How to choose a financial adviser
Choosing a financial adviser can seem like a daunting task regardless of your experience with investments and financial matters. It’s typical to be bombarded with calls from prospective advisers when a business sale is announced in the press, or a promotion is made public on LinkedIn. A good relationship with a financial adviser should be built on trust and will usually span over many years, decades or even through multiple generations. How then, can you ensure that you choose a financial adviser that is right for you? Whilst the below list is not exhaustive, it sets out some of the main considerations and questions to ask:
Word of mouth is key
There is no substitute for a referral from a trusted friend, colleague, or another professional adviser such as a lawyer or accountant. Whilst there are plenty of IFA review sites available online, not all advice firms will be signed up to use them. Someone who knows your own personality and working style may be best placed to recommend an adviser that’s a good fit.
Ask lots of questions! A good adviser will welcome any and all questions (and they will be asking you a lot themselves). Their job is to make sure you understand the advice that’s being given, and you should never feel pressured into taking action that you are not comfortable with.
Service Level
What service will you be offered? How often will they meet you and will it be in person? Will they be happy to have ad hoc phone calls? Will you have one central point of contact? All advice firms should have a documented client service proposition which will answer several of the questions in this blog post. Ask the adviser to explain anything that you aren’t completely clear on.
Investments
Make sure you understand the adviser’s investment proposition. Do they manage their investments in house or are they outsourced to a third party? Do they prefer an active or passive approach, or a combination of the two? If ethical/sustainable investing is important to you, will they accommodate your needs? The adviser should explain the risk associated with any proposed investments and how that ties in with your financial planning strategy. Past performance figures can help with understanding how you might expect the investments to perform in certain market conditions, but they should not be relied upon as a forward looking forecast.
Fees
Advisers should be upfront about their fees as well as any fees relating to investments or platforms. They should be able to clearly explain what you will get for your money and demonstrate the value they are adding. We will shortly be publishing another blog post explaining the different layers of fees involved in obtaining and implementing financial advice.
Wider Planning
Many of our clients use several professional advisers, including accountants, solicitors and lending specialists. As there is often overlap between these areas, you should understand whether your adviser is happy to liaise directly with the other parties or sit in a joint meeting to ensure your affairs are joined up neatly. Often, your existing accountant or lawyer will be able to give you a referral to a quality financial adviser who they have worked with before.
Experience & Qualifications
The regulatory bodies have gradually been increasing the qualification requirements for advisers over the years, however there is still a range of levels. Whilst exams are no substitute for experience, it can be reassuring if the adviser or advice firm has attained chartered status, particularly when dealing with more complex planning situations.
Typical Clients
Whilst most advisers will cover a range of planning scenarios, they may have more experience in a certain area or size of client/investment. Ask them how often they deal with situations similar to your own and whether they can give any examples without compromising personal information.
Longevity & Succession Planning
Your financial planning needs will usually not retire when you do! With the increased popularity of flexible pension arrangements, and Inheritance Tax receipts at record levels, your requirement for a financial adviser can last well into your later years. It’s therefore important to ask questions around how long a potential adviser might expect to be working and what kind of succession planning they have in place.
As mentioned earlier, a great relationship with a financial adviser is built on trust, which usually takes time to develop. Most relationships with financial advisers are ongoing in nature rather than a one-off transaction. It’s likely that you will therefore spend a lot of time with them, during which there will be open discussion about personal topics relevant to the advice process. It’s therefore most important that you get on well with them. Their answers to the questions in this post, along with a reliable referral can give you confidence that you have chosen an adviser that’s right for you.
You can search the FCA’s Financial Services Register for firms and individuals, which all authorised advisers will be listed on.
If you would like further information on anything covered in this article, please get in touch via the contact page.