How to find the best adviser

Here's the lowdown on how to choose a good financial adviser.

I’ve always had my doubts about financial advisers – in fact, I wrote about some of those doubts only two weeks ago. But I accept that many people do need financial advice, especially when it comes to some of the bigger decisions, so here are some tips on how to find a high quality financial adviser.

Independence

I’d always go for an Independent Financial Adviser (IFA). Independence means that the adviser can recommend any product across the market. Most banks and insurance companies employ ‘tied’ advisors who can only recommend a smaller range of products; I’d go for an IFA every time.

Meet the adviser

Many IFAs are happy to offer a free introductory ‘get to know you’ meeting. I’d recommend that you try out at least three advisors in this way. Think of these meetings as job interviews where you’re the potential boss.

Word of mouth

This is one of the best ways to find an adviser. Ask your friends if they’ve used an adviser in recent years and if they can recommend that adviser.

When you have your initial meeting with your adviser, ask him if you can speak to any of his current clients. He may offer to show you some written testimonials but if possible, see if you can arrange a phone call with one of his clients. The information you’ll get from that conversation could be invaluable.

Fees or commission

I’d always prefer to pay an upfront fee to an advisor rather than use a ‘free’ service where the adviser receives commission from the financial services industry.

Paying a fee means I can be 100% certain that my adviser has my best interests at heart and isn’t just recommending products so he can earn extra cash from commission.

IFAs are obliged to offer a fee-based service if clients want one, but it’s worth asking an advisor whether he actually does much fee-based work. If he generates most of his revenue from commission, I’d be a little wary. I’d prefer to use an advisor who is fully committed to the fee-based model.

What do they charge?

It’s crucial you find out how much it will cost  before you sign up. Many IFAs charge between £75 and £250 an hour but it might be better to pay for a full financial review rather than go for the hourly rate. A review could cost anywhere between £400 and £1500 depending on how complex your financial affairs are.

Qualifications

It’s always worth asking an adviser about his qualifications. Currently an IFA has to have a qualification which has ‘level 3’ status.  The Certificate in Financial Planning is one of the most well-known level 3 qualifications. However, from January 2013 all advisers must have a Level 4 qualification – these include the Diploma in Regulated Financial Planning and the Diploma in Financial Planning.

I wouldn’t use an advisor who didn’t have a Level 4 qualification at the very least. I also think it’s best to use someone with a few years’ experience. And make sure you check that the adviser is authorised via the FSA register.

Ask about the typical client

Don’t be afraid to ask the adviser about his typical client. It’s not a disaster if his typical client is very different from you, but, in an ideal world, it’s nice to have an adviser who has a really thorough knowledge of the issues affecting someone in your financial circumstances.

So hopefully, these tips will make it easier for you to find a good adviser. If you’re wondering when it’s necessary to see an IFA, and when it isn’t, I’ll return to this issue very soon.

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