What to expect from a Financial Adviser

By: Mark Hutchinson, The Personal Finance Society

15 Dec 2009 Tell a Friend

At a time when you are planning your finances for now and the future, who should you turn to for the best advice?  For people with both the time and inclination, the internet is a great resource, particularly for information. However, for the majority, seeking professional advice before acting is essential.

The value of consulting an expert can't be underestimated, considering the fact that since the State Pension was introduced in the early 1900s, a new piece of legislation has been introduced every single week!

Financial advisers study for many years to attain a level of knowledge and expertise. They have access to the latest information on what?s available in the market regarding financial products, funds and legislation.

When dealing with something as important as, for example, your pension, you need to be confident that the advice you get is the most current and appropriate and covers all the options available. This is because there are a variety of ways to fund for retirement, not just traditional pensions - and not all advice points to a product.  Equally, people might read a newspaper and be forgiven for thinking that the only way to invest is through an actively managed investment fund, while there are - in fact - other ways. Unless your research is thorough, a little information can be a dangerous thing!

Unfortunately the relatively recent history of personal finance advice has affected the level of public trust in the advice profession. Failures including the collapse of Equitable Life, pensions miss-selling and the closure of final salary pension schemes are just some of the issues that have blighted the sector. But while some people may have had bad experiences, it's not always because of their adviser. The vast majority of consumers find professional advice an invaluable component of their long term financial planning.

Nevertheless, the Financial Services Authority (FSA) has launched the Retail Distribution Review (RDR), a process aimed at restoring consumer trust in financial services.

Two key proposals of the RDR are first, removing the potential for "commission bias", so people will pay for the advice directly rather than the adviser taking a commission from the sale of a financial product.

Second, is raising the minimum level of qualification for advisers. Research by the Chartered Insurance Institute shows that consumers expect advisers to be professionally qualified to at least degree level, whereas the current entry level is just  "A" level.