SIGNpost : Brief Guide to Financial Advice

This item is an extract of a SIGNpost article that originally appeared in the Associate Magazine, but is updated with current links, addresses and other contact details.

• State Pensions & Benefits 20%
• Social Events/Visit Requests 20%
• Financial/Tax/Insurance Issues 19%
• P&G Pension/Shares 18%
• Care Homes/Practical Support 9%
• Legal Issues 8%
• Computer/IT Issues 2%
• Voluntary Work Opportunities 2%
• Health Issues 1%
• Local Tradesman Requests 1%

As you can see, a significant proportion of queries relate to financial issues and where financial advice is required, SIGNpost refers the individual on to an Independent Financial Adviser (IFA) in their specific area.

You do not need hundreds of thousands of pounds to potentially gain benefit from talking to a financial adviser. For those who find themselves inheriting a sum of money, have policies maturing, have shares they are considering selling or perhaps would like to know the best way of leaving money for children and grandchildren, an Independent Financial Adviser can provide a valuable source of (regulated) information and advice.

However, if your financial issues relate more to the ability to pay bills and juggling creditors, rather than maximising income from investments or tax avoidance, organisations such as your local Citizen's Advice Bureau can provide you with debt counselling. No matter how bad you feel the situation may be, there will always be a route out of the problems and organisations like the CAB (others listed below, at the end of this item) can provide you with essential support and guidance.

However, callers to SIGNpost often say that they are not really sure how to choose a Financial Adviser, what to ask etc. and we thought that Associates might like to know the initial questions they should ask.

Basically, before seeing an IFA you should ask:

• Whether he or she is tied (works for a specific provider of financial services and so can only advise on that organisation's products) or independent (an Independent can provide advice on the whole spectrum of products). Either is fine but you need to make sure that you choose the type which best suits your needs;
  
  
• If the individual is qualified to provide financial advice. The most important fact is that only companies, partnerships or sole traders who have authority under the Financial Services Act are legally allowed to provide you with financial advice. Any individual or organisation (even voluntary) that is not regulated under the Act will be breaking the law if they provide you with financial advice.
  
  There are basically 3 levels of qualifications with recent articles in the National Press strongly suggesting that people use an adviser with at least the intermediate qualification (SIGNpost can provide you with a list of qualifications, please call if you would like a copy);
  
  
• If they work on a fee or commission basis. Fee based advisers charge a time based fee, like solicitors and accountants, for the work they do for you whereas advisers who work on commission get an amount from the company you invest with which comes directly out of the amount you invest. Again either is fine but you need to check:
  
  
  • If fee based - what sort of fee you will have to pay. A fee based adviser will usually start charging straight away so it's a good idea to agree a fee up front so that you are clear about how much you are paying;
    
    
  • If commission based - what sort of commission the adviser will get against the time they are going to put in as if the commission rate is higher than the cost of the time you may be able to get some of the commission back or reinvested. It is also worth bearing in mind that you still pay the commission even if you buy the financial product directly from the provider organisation as this is built into the price.
    
    
• If they are used to dealing with people like you. Some advisers only deal with people with a lot of money whilst others have only ever sold basic endowment policies so you need to be sure that they have a client base which reflects your circumstances. The easiest way to do this is to simply ask them how many clients they have who have investments of roughly the same amount that you are considering.
  
  
• If they have an in-house tax capability. With interest rates low, an adviser who can save you money on the tax you pay is helpful and no adviser should advise on your finances without taking your tax position into account.