Choosing a new Financial Adviser? 10 things to look for and 10 to beware of

Financial News

Choosing a new Financial Adviser? 10 things to look for and 10 to beware ofChoosing a new financial adviser can be a daunting prospect.

Where do you find an adviser? How do you know they are the right one? How do you know you will get value for money?

These and others are all questions which will rightly go through your head; we’re going to try and answer some of them here.

Where to find a financial adviser

You have a number of options:

Recommendation This is without doubt the best option. Ask your friends and family who they use and if they are happy, then set up an introductory meeting or telephone call to see if you and the adviser are compatible. This was the first and is still the most well-known directory for advisers. You can search based on location and then learn more about the advisers before you decide who to get in touch. This site allows you to find advisers based on location, but also gives them a rating out of five stars based on feedback from their clients. Furthermore the site shows the type of clients the adviser is most used to dealing with, which is useful when you’re deciding whether an adviser is compatible with you.

How do you know you’ve found the right adviser?

Of course a lot will come down to good old gut instinct, but let’s try and introduce a bit of science into the process.

Here are 12 questions you must ask your new financial adviser.

1. Are you authorised by the Financial Conduct Authority (FCA)?

Look for: All financial advisers must be authorised by the FCA. You can check your new adviser appears on the FCA register by clicking here and entering their details.

Beware of: Unregulated ‘advisers’, who are nothing more than sales people, peddling exotic and often high risk investments.

If you can’t find your adviser on the FCA register, walk away.

2. Are you independent or restricted?

Look for: A simple answer. If they are “independent” they will use that work, if not they are restricted, which means limitations on either the products they can recommend or the areas they can advise on.

Beware of: Advisers who try and mask their restrictions. In some circumstances a restricted adviser can be fine, but you need a clear and honest explanation.

3. What qualifications do you have?

Look for: All advisers must now be qualified to at least Diploma level, also known as Level 4; some advisers have gone even further and taken additional qualifications, often in areas they specialise in.

Each adviser must also have a ‘Statement of Professional Standing’ (SPS) which confirms they are suitably qualified and keep that knowledge up to date through ‘Continuous Professional Development’ (CPD).

Ask to see a copy of the adviser’s SPS and check they are qualified in areas which are relevant to your needs.

Beware of: ‘Advisers’ are unqualified and unregulated; they are nothing more than salespeople. Also be wary of advisers who are reluctant to show you their SPS.

4. How experienced are they?

Look for: Qualifications are important, but so is experience. Ask the adviser about the types of clients they are used to dealing with and make sure they are experienced in the areas you want advice on.

If in doubt ask for references from existing clients; an adviser confident in the service he or she delivers should have no problem with this.

Beware of: Advisers who are not experienced in the areas you need advice on.

5. How do you deliver your advice?

Look for: An adviser who will deliver advice in a manner that you want to receive it. Most people want to get advice on a face to face basis, but others are happy to work over the telephone, by email or using Skype. Make sure the adviser is willing to provide both initial and on-going advice in a way in way you are happy with.

Beware of: An adviser who won’t work in the way you want them to. Over time the need to conform to their requirements will potentially sour the relationship and lead you to seeking yet another new adviser.

6. Does the adviser ‘speak your language’?

Look for: An adviser whose recommendations you can understand.

Your first meeting will give you a feel for whether they speak your language. If in doubt ask them to explain a concept such as the new pension rules, or how ISAs work, if the answer is clear you can tick this question off.

Beware of: An adviser you don’t understand. Yes, many of the concepts they are explaining can be tricky, but it’s their job to explain them in ways which you can grasp.

7. How do you charge?

Look for: An adviser who is clear and transparent. All advisers now have to charge fees; some work on a percentage of the amount you invest, others charge an hourly rate, which is sometimes fixed or capped so you know where you stand.

Both options have pros and cons; the most important thing though is you get value for money.

Make sure too that fees are confirmed to you in writing before you engage with the adviser.

Beware of: Advisers who charge too much for the service they are offering, who won’t explain how their fees are broken down or who are generally evasive on costs.

8. How do you invest money for clients?

Look for: Advisers who are systematic about how they invest money and have a proposition they can easily explain to you.

Beware of: Advisers who say they pick funds themselves. In our view very few firms are large enough to have the in-depth research capability needed to do this successfully. Also watch out for advisers who make overly complicated recommendations, when a simple solution might be more effective.

9. What back up support do they have?

Look for: Advisers who have support behind them. This might take the form of staff in the office who you can turn to when the adviser is not available, a locum when they are ill or on holiday, or outsourced compliance support who will audit the adviser’s advice.

Beware of: Advisers who have no back up support whatsoever; every adviser should at least have a locum and be prepared to have their work checked and audited.

10. What on-going service do you provide?

Look for: An adviser who provides an on-going service you actually need, at a price you believe offers value for money. Once the initial recommendations have been made, continuous advice is often important to make sure your affairs are kept in order; but this has to be appropriate.

Beware of: Advisers who offer on-going services that you don’t really need but will cost you money. Every pound you pay in fees has got to provide a tangible benefit, if it doesn’t, ask yourself why you are paying it.

We’re here to help

As we said at the start of this article, choosing a financial adviser isn’t easy; we hope the information we’ve provided will help you make the right decision.

If you want to know more, or discover how we answer the 10 questions (and we think you will be impressed!) call us on 0115 933 8433 or email