There may be times in your life when it would be helpful to get some personal financial advice. A financial adviser can take an overall look at your finances and recommend different products and services which would be suitable for you.
Perhaps you are going through a life change – buying a house, starting a family, or wanting to save for the future and looking to make some new investments.
Or you might have an inheritance or a lump sum that you are unsure what to do with.
Financial advice can also help during difficult life changes such as divorce, bereavement or redundancy.
You might just want financial advice on where to put your long-term savings.
A financial adviser can give you professional advice and come up with a personalised financial plan for you. Most importantly, they can look at your tax position and recommend a strategy that maximises your personal and tax allowances now and in the future.
It’s also important to think about your attitude to managing your money – are you disorganised? Will you really get around to sorting out your investments? Do you want to keep track of your portfolio? If not, a financial adviser might be able to help.
It is really important before you start the process to understand how financial advisers earn their money, and what you can expect from a financial advice consultation.
In the world of financial advisers, there are several types of service:
Independent financial advisers (IFAs) who can give advice on a wide range of products and services, and recommend investments from lots of different companies
Tied agents – a type of financial adviser who is connected to a single company and can only give advice and recommendations on products sold by that company
Restricted financial advisers – these tend to specialise in certain areas, for example, mortgage brokers or pension specialists. They can give you advice on a range of products, but usually in one or two specific areas
If you are looking for free financial advice then there is a lot of information on the internet where you can learn about stocks & shares, investment ISAs, pensions and mortgages. You can read the guides on Money.co.uk to learn more:
There are also a lot of internet sites that recommend different investments, funds and shares. However, these might not necessarily be right for you.
The financial decisions that you make and the shares or funds that you buy need to match your lifestyle goals, the amount of time you have to invest (it should be for five years or more) and the amount of risk you are willing to take.
A good financial adviser should ask you a lot of questions about your money, your goals and your attitude to risk so that they can recommend the right product to you.
When you meet a financial adviser, the initial consultation is usually free. You can find out how they work and they should explain their charging structure clearly.
If you are receiving personal financial advice then you usually will need to pay for it. There are a number of different ways to pay for financial advice:
An hourly rate – a financial adviser may charge you for the time taken to find out about your needs and recommend a product
A fee for advice: you can pay an independent financial adviser a fee for providing you with advice and a plan for your finances going forward. This is often a fixed fee for a specific service, such as setting up a pension or a pension transfer
Commission: when you buy a product recommended by the adviser, they may receive a commission fee (usually of between 1% and 2% of the fund you are investing)
Ongoing commission: some advisers will receive a percentage of the value of the assets (money and investments) they manage for you as a monthly or annual fee which grows as your investments grow
Whichever option you choose, it is important to discuss the fee structure before you start taking advice, so you are clear about the costs involved.
There are a number of financial milestones that a financial adviser can help you with:
A financial adviser can help you start a pension, work out whether you need to contribute more to your existing pension, help you set a date for retirement and advise on whether you want to take part of your pension gradually or buy an annuity which will give you a lifelong income.
An ISA is a good way to start investing for the future and there are lots of different ways to invest in one. Among the most popular way is to choose a fund or number of funds which invest in the stock market across different countries or sectors. A financial adviser will be able to help you choose which is the best for you.
The mortgage market is complex and it can be particularly difficult to find the right product, especially if you are self-employed or run your own business. A mortgage broker can advise on the best deals. In addition, the large brokers tend to have exclusive deals with mortgage lenders and can negotiate on your behalf.
Taking advice from a financial adviser could save you money in the long run because it can stop you from making mistakes with your money.
Also, a good financial adviser will look at all your finances – your pension, savings and investments and life insurance and work out if there are any gaps.
However, you do need to factor in the cost of advice, and any commission or ongoing charges. For example, if you do not pay a fixed fee or hourly rate, then your financial adviser is likely to earn their money via commission.
A good financial adviser will help you save tax and will check in with you on a regular basis to make sure that you are still on track to achieve your financial goals. They will manage your investments and suggest changes if necessary.
When you use the services of a financial adviser you will usually have a face to face meeting where you will fill in a questionnaire about your money, savings, attitude to risk, objectives and what product you already have. They will also check your identity and who you say you are - this is called Know Your Customer and is required under money laundering rules.
Over the past few years, some finance companies have started to use artificial intelligence and algorithms to build personalised portfolios for customers. These are known as robo-advisers and can match your financial goals with an investor profile.
Based on your investor profile, the robo-adviser will recommend products and services, but because the profiling is automated, the advice is cheaper than using a human.