Some advice if you are seeking advice

Published on Friday 22 February 2008 20:26

The guide: Top 10

1 REGULATED? Ask your adviser if they are regulated by the Financial Services Authority (FSA). You can check this for yourself by visiting www.fsa.gov.uk. The FSA is an independent, non-governmental body, given statutory powers by the Financial Services and Markets Act 2000. One of the regulator's key aims is to retail consumers – like you – "achieve a fair deal".

2 INDEPENDENT? Establish if your adviser is "tied", "multi-tied" or "independent". As Gordon Wilson, director of Thomson Shepherd, a firm of Scottish IFAs points out, fully independent advisers can advise you the whole of the market, offering you maximum choice and flexibility. As the labels imply, "tied" advisers can only tell you about the products of one company, and those who are "multi-tied" can only advise on the products of companies they are linked to.

3 EVIDENCE? Seek evidence of independence, as some "independent" advisers tread a fine line, recommending the same solution to all clients or directing all the investment to funds run by themselves. Ask for a breakdown of their business mix by company and by product to gain an understanding of the extent of their independence. If they favour certain companies, make sure you receive a clear explanation about why this is.

4 PAYMENT TYPE? One of the key questions is to ask how the adviser will be paid. Wilson's view is it doesn't matter whether advice is paid for by fee or commission – the key is how much is paid and how it affects you. Agree costs and payment method in advance. Remember fees attract VAT at 17.5 per cent, commissions do not.

5 RESEARCH? To establish how the adviser comes to recommend certain products and to eliminate the question of commission bias, request a copy of the research or "due diligence" trail which lead to the recommendation.

6 DETAILS? Make sure you receive detailed written recommendations prior to proceeding and take time to consider the advice and ask plenty of questions.

7 EXPERIENCED? Ask for a curriculum vitae. Wilson points out that this is an excellent way of quickly understanding the skills and experience of your adviser, but it is seldom requested.

8 QUALIFIED? Enquire about qualifications and be specific about those relating directly to your specific requirements, be it advice on pensions, investments or mortgages.

The top tier of advisers are chartered financial planners, listed on www.pfs.org.uk, and certified financial planners, on www.financialplanning.org.uk. Many advisers who have not quite reached these levels will have specialist qualifications so if you are retiring or selling a business and want investment advice then insist on seeing evidence of a specialist investment qualification. If you are looking for pensions advice, insist on a specialist qualification. Qualifications don't guarantee good advice, but they tend to be an indication that the individuals are serious about their careers and that they have taken time out to develop their technical expertise.

Look for advisers who hold the diploma in financial planning (DipPFS) or associateship of the PFS (APFS) as these are advisers on their way to acquiring chartered status.

9 MEMBERSHIP? Make sure your adviser is a member of one of the professional bodies – either the Personal Finance Society (PFS) or the Institute of Financial Planning (IFP). Wilson explained that to maintain membership, it is necessary to keep records of continuing professional development (CPD) and uphold certain professional standards and ethics.

10 DO YOU HAVE ALL FACTS? Gain an understanding of the resources available – staff numbers, qualifications and what happens when your adviser is on holiday or unwell. Make sure you request a "contractual" review with an agreed time scale and fee or commission structure. Make all cheques payable to the company you are investing with, not your adviser.