Top Ten Tips: Getting the best financial advice

FINANCIAL advice is poised for an overhaul at thestart of 2013, (although the Treasury select committee has called for a one-year delay).

The proposed changes, known as the retail distribution review (RDR), include the removal of commission, while advisers must also meet higher qualification requirements. But there remains huge variety when it comes to the quality of financial advisers. Jason Hemmings, a partner of Edinburgh-based Cornerstone Asset Management, gives his top tips on finding the right adviser for you.

1. INDEPENDENCE

Look for a firm that is genuinely independent and not tied to a single provider, or a select group of providers. Many bank-based advisers are little more than salespeople because they can only recommend their own company's products. In contrast, an independent financial adviser (IFA) has the run of the entire market.

2. FEES VERSUS COMMISSION

IFAs have to offer a choice of payment through fees, commission from the product provider or a combination. Although commission will be abolished at the end of next year, many IFAs still work on this basis. Many people wrongly believe that paying for advice by commission costs them nothing, but it is often built into initial and ongoing charges.

Most investment funds carry initial charges of 5 per cent, which is taken straight off your investment. There are ongoing charges too, and about a third of the typical annual management charge of 1.5 per cent is paid out as trail commission to the IFA, or kept by the fund management group if bought directly. If you use a fee-based firm, you can often access investments without paying an initial charge. Fee-based advisers usually pass any commission back to you. Ask for a comparison of fees and commissions.

3. QUALIFICATIONS

Under RDR, financial advisers have to meet new minimum qualifications. For many, this means further learning and examinations. The certificate in financial planning (Cert PFS) is the current minimum. This is being replaced by the diploma in financial planning (Dip PFS).

However, there are a range of more advanced qualifications, with many advisers taking further qualifications in specific areas. Go for a firm with advisers who specialise in the area of advice you are looking for and have the relevant qualifications.

A full list of IFA qualifications can be found at www.unbiased. co.uk/find-an-independent-financial-adviser/independent-financial-advice/ifa-qualifications-on-unbiased.co.uk/.

4. EXPERIENCE

Qualifications are important, but experience counts, too. Ask potential advisers how long they've worked in the industry and what experience they have in dealing with people in similar circumstances to you. Advisers worth their salt will be able to provide detailed examples, while maintaining client confidentiality, of course.

5. COMPLIANCE

The RDR doesn't come into force until next year, but some firms are fully prepared already, having put their advisers through additional qualifications and adopted a fee-based service with a transparent charging structure. They are embracing the positive changes that RDR brings.

6. ADVICE PROCESS

Make sure the firm has a structured advice process and provides full written details of this before you commit to doing business. Although there is no requirement for advisers to prepare a recommendations report in advance of completing a transaction, such a report can help you fully understand the recommendations and raise any concerns.

7. ONGOING SERVICE

Putting a financial plan in place is one thing, but monitoring this to ensure it remains suitable is equally important. Most firms offer an ongoing service, but this varies from an annual review to a more comprehensive service. Make sure the ongoing service - and related cost - is detailed. .

8. RELATIONSHIP BUILDING

Nobody wants to be just another number or a means to a paycheque. Good advisers will get to know you as a person: your priorities, motivations and aspirations. Make sure your adviser is willing to visit you at home, should you wish. That way you'll be able to build up a personal professional relationship that doesn't solely rely on e-mail or phone.

9. PROFESSIONAL CONNECTIONS

An IFA might not be able to provide for all your financial needs. Consider a firm with long-standing connections with other trusted professionals, such as solicitors and accountants. This will ensure you receive a fully comprehensive service.

10. FINDING AN ADVISER

Go with a personal recommendation - from family, friends or employers - where possible. Alternatively, unbiased.co.uk has a "find your adviser" facility where you can source a list of independent advisers in your area.