|Bookmark this page! |
UK Independent Financial Advisors
Independent Financial Advisers (IFAs) offer investment advice and products from all the companies in the marketplace, not just a single firm. They offer unbiased advice, but can be more expensive than other options. Still, they offer the widest array of products, so they're unlimited in choosing what best meets an investor's needs. They can also keep track of investments and adjust for market changes, saving the investor much time and hassle.
An IFA's expertise isn't free. Traditionally, advisers have been paid by commission with the cost deducted from the investor's holdings. Advisers can also charge a fee, somewhere in the realm of £80 to £200 an hour, taking into account considerations like experience and specialties. There is also a combined method whereby fees are charged by the hour, but are paid by commission. By law, IFAs have to offer investors the choice to pay by commission, fees, or both.
While commission should not influence an IFA's advice, there could be a conflict of interest with respect to products that don't pay commission, like National Savings & Investment products. Charging by fee removes this doubt. Investors pay the hourly rate and any commissions are returned. Experts say investors are usually better off paying by fee, most especially when dealing with very large sums of money.
All IFAs have a Certificate in Financial Planning or the equivalent. This is the basic qualification that all advisers must complete. Many choose to go further, specialising in areas like investment, long-term care, or pensions. Advisers who achieve at least three of these may attain the Advanced Financial Planning Certificate. They can also study further to become a Chartered Financial Planner, which puts them roughly at the same level as an accountant.
Advisers can be generalists or specialists. Specialists focus on specific areas whereas generalists do everything and may only handle certain types of cases a few times in a year. Choosing one or the other depends on an investor's specific advising needs.
Finding an IFA
As with most things, the best way to find an IFA is to solicit recommendations from friends and family. Investors should meet with potential IFAs and clarify costs, their training, their qualifications, and so on. IFAs will do a factfind – have you complete forms and ask about your financial goals, aversion to risk, and current investments. It's important to be comfortable with an IFA.
While IFAs are not cheap, the services they provide can be well-worth the money you spend.