Posted on: 7th November 2018
Taking professional financial advice is not going to be free. However, when you do make this decision to speak to an adviser, it may give back more money in the long run! This week, we will tell you everything you need to know about picking and paying for an IFA.
Paying for an IFA: what is a financial adviser anyway?
You are likely to depend on certain financial products throughout your life. An adviser is there to help you make the right decisions regarding the products that are right for you. While this advice may not be free, you will see that there is a lot of value in paying for an independent financial adviser. It really is a smart option if you need help with your financial investments. There are two types of financial advice you can get:
Independent Financial Advisers (IFAs)
This is when an adviser is “independent” or a firm of advisers that offer “independent advice”. This means that it is able to provide you with a broad list of products and offer more advice about your options. It also means that they can suggest any provider on the market. As a result, you should receive the best advice and products that are tailored to your needs.
In contrast, as the name suggests, a restricted adviser is one that can only provide you with a restricted selection of products or providers. The adviser should be able to clearly explain the nature of the restriction to you. However, don’t be afraid to ask if you are unsure.
When you decide to seek professional advice, we suggest you check it’s from an IFA. This is the best option if you are new to receiving financial advice. It can often be difficult to identify why restricted advisers are restricted. Some may be restricted by products they advise on (though this may not always be a bad thing). Others may be restricted by the provider. This is often bad as other providers will likely have much better deals to offer.
When would I need to us an adviser?
If you are looking at complex financial products, it may help to get advice if you feel unsure or unconfident about doing the research. Below, we have a list of some of the main products in which financial advisers deal with. Even if you are going to a financial adviser to invest in one of these, it is a good idea to do your research first. You will want a good idea on what you are getting before you meet. That way, you will feel much more in control of the choices that you make.
Annuities: You can trade yourin for this after you retire, bringing you a regular income for life.
Financial or tax planning: This can get complicated based on how much money and assets you have. There are many products available, but an IFA can help.
and equity release: Another complicated factor, but an IFA can also help with this.
Protection Insurance: Life insurance, critical illness and income protection can all be confusing. It can sometimes be done without an adviser, but this isn’t recommended.
and pension transfers: this is often a case of picking the right provider, but there can be many to choose from based on your circumstances.
How much does an IFA cost?
IFAs are not allowed to accept commission from providers on products like investments and. Instead, they must charge a fee in which you agree upon. They can still accept commission from providers for life, critical illness and income protection insurance policies, and broking. They will take a cut every month that the product is held.
How much will the fees cost me?
This depends on whether you pay an hourly fee, flat fee or a “commission-style” fee. The initial meeting is often free, then you pay from there. Do check, however, just in case they send you a bill. You have three ways to pay for everything else later on:
Percentage fee: The most common way to charge, this is based on a percentage of the money you want managed or given advice on. You will usually pay an initial percentage charge for becoming a client and investing your money. Then, there will be an ongoing percentage charge for each year they manage your money. This can range from 0.5 per cent to 5 per cent. Be sure to check.
Fixed fee per service: This is a fee that is charged each time you go to the adviser for different “projects”, such as investments. These are best if you don’t want an ongoing service, only help with a specific job.
Hourly: Some advisers are starting to charge on an hourly basis. If you choose this, make sure they give you a full breakdown of the work they have done and how long it took. This could be anything between £50 to £250 an hour, so be sure to check before you go ahead.
Finding a financial adviser
It’s good to speak to family and friends to see if they have used an IFA in your local area. Of course, their experience with them may not be the same as yours, but it’s a good place to start. You could also check out websites such as VouchedFor and Unbiased. Both of these websites will offer you a wide range of advisers to choose from.
If you’re based in and around Altrincham, and are seeking independent financial advice, then we can help. Haven IFA consists of a team of experienced advisers who aim to give you the most from your investments. To find out more about how we can help with your savings, get in touch.