different qualifications. Ask the adviser what relevant qualifications they hold. You can check what qualifications stand for on www.unbiased.co.uk

Your questions answered:

1. How can I find out what the letters after my financial adviser’s name mean?
Independent Financial Advisers (IFAs) can pass examinations relating to a wide variety of topics. To help you understand which qualifications your adviser holds go to www.unbiased.co.uk.

2. Can I negotiate the cost of advice with a firm?
Yes, you can ask whether or not a firm is willing to negotiate its charges, fee or commission or both. To help you negotiate, shop around to compare charges between different firms using the information they will give you about their service.

3. How much personal information do I have to give a financial adviser?
To help an adviser give you good financial advice, you’ll need to give some detailed personal information and be prepared to answer their questions. But ask how they will use this information – for example whether they intend to use it for
marketing purposes – and make sure you are satisfied with the response. You may also want to ask the firm about its data protection policy.

For more detailed information and tips on how to prepare yourself when seeing a professional adviser, get a free copy of our Getting financial advice printed guide. You can download or order it online from: www.moneymadeclear.org.uk/pdfs/financial_advice.pdf or call Moneymadeclear’s telephone helpline on 0300 500 5000 to request a hard copy.