Frequently asked questions about IFAs

Investment / Savings
Joe Phelan's picture
What does an IFA do? How much do they cost? How do I choose one? We've got the answers.

How much does financial advice cost?

Since January 2013, financial advisers no longer receive commission when they recommend an investment or pension fund, eliminating the biases this system used to create, and creating downward pressure on investment and pension charges.

Instead, advisers now agree a charge directly with their clients. The first conversation or meeting(s) will usually be free and without obligation. Thereafter, if you continue, the charge is most commonly an annual percentage of the amount you invest through the adviser. Alternatively, it can be a fixed or hourly charge. Most commonly the charge will be deducted from your investments and pensions, with the expectation that your investment returns more than enough to cover the fee.

Nothing should be charged without your prior agreement and the adviser should be able to clearly demonstrate the value you’ll receive will far outweigh the costs.

 

What do IFAs actually do?

Financial advisers help people with their long-term financial planning, including investments, pensions and annuities. Some will also help people with life assurance and mortgages. They may also help in specialist areas like inheritance tax planning, estate planning or ethical investing.

People will often go to an adviser either with a specific need (e.g., “I want to consolidate my pensions”) or a broader goal (e.g., “I want to review all my finances and make sure I’m well set up for retirement”).

People approach advisers at all stages of life – young families, mid-life, pre-retirement, post-retirement, later life, marriage, death and divorce.

An adviser will start by building up a full picture of your situation – your finances, your future plans (and what they’ll cost), and how cautious or adventurous you wish to be with your money. They will then present back a high level plan, or set of options, outlining the implications and choices. This might cover how much you save for the short-term vs. invest for the long-term, or whether to invest through an ISA and/or a pension.

Once you have agreed a plan, they will then go on to hunt out the very best accounts, funds or products for you.

With your permission theyw ill then complete the necessary administrative work to execute the various transactions.

Finally, an adviser will be able to regularly update you on how your finances are performing, and periodically review your situation with you.

 

How do I choose a financial adviser?

Here at VouchedFor we’ve tried to make it as easy as possible to find the right adviser.

All advisers on the site have:

·         Been checked against the Financial Conduct Authority (FCA) Register, which confirms that someone has regulatory clearance to offer financial advice.

·         Confirmed they offer INDEPENDENT advice. This means they have no ties to any investment or pension funds, and will research the entire universe of suitable funds before making a recommendation to you.

We also show you very clearly:

·         What their previous clients think of them, and the types of client they typically serve.

·         Any 'minimum criteria' they may have in terms of client wealth.

·         Whether the IFA is a 'certified' or 'chartered' financial planner.

·         Any specialisms they may have.

·         Hopefully you’ll soon find one or two that look appropriate. To find out more, send them a message with as much detail as you can. When they call you for an initial chat make sure you ask the questions you need to.

If the conversation goes well, a meeting (usually free of charge) will be arranged where all the details will be discussed and you can make a decision on proceeding.

 

What is the value of financial advice?

Based on thousands of client reviews, we would summarise the value of advice as:

·         Confidence that your money will stretch far enough to meet your future plans.

·         Increased investment returns and income.

·         Reduced risk and greater financial protection.

·         Saved time.

·         Peace of mind things have been done properly.

·         Protection through the Financial Services Compensation Scheme (in the event of bad advice).

It’s difficult to quantify the value advisers add. One adviser may generate higher returns than another, but that does not necessarily mean they are better at their job. It could, for example, just be because they deal with clients who are happier to take risks. Hopefully by reading clients’ reviews on this website, you’ll get a better feel for the benefits advice can deliver.

 

Do I need advice, or should I do things on my own?

When it comes to managing your finances, the do it yourself vs. take advice debate is one that many investors wrestle with at some point.

DIY advocates might argue:

·         You can take out investments, pensions, mortgages and insurance yourself online without the cost of advice.

·         It’s better to be in control of your own destiny.

The counter argument:

·         Advisers have years of specialist education and experience.

·         The cost of a mistake can be huge, and if you DIY you have no protection under the Financial Services Compensation scheme.

·         Just a small improvement in how your finances are managed should more than offset the costs.

·         Managing your own finances (properly) can be extremely time consuming, and VouchedFor reviews prove that even the most financially literate people still utilise advisers.

Ultimately it’s your own decision, but we recommend that you at least speak with one or two well-rated IFAs before making it.

 

What will happen in your first meeting with an IFA?

With VouchedFor, most IFAs offer a free initial discussion with no obligation. This might be over the phone or face-to-face depending on your preferences. It gives you a chance to briefly discuss your situation and how they might be able to help, and decide whether a meeting makes sense.

The first meeting will usually last around an hour, and again is generally without cost or obligation. If possible, take along an overview of your finances including savings, investments, pensions, debt, incomes and outgoings. It’s also worth thinking through your financial goals. For example, are you looking to save for your child’s education, plan for your retirement, or limit inheritance tax?

Outcomes of the first meeting often include a proposal outlining an adviser’s suggested next steps. This will include what services they can offer and the associated costs and benefits.

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