Ten money saving tips: financial advice

NEW rules come into force next month that will reform the way in which consumers work with financial advisers.

A ban on commission payments and enhanced qualification demands for independent financial advisers (IFAs) are among the features of the new rules, yet awareness of the changes remains low.

Carrie Heron, financial planning expert at Brewin Dolphin, outlines the questions to ask an adviser to ensure you get the best service for your money.

1. Is my initial meeting free?

Many companies offer a free initial meeting, which enables the adviser to ascertain what areas of advice you require and a follow-up letter will detail the areas which the adviser thinks should be reviewed. A charging structure can be agreed prior to any other work being undertaken.

2. How will you be paid?

To date advisers can be remunerated by payment of commission or by fee agreed with the specific product provider. From 1 January 2013 the way in which advisers can be paid is changing to ensure that the adviser is paid accordingly and that the client can see in clear terms how they have paid for the service they have received.

3. What do you specialise in?

Some advisers specialise in different areas of financial planning. Some may be pension specialists or tax planning experts. Make sure your adviser is capable of providing you with the advice you require. A holistic planning approach may be required if you’re looking for a full financial review.

4. Do you provide investment advice?

Some financial advisers will also offer investment advice. This means that they will provide financial planning advice on the required investment or pension product. Following this they may also advise on the funds to invest in, to ensure your money is in a fund suited to your risk profile and investment objectives. Other advisers use specialised investment managers to provide investment advice. If the adviser is giving investment advice the client must ensure that they are qualified to do so.

5. How often do we meet?

After the initial meeting you should agree with your adviser on an ongoing strategy for reviewing the advice given. This generally requires an annual review at which time the adviser will obtain up to date information from the client. The adviser will use this information to ensure that the advice previously given is still suitable and that any changes in circumstances will be taken into account for future advice. At this stage, the adviser should also provide correct contact details. If wanting to contact the adviser more regularly than once a year, it may be more suitable to speak to an assistant or to agree a regular date of contact to avoid any undue delays.

6. Tell me about your experience and qualifications

Finding out how long an adviser has been in their role will give you some idea of how often the adviser changes roles and how well they know the company they are currently employed with. It’s also important to note that the exams taken by financial advisers have changed recently and many advisers have found that they are required to undertake additional learning to keep their qualified status.

7. When do you use discretionary fund management?

Some investment managers will set a minimum level of funds which can be discretionary managed, due to the level of risk and charges involved. It is important to ask what level your adviser thinks is suitable for Discretionary Management.

8. How do you assess risk?

The advice that you are given should be suited to your aims and objectives, whilst taking into account your personal risk profile.

Ask your adviser how they quantify your risk profile.

9. Do you keep your clients informed?

The financial planning world is constantly changing with rules and regulations altering regularly. It depends on the agreed relationship between adviser and client whether the adviser will continue to keep a client updated on changes in regulation or legislation. This should be agreed at the outset.

10. Will you review all products?

Some advisers are able to provide advice on the financial products offered by all the companies in the marketplace, whilst others are restricted to products offered by a selected number of companies.

Being restricted does not mean that the quality of advice provided should be any different, just the range of products they can offer.