Have you got to the point where you would prefer to pay for professional help? Or do you have a friend or family member who isn’t interested in managing their finances themselves, or has more complicated needs than just saving for retirement in 20+ years?
We often have questions about how to find a financial adviser that can help, or what to look out for when trying to find financial advice. The following is a list of considerations and possible avenues, rather than a list of requirements. The ‘best’ option on paper may not be right for all manner of reasons – you may just not get along.
Why do people take financial advice?
If you’ve followed the flowchart, read our wiki, and watched and read some of our recommended resources, you might wonder why people bother paying for financial advice at all, given it’s possible to manage everything yourself and additional fees can have a big impact on your investments’ performance.
There are lots of possibilities, but here are a few:
- They aren’t confident to do things themselves
- They don’t have the time or inclination to do so
- They have more complex needs than “save for something a long time in the future” (e.g. pension withdrawal planning, inheritance tax planning)
- They need specific expertise
- They want ‘financial planning’ (see types of financial advice below)
The key point is that people who take financial advice tend to make better decisions than those that don’t (source 1, source 2, source 3). Paying for financial advice may not be right for you, and that’s fine, but be careful not to judge others for their choices.
What exactly is financial advice?
Financial advice has a specific definition in the UK, thanks to legislation and regulation. This is in contrast to financial ‘guidance’, which is unregulated.
Citizen’s Advice explains the difference as follows:
Some individuals and organisations – often advice charities – offer financial guidance. This is different to financial advice. Guidance provides you with information about the various options available to you, but should not recommend any particular option over another. Financial advice, however, informs you which specific product would best suit your needs.
For example, if you have a lump sum you want to save, someone giving guidance would tell you what your saving options are in broad terms. They may tell you about the pros and cons of regular savings accounts, ISAs and investments. They won’t tell you about specific products offered by named companies or what option might suit you best. A financial adviser would look at specific savings accounts, investments and ISAs offered by various companies and recommend a specific one that best suits your personal circumstances.
Guidance services are not regulated by the Financial Conduct Authority (FCA). This means if things go wrong with your financial choice, you may not be able to complain to the Financial Ombudsman Service or Financial Services Compensation Scheme.https://www.citizensadvice.org.uk/debt-and-money/getting-financial-advice/
They key concept is that advisers take on responsibility for their recommendations, and if these recommendations didn’t properly take account of the customer’s needs, or were incorrect or misleading, there would be a clear route for the customer to complain and receive compensation.
All regulated advisers have to follow the recommendations of the independent financial ombudsman in the case of a dispute.
How much money do you need to see an adviser?
In general, advice provided by human beings is a luxury service. It tends to be aimed at people with investable assets of at least £50,000, with a much-maligned (but not very often dealt with) “advice gap” for people with less.
There is a new generation of financial planners/advisers who are experimenting with different fee models that are less interested in how much you have invested, with the subscription model being an often-discussed option, but this still tends to be in the region of £100+ per month.
If paying for financial advice doesn’t make sense in your circumstances, it’s worth spending the time with our flowchart and recommended resources to learn more about managing your own finances. You can also get help from guidance services, which are generally accessible free of charge.
Types of adviser
The following is a (probably non-exhaustive) list of the different types of financial advice on offer in the UK.
A note on the fees in each section below – they refer specifically to the amounts charged for the service of providing financial advice. There are other costs of investing, such as platform/broker fees and investment fund fees which would be paid in addition.
This is a catch-all term for technology-led investment platforms that provide you with advice on what to invest in in an automated way, based on information you provide them about your circumstances and preferences.
Examples of this are Wealthify (owned by Aviva, a major insurance company and investment provider) and Nutmeg (owned by JPMorgan, a multi-national investment company).
These technology platforms are different to online investment brokers, because they are taking responsibility for the suitability of your investments on an ongoing basis.
If you bought an unsuitable investment with an online investment broker, it would be on an execution only basis. Basically, you would be responsible, and have no right to complain about it. In contrast, if you felt that the investments recommended by a robo-adviser were unsuitable, you would have a right to complain about them.
Fees: Robo-advisers tend not to charge an upfront fee, and instead charge a percentage of your invested funds each year, for ongoing use of their service. Wealth required: any money available to invest. Typically designed to be accessible to all.
The best example of transactional advice is using a mortgage broker. A good mortgage broker will make the process of applying for a mortgage easier and less stressful. They may help with paperwork, give advice about how much deposit to place, what type of mortgage best suits your needs, and will liaise with the lender on your behalf as the process goes on.
There are other examples of transactional advice. You may want to ensure your family’s financial needs are met in the case of your death or a severe illness. Whilst you can buy life insurance from the online insurance brokers, there are lots of pitfalls, and a good transactional adviser can ensure the products are appropriate and properly setup. Once again, because of the advice relationship, you would have the right to complain if things did go wrong down the line.
Another example would be taking transactional-only advice from a traditional financial adviser (see below), or stockbroker.
Fees: Transactional advisers may charge you a direct fee, and may also receive a fee or commission from a mortgage lender or life insurance provider. To assess the value, make sure you consider the total cost, including any commissions paid. Wealth required: N/A as typically insurance or mortgage related.
“Traditional” financial adviser/wealth manager
Traditional financial advisers (they will often refer to themselves as “IFAs”) tend to have developed their businesses out from transactional advice. Their target market is generally “mass affluent” clients with investable assets of more than £100,000.
These firms may be small and ‘independent‘, or part of larger networks where they are ‘restricted‘ to only selecting products from the panel their network allows (notable examples being St James’s Place, Tenet, Openwork). They may also be employees of much larger companies such as banks.
Services involve matching products to your personal circumstances, needs and objectives, and providing ongoing review of these products for an ongoing fee.
Fees: Traditional financial advisers generally charge fees as a percentage of invested assets. They may include fixed or minimum initial fees, and ongoing fees. There are many variations on specific fee styles, though. A typical fee structure might look like: Initial fee of 2% of invested assets subject to a minimum fee of £2,000, and an ongoing fee of 0.75% of invested assets. Wealth required: Usually >£50,000 in investable assets (though the banks tend to have lower minimums).
Financial planners are generally more focused on clients’ situation and goals than on the products that may be suited to them. The service will usually involve the production and regular updates of a financial plan using specialist software.
At the end of a financial planning process your long-term goals and objectives should be both clarified and quantified, and financial models should have been built to determine your chances of success and plot a route forward.
The author of this article is a qualified and practicing financial planner (with all the potential bias that conveys!). It is my opinion that anybody who has made the informed decision to seek financial advice would benefit from financial planning, especially as the costs tend to be comparable to ‘traditional’ financial advice.
It can be hard to distinguish between financial planners and financial advisers. Financial planners often offer traditional financial advice/wealth management alongside their planning services, and many “traditional” financial advisers will also describe their services as “financial planning”. While “financial adviser” is a protected term, financial planner isn’t, and so the label is often misused.
Fees: There are many different fee models for financial planners, ranging from percentage fees, to fixed fees, to hourly charging, to subscription fees. Wealth required: Typically >£200,000 in invested/investable assets. For planners focused on young professionals, often no wealth minimums but aimed at those with earnings of >£100,000/year.
How to find an adviser
There are lots of routes to finding a financial adviser, and nearly as many opinions as to what is important.
The following steps should help find a properly qualified financial adviser or planner that you can work with.
Find some names to research
You may be able to get recommendations from friends, family or colleagues to start your list.
Whilst these websites can be useful to research potential advisers, they are not as independent as they first appear. They are both “lead generation services” for advisers, and their business model is to charge advisers fees to appear on listings and to contact potential clients who find them via the site.
Unbiased pushes you towards its matching services, which promises to find the best adviser for you, but in reality this sends your enquiry to all paying advisers within a certain radius of your postcode and the first to pay an additional fee will receive exclusive rights to contact you.
If you do use unbiased to help find potential options, make sure to use their directory rather than their matching service, and be aware that they do little vetting of legitimacy.
Their “ratings”only measure speed of response, rather than reviews of service. They also allow advisers to pay extra fees to appear at the top of certain postcodes, even if they don’t have offices or advisers in the area.
Vouchedfor offer a little more by way of vetting and checking, and don’t charge advisers extra for appearing at the top of search results. Their differentiator is that customers leave reviews for their advisers, which you can use to help inform a decision.
They still charge advisers to appear on the site, and to respond to enquiries. They encourage advisers to ask their customers for reviews, and their search algorithms favour advisers with larger numbers of recent reviews.
The main issue with this system is that advisers can choose who they ask for a review. Reviews are overwhelmingly positive as a result of this.
Where else can I look?
We have links to the main professional bodies and some specialist associations below. Use the professional body search engines as your starting point, and refer to Unbiased and Vouchedfor as additional sources of information.
Check their FCA registration
All financial advisers must be registered with the Financial Conduct Authority. Never pay for financial advice from somebody who isn’t.
The FCA maintain a public register that should be checked before you agree to work with an adviser, and at least annually thereafter. Not only does the register confirm the adviser’s regulated status, it also provides information on the business they advise under and gives details of any past disciplinary action.
Check their qualifications
All authorised and regulated financial advisers must have an “appropriate NQF level 4 qualification”. The most common is the “Diploma in Regulated Financial Planning” from the Chartered Insurance Institute/Personal Finance Society (CII/PFS), but there are others.
Anybody claiming their Level 4 qualification differentiates them from other advisers should be treated with caution. There are higher levels of qualification that should be prioritised:
- “Chartered Financial Planner” status, (NQF Level 6, awarded by CII/PFS). This is the highest level of general-purpose financial advice qualification that can be achieved in the UK. It should be sought as an absolute minimum as it demonstrates high-quality technical knowledge and skills. Despite the name, it is not a ‘financial planning’ qualification, and you should seek an adviser with it regardless of whether you want a ‘financial planning service’ or not. Around 20,000 individuals hold Chartered status.
- CFP™ or “Certified Financial Planner” status (NQF level 7, awarded by the Chartered Institute of Securities and Investments (CISI)). This qualification is specifically focused on the practice of financial planning. All CFP planners are listed on their Wayfinder site. Around 900 individuals hold the CFP status.
There are also specialist accreditations that may be helpful if you have particular planning needs, for example:
- Resolution-accredited financial professional (in the case of divorce)
- STEP-Affiliate financial advisers (trust specialists)
- Society of Later Life Advisers (focused on later-life matters)
It should be pointed out that none of these accreditations or qualifications necessarily guarantees a higher level of advice, but they take meaningful time, effort and investment to obtain, so generally attract a more professionally-minded adviser.
A note on corporate accreditations
The above qualifications all refer to individuals. Confusingly, it is also possible for a financial advice business to have corporate accreditations.
The most common is “Chartered Financial Planners” awarded by CII/PFS. Around 800 businesses hold this accreditation, and whilst the firm has to adhere to a specific set of rules and standards , there is no guarantee that the individual is as well-qualified.
The other major accreditation is “Accredited financial planning firm”, awarded by CISI. Only around 60 businesses have this accreditation, and the requirements are stricter and more financial planning-focused than the Chartered accreditation. Again though, this doesn’t guarantee that the individual you work with is suitably qualified.
Finally, there is the “Pension Transfer Gold Standard” accreditation, which is an “honour-based” opt-in for businesses who believe they meet the standards when it comes to defined benefit pension transfers (a high-risk area with some high-profile systemic failures).
This will, again, not guarantee the firm is any good, but if you or somebody you know requires advice in this area, do not go anywhere near a firm that doesn’t subscribe to the standard.
Make sure they’re working for you
It should be really obvious that the adviser’s focus is on your outcomes. A few areas to watch out for:
- If the adviser works as part of a ‘network’, or a large national business, they may be limited in what services they can offer. This isn’t necessarily a dealbreaker, but they should be upfront and transparent about these limitations.
- Their fees should be clear and they should be happy to discuss them. This might mean they are published prominently on their website, or that they are happy to discuss the fees and clearly articulate the value they provide for them early on in any conversations.
- They should be open about any potential conflicts of interest, and prepared to have a discussion with you about what they might be.
- Their focus should be on your long-term aims, objectives, goals and needs. Be wary if they are quick to talk about products and solutions.
- Any ongoing service should be clearly defined with regular meeting intervals at least annually.
- A clearly defined fee for any initial financial planning and reporting work is often a good sign. This should allow you to separate the planning from the product-based advice (for example, going away and putting any planning into motion yourself if you are so inclined).
Find out what other people think about them
Most financial advisers (good and bad ones) will find most of their customers by referral from existing customers.
A referral from a friend or family member can be a good start for finding somebody, but it shouldn’t override the other considerations mentioned here.
If somebody does recommend an adviser they like, ask them some questions about what the service looks like, what they feel they get from it, and so on.
Equally, if you have found a potential adviser from the directories above, ask them if they would be happy for you to talk to existing customers in similar situations to you. This is a great way to get some independent feedback, and an adviser should be happy to put you in touch.
Make sure you will be able to work with them
You have to get along with your adviser!
Unfortunately, many people seeking advice treat this as the main priority, which can mean that personable, affable advisers who aren’t particularly good can still receive glowing reviews.
Most advisers will offer a free meeting (face-to-face or remote), so take advantage of it.
On this note, if you want a primarily online experience, make sure the adviser has the capability to do so.
Make sure that there are no barriers to leaving them
You may be absolutely bowled over by an adviser on first meeting, but over time become less impressed, or want or need to move on for any number of reasons.
It should be a major red flag if there are any minimum timescales required, or long notice periods.
Create a shortlist of at least two possibilities
Try to speak to at least two potential advisers so that you can compare and contrast their services and fees. Don’t pick an adviser after speaking only to them, even if they seem fantastic.