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Last Updated: Wednesday, 2 April, 2003, 07:28 GMT 08:28 UK
Finding unbiased financial advice
MONEY TALK
By David Elms
Chief executive of Independent Financial Adviser Promotion (IFAP)

David Elms and a piggy bank
With the deadline for tax free investments looming many people would like advice, but after successive mis-selling scandals who can they trust? An industry expert explains what advice-hungry savers should look for.

There are just a few days left before the current tax year comes to an end.

The 5 April deadline is a date that focuses the mind on financial issues - at least it should do.

Every year around 45 million people waste 4bn a year in unnecessary tax - that's 114 for every individual.

Seasonal advice

The run up to 5 April is often called the ISA season - a time of year that traditionally sees investors hurry to make the most of their Individual Savings Account allowance before it is lost for ever.

ISAs are just one way where people can save tax. You can invest up to 7,000 in equities tax free in an ISA, or save up to 3,000 in a cash ISA, tax-free each year.

Any financial adviser will tell you that the ISA season is their busiest time - clients are keen to spring clean their finances.

However, getting unbiased financial advice is not as simple as it sounds; being forewarned is forearmed.

Different advisers

First question anyone wanting financial advice has to ask themselves is what type of financial adviser to see.

Financial advice is currently governed by "polarisation" rules - although this is set to change.

At the moment products are sold through three distinct channels: independent financial advisers (IFAs), agents selling one company's products, or direct from the product provider.

Polarisation means that a financial adviser must either be "independent" or "tied".

Put simply, tied agents sell one provider's products, and most banks and building societies have large numbers of such agents.

Independents, on the other hand are free to recommend a product from any number of providers, but they often receive commission for their sale - which has led to some accusations of bias.

Polarisation is set to be scrapped in the next year or so and institutions such as banks will soon be allowed to sell a selection of other companies' products alongside their own.

What to look for

Whether you choose an IFA or a tied adviser, you next have to ensure that they have the right knowledge and experience.

Like choosing an accountant or dentist you are looking for someone that you can forge a trusting relationship with - personal impressions are important as are recommendations from friends and colleagues.

Check an adviser's credentials by asking them what qualifications they have.

All IFAs, for example, are required to have passed the Financial Planning Certificate (FPC) before being allowed to advise clients, and are also regulated by the Financial Services Authority (FSA).

If you are after experience, ask how long they have been practicing, or if you want specific advice - for example you could be approaching retirement - find out what their areas of expertise are.

Advice costs

Once you have made a choice, your first meeting will be a "getting to know you session", where you will be asked about your priorities and plans.

It is important that you are open and honest to ensure you get the most suitable advice.

The initial meeting is often free, but from then on you will be expected to pay for the on-going advice in some form.

When it comes to charging advisers fall into two camps.

The majority of tied agents and even IFAs work on a commission basis, whereby the product provider remunerates the adviser when you take out one of their products.

However, an IFA must disclose to you how much commission they are being paid.

If the thought of commission troubles you - and it does many after the pension mis-selling scandal of the early 1990s - you can opt for advisers that charge a fee.

But like any professional, a good adviser does not come cheap - they charge between 80 and 200 per hour, or a set fee for a specific issue such as arranging a pension.

Too rich for you? Then many advisers offer clients a choice of commission or fees at the outset.

But one major plus point with fees is that any commission due from the product provider should be invested back into the product or fund.




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