How to find a Financial Adviser

By: Mark Hutchinson, The Personal Finance Society
15-Dec-2009

The first step is to always check that your adviser is FSA-authorised (you can do this quickly and esily using the FSA register) and ask them to confirm their qualifications.

The different types of financial adviser currently are:

*   An independent financial adviser (IFA) who can advise on anything within the market
*   A "tied" or "multi-tied" adviser who advises on a limited range of products
*   A bank employee who generally sells only the bank's own products or a limited range from the wider market
 
There are primarily 3 different charging methods:

*   Commission, where the adviser is paid by a product provider as the result of a sale (although commission generally increases the product charges)
*   Fee only, where the customer pays an agreed amount for the adviser's time or service

*   Commission offset - where a fee is agreed, but any commission from a sale will go towards paying the adviser's fee.

All advisory firms have to declare their terms of business up front. There is usually no charge for an initial consultation, but the adviser should make the service being provided and charging method clear going forward.

In terms of the financial planning process, no-one can advise you properly without a fundamental understanding of your current position and aspirations. So, the adviser should conduct a comprehensive fact-finding exercise before making any recommendations. There might be obvious risks to consider, such as having children but no life assurance in place. 

You need to consider your future priorities: when do you want to retire? Do you want to put your children through private education? The adviser should take you through a series of scenarios that might impact your finances and also gain an understanding of your attitude to financial risk. It is important that you are honest about your goals and priorities and it is probably wise to discuss these with your spouse or partner ahead of the meeting.

It is also necessary to agree a review process - preferably occurring at least annually - to take  account of any changes in your personal or financial circumstances and review the plans in place.

 But there is also a role for you in being a "good customer". By that, I mean giving your adviser as much information as possible so he or she can develop an accurate picture of your circumstances. Are you clear about your future priorities?

Any recommendations should be given to you in the form of a report, which should also include reference to any suggestions you might have dismissed. This ensures the process is transparent prior to making any decisions or taking any action.

With the FSA's Retail Distribution Review, and the promotion of ethical behaviour by professional bodies including the Personal Finance Society and the Chartered Insurance Institute, financial advice should be seen as a more trusted profession.

And that is essential if people are going to be confident in seeking the advice they need to safeguard their financial future. Act today and get on track to a better future.