This content is for information purposes only. It should not be taken as financial advice or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult an independent financial adviser or financial planner such as ours here at Shorts in Sheffield and Chesterfield.
Choosing the right financial adviser can be tricky.
Should you rely on adviser directories or stick with personal recommendations?
How can you tell if a firm is legitimate? What are the warning signs you should be looking for?
And just as importantly, how do you know if your adviser is someone that you can trust with your major financial decisions throughout your life?
Here are our 6 top tips for choosing a financial adviser, from the basic checks you should do, to working out if they are someone you can work with long-term.
1. Ask for Recommendations
It’s simple enough to find out which firms are available in your local area. A quick Google search takes care of that.
Beyond that, there are various adviser directory sites that can help you to choose a firm compatible with your needs. The listings normally include key people, areas of expertise, qualifications, and reviews from other clients.
The firm’s own website will also give you a feel for how the business operates. Anonymous websites which include very little but news articles and market data can be somewhat off-putting. A good website with relevant content and a personal touch can give you more of an insight into whether the company is a good fit for you.
But choosing an adviser based solely on their online presence can be risky. Anyone can set up a website and internet reviews can easily be fake or misleading. Equally, they only give a snapshot of one person’s subjective opinion.
It is preferable to seek recommendations in the real world if you can. Family members or friends may have had excellent service from a financial adviser, or perhaps they can steer you away if they have had a bad experience.
Of course, not everyone likes talking about money, especially with family, friends, or acquaintances.
If you have worked with an accountant or solicitor, there is a good chance that they will be able to recommend a financial adviser. Even better, if they are used to working with a particular firm, it can make things like wills, trusts and tax matters easier to organise.
Carry Out Basic Due Diligence
Financial services in the UK are highly regulated, and there are basic minimum standards that all firms must comply with. For example:
- The business must be authorised by the Financial Conduct Authority (FCA).
- The firm must make regular reports to the regulator regarding financials, employees, complaints, and insurance coverage.
- It is a requirement that the business carries adequate Professional Indemnity Insurance and is financially solvent.
- The company needs to have specific permissions for the business it undertakes. So for example, any financial advice firm will be able to advise on your ISA or personal pension. On the other hand, very few financial advisers can provide advice on a defined benefit pension.
- All advisers must have suitable qualifications and keep their knowledge up to date.
Additionally, the firm must make it clear whether they are independent or restricted. An independent firm can advise on the whole of the market and is not limited to products and services from a small number of providers.
A restricted firm is limited either in terms of:
- The companies it can recommend for investments, pensions, and protection, or;
- The types of solutions recommended, for example the company might specialise in retirement planning.
Before contacting your chosen firm, you should confirm that they meet the regulatory requirements and whether they are independent or restricted. The FCA website is a good place to start.
3. Check You are Compatible
The next step is to arrange a discussion or first meeting with your chosen firm. Agreeing to a meeting does not commit you to anything, and the main purpose should be to find out if you can work together.
During the meeting, consider:
- Does the adviser listen to what is important to you?
- Are they open and honest, even if this means occasionally disagreeing with you or challenging your assumptions?
- Do they appear knowledgeable about the issue you want to discuss? Sometimes you can understand more about a person from what they don’t know. Do they admit the gap in their knowledge and take time to find out, or do they bluster over it and move the conversation in a different direction?
- Does the meeting start on time and is it well-organised? A haphazard approach can affect other areas of the business.
- Do you feel pressured into making a decision or immediately moving forward with advice?
- Would you be happy to meet the adviser once or twice a year for your reviews? Whether or not you like a person does not reflect their competence, but financial advice is based on long-term relationships. Some rapport or common ground is important.
If you have doubts after the first meeting, you should take some time to think and even meet with other advisers.
Financial advisers have a responsibility to treat customers fairly. This is ingrained into the industry culture, to the extent that any adviser will know what you mean if you mention ‘TCF.’
The following should be explained to you, in writing, with absolute clarity:
- How much the advice will cost.
- How it will be paid, whether this is deducted from your investment or paid directly by you.
- Once a recommendation is made, you should receive a report detailing what you should do and why, as well as any charges, risks, and potential disadvantages.
- The level of service you will receive going forward, as well as the costs.
Not everyone has the same level of understanding around financial matters, and advisers should not assume that they are always dealing with knowledgeable, experienced investors.
Advice firms have certain procedures for dealing with vulnerable clients. Vulnerability can relate to age, financial literacy, ill-health or even a recent life change. Your adviser should take time to understand your situation. Where appropriate, they might suggest that you invite someone to join you for your meetings, or give you extra time to consider any recommendations.
It is the adviser’s responsibility to make sure that not only is the recommendation clear, but that you understand it and are capable of making the decision to go ahead.
Don’t Rush into Anything
A good financial adviser will never pressure you into anything. They should give you the time you need to make any decisions.
Any of the following should be regarded as warning signs:
- Making recommendations before they fully understand your situation.
- Asking you to sign applications at the first meeting.
- Pushing you to invest in high risk or unregulated products without good reason.
- Discouraging you from taking time to think or consult with family members.
- Not providing a report on the recommendations or not giving you a chance to read it.
- Not checking your understanding or giving you an opportunity to ask questions.
Of course, there may be deadlines that need to be observed, for example the end of the tax year. But these should be clearly explained to you.
Advisers who need to push or hurry clients into taking their advice usually have their own reasons for this, and they are rarely in the interests of the client.
If you feel comfortable about the recommendation and have a chance to proceed at your own pace, this is more likely to result in a trusting working relationship.
Respect Their Time and Yours
If your adviser asks you to make an appointment before visiting their office, or to call at a certain time, don’t be offended. This not only suggests that they have other commitments, but also that they have a well-organised diary.
If your adviser is available at all hours or drops everything to meet with you, this is not necessarily a good sign. For example:
- The adviser may be eager to secure your business and may not be able to keep up the momentum longer-term.
- They might not be able to carry on with this level of personal service if they take on more clients.
- It’s possible they are trying to do too much, which is not usually sustainable.
- They could be letting other clients or employees down, or missing vital details.
- It may be a sign of poor time management.
Ultimately, an organised diary, a good support system and reliability bode well for a long-term relationship with your financial adviser.
Please do not hesitate to contact a member of the team to find out more about your financial planning options. Book a free call with a member of our team today, without obligation. We look forward to speaking with you.