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Last Updated: Thursday, 6 October 2005, 10:45 GMT 11:45 UK
Finding fair financial advice
MONEY TALK
By David Elms
Chief executive of Independent Financial Adviser Promotion (IFAP)

David Elms and a piggy bank
David Elms, a financial advice expert
Thinking of giving your finances a new year makeover but don't know where to start? An industry expert explains what types of financial advice are on offer and how much it costs.

There are a number of reasons why people first turn to a financial adviser for help.

You may be looking for the best way to save for retirement, a mortgage, advice on how to invest for the future or protect you and your family with a life insurance policy.

Perhaps you are just looking to make the most of the 5 April tax deadline.

Whatever your motivation for seeking it, getting unbiased financial advice is not as simple as it sounds; being forewarned is forearmed.

Different advisers

Multi-tied agents are allowed to recommend the products of a selection of providers, rather than just one

Until recently, there were two main ways of seeking financial advice for products such as life assurance, pensions and investments: either through an independent financial adviser (IFA) or a tied agent.

An IFA is required to act on your behalf, researching the whole market to find you the most suitable products.

Tied agents can only advise on the products provided by their employer, usually a bank, building society or insurer.

However, the Financial Services Authority (FSA), recently decided that there should be a third way to obtain financial advice; through a multi-tied agent.

Multi-tied agents are allowed to recommend the products of a selection of providers, rather than just one.

They can choose how many companies' products they offer advice on, based on commercial arrangements with those companies.

Multi-tied advice was introduced to increase choice for people who would otherwise have taken tied advice.

All advisers are required by the new rules to produce a key facts document up-front, explaining what type of advice they offer.

You should check out the breadth of products and providers on offer and decide if this is good enough for you, or whether independent advice across the whole market of financial products would suit you best.

What to look for

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

Personal impressions are important when selecting the right adviser, as are recommendations from friends and colleagues

Ask how long the adviser and firm have been practicing, and check their credentials by asking them what qualifications they have.

All advisers have to pass the Financial Planning Certificate (FPC) before they are authorised and regulated by the FSA to give advice.

However, many IFAs have chosen to take further exams, either in general financial planning or specific product areas, to improve and demonstrate their professionalism to clients.

Some people will feel more at ease with a female adviser, or one that specialises in advice on particular product areas like retirement planning or mortgages.

You can find IFAs that match your preferred criteria, quickly and without pressure, online.

However, like choosing an accountant or dentist, you are looking for someone that you can forge a trusting relationship with.

Personal impressions are important when selecting the right adviser, as are recommendations from friends and colleagues.

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.

As part of the recent rule changes, all types of financial adviser are required to give you a second key facts document containing a "menu" of charges at the start of this first meeting, to enable you to compare costs, see what you are getting for your money and shop around.

An IFA must offer you the option of paying by a fee, as well as the option of paying by commission, ultimately added to the cost of any financial product bought from the adviser, or a combination of the two.

Tied and multi-tied agents don't have to offer you this choice, but some may.

In the past the majority of consumers tended to opt to pay for their advice by commission.

In the future there may well be a shift towards more people paying fees, as the cost and value of advice becomes clearer through these new disclosure documents.

Fees for advice vary widely, but are typically between 50 and 200 an hour.

Do not be afraid to negotiate on costs with your adviser; he or she may well be prepared to reduce their fee or rebate more commission, especially if they want you as a long-term customer.

Financial planning and adapting to changing circumstances is a lifelong commitment, so taking a little time now to find the most suitable type of advice from someone you are comfortable with could save you a great deal of money in future.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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