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When you bear
in mind the pensions and endowments mis-selling and
the recent turbulent markets causing havoc in most
investment portfolios – it is no wonder that the term
"independent financial advisors" has acquired
negative connotations.
While some financial
advisors may deserve a bad name, it is important not
to tar all of them with the same brush for majority
of them are reputable providers of financial advice.
But, just like
we shop around for most things these days to get a
better deal, it is important to decide the type of
advisor you want and are comfortable with. For example
–many people are looking for a generalist IFA who
can advise across a range of financial areas or there
are some who are specialists dealing with specific
financial issues such as pensions and inheritance
tax.
There are also
financial advisors who are "tied" meaning
they will only sell the products of the institution
they work for. Independent financial advisors can
sell anything from anyone and in some cases just simply
offer advise on how to plan your finances rather than
sell any product.
But where do you
start looking exactly in this minefield of advisors
floating around today?
A recommendation
from a friend or family can often be a good start
but you need to evaluate your own needs first carefully.
Another route is quoted in the press regularly indicating
their reputability but again your priorities must
come first. You can also search one at the Society
of Financial Advisors at www.sofa.org or www.find.co.uk
offering a selection of IFAs.
Once you are
confronted with an IFA, perhaps the top ten questions
below will help anyone test just how good they are
and put them on the spot:
Q1. How big
and how old is your firm?
A big outfit with a
long history does not mean better advice but it still
gives an idea about the firm you are dealing with
it.
Q2. How long
have you been an IFA and how many clients have you
got?
Again a new IFA does
not mean you will not get good advice but a long track
record with a healthy list of clients can be encouraging.
Q3. Are you
registered with the Financial Services Authority?
All IFAs have to be
registered with the FSA, else they cannot operate
Q4. What qualifications
do you have?
Tricky one! All financial
advisors should have Financial Planning Certificates
(FPCs) 1,2 and 3 gained through Chartered Institute
of Insurance which is the basic but some would have
gone much beyond with advanced certificates and so
this would be a bonus
Q5. Do you
have a Professional Indemnity Insurance (PII)?
There is always the
potential of advisers mis-selling products so it is
better to find out if they are insured or not. This
does not mean that if they do not have PII, that they
would mis-lead since many may not be able to afford
premiums.
Q6. Are you
fee based or commission based or both?
Any charges should be
explained at the outset and negotiated before any
transactions are made. If you are paying fees –ask
the hourly rate and this can vary on average between
£90 - £175 an hour.
Q7. What type
of ongoing service do you provide?
A regular advice and
consultation is the key to keep your portfolio up
to date. Two meeting a year should be the norm and
seek out charges for this as well.
Q8. Who will
look after my portfolio if you leave the firm?
Where do you stand in
this? A guaranteed replacement with similar skills
or left in the lurch?
Q9. Have you
had any complaints made against you?
Obviously inviting a
"No" answer and dodge the question quickly
but still a sensible one to ask since if it is a "Yes",
Q5 is even more important.
Q10. How many
referral clients do you get normally and where do
you advertise your services?
An indication of the
level of satisfaction, which led to a recommendation,
supported by the fact that the IFA is also in the
press.
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