How to find the best financial advisers
If you want to make the most of your money, or just need advice on what financial product to get, a financial adviser can help.
Few people relish having to make big financial decisions. It’s time-consuming and involves some serious brain exertion. Plus, it brings with it inevitable anxiety about making a poor choice. Combined, these factors can result in rushed decisions, just to get it out of the way. Or, in some cases, putting off making a decision at all. If any of this sounds familiar, one option is to pay an expert to do the hard graft on your behalf. We outline the pros and cons of using a professional financial adviser, and how to find a good one.
What is a financial adviser?
A financial adviser is a professional who offers advice and recommendations to those looking to take out a financial product, or who want help planning their finances.
Most financial advisers are required to have specific qualifications depending on their area of expertise. To give professional financial advice in the UK, you must be authorised and regulated by the Financial Conduct Authority (FCA).
What does a financial adviser do?
Financial advisers generally offer advice and help you make the right decision on a range of financial products. These include:
- Investments
- Pensions
- Mortgages
- Insurance
- Financial planning
- Tax
Depending on the type of adviser, and your own preferences, they may provide general advice, help you find a particular financial product, or even personally plan your finances on your behalf.
Types of financial adviser
There are two main types of financial adviser.
Independent financial advisers (IFAs)
As the name suggests, independent financial advisers have no ties to specific financial products or services. They can therefore offer advice on all the products available on the market. This means you should be able to get the best personalised advice and products that are best suited to your financial goals and situation.
Restricted advisers
Unlike IFAs, restricted financial advisers are limited as to what they can recommend. There are two subcategories of restricted advice. One or both limitations may apply to a restricted financial adviser.
- Product-type restricted. This type of adviser can only offer advice on financial products within a certain category. For example, some restricted financial advisers are only authorised to offer advice on pensions, or retirement products. They may still be able to cover the whole of the market within this product type. This type of restriction isn’t necessarily a bad thing if you only want advice on the specific product type(s) the adviser specialises in, and can mean they know their niche area very well. Just be aware they won’t be able to offer a truly holistic view of your finances.
- Product-provider restricted. These restricted financial advisers can only offer advice on products offered by certain providers or, in some cases, only one provider. Getting advice from this type of restricted adviser means you won’t get a full picture of your options, and may miss out on the best products or providers for your needs. This type of advice is often on offer directly from product providers, and may be cheaper than independent financial advice. While limited, it can be useful if you’ve already decided on a provider and need a bit of help deciding between the options it offers.
When might I want to consider taking financial advice?
The points at which financial advice can be particularly valuable are those life events where making the wrong decision could have big financial consequences. For example:
- You are planning for your kids’ future
- You come into a substantial inheritance
- You’re approaching retirement and want to maximise your pension income
- You’re considering transferring your pension from one scheme to another.
Of course, there may not even be a specific life event that triggers the need for financial advice. You may simply benefit from ad hoc or ongoing help to keep your finances on track and meet your goals.
The sums involved don’t necessarily have to be huge for you to benefit from financial advice. Though you will, of course, have to weigh up the adviser’s fees against the potential benefits they can offer – both in time saved and money made by making the most of their expertise. A good financial adviser should be realistic about this up-front.
Do I have to take financial advice when investing?
No. You are under no obligation to take financial advice when investing, or taking out most types of financial product. It’s entirely your call.
One notable exception to this rule is that you cannot transfer a final salary (or defined benefit) pension worth more than £30,000 into a defined contribution pension scheme without taking financial advice. That’s because final salary schemes, often called “gold plated” pensions, have valuable benefits that you would lose in the transfer. This means it’s rarely a good idea.
Can I get one-off financial advice?
Yes. Getting financial advice doesn’t have to mean committing to a long term relationship with an adviser, and the associated costs.
Independent financial advisers are likely to offer options ranging from one-off advice when making a rare big decision — how to access your pension, for example – to ongoing advice that can encompass regular financial reviews and, in some cases, managing your finances on your behalf.
Financial advice on offer from product providers often comes in a more “packaged” format, with clear limits on what it will and won’t cover, though there may be exceptions.
What are the benefits of taking financial advice?
Taking financial advice, and in particular independent financial advice, has a raft of benefits. These include:
- A good independent financial adviser will take account of your full personal circumstances before making recommendations. This means the products they recommend are more likely to meet your needs, and they may be able to suggest paths, products and opportunities you hadn’t previously considered.
- Depending on the type of adviser you use, they may have access to products and providers that you couldn’t find or access on your own.
- An adviser can help you organise your thinking and plan out short, medium and long-term goals, and the steps you need to take to meet them.
- Financial advice can help you save, or make more, money by ensuring you have the products that will work hardest for you, and that you are making the most of tax reliefs and allowances.
- If it turns out that a financial adviser has given you poor advice, you have the right to complain and claim compensation. If necessary, you can escalate your complaint to the Financial Ombudsman. If you make a poor decision off your own bat, you have nobody to complain to but the mirror.
What are the downsides of taking financial advice?
There’s one key downside to taking financial advice: it costs money.
In principle, the fees you pay should be balanced out by the money-saving and other benefits of taking advice. But if you have the time, energy and expertise to put into doing your own research, getting to grips with tax reliefs and allowances, and identifying the products and providers that would suit you best, you may decide that the charges aren’t worth it for you.
It’s also important to be aware of the limitations of taking restricted advice, particularly if the adviser can only recommend products from one or a handful of providers.
How do I choose the best financial adviser?
This will depend on factors like the type of advice you need, the types of investments you want to make, and your risk profile and budget. Ultimately, the best financial adviser will be a matter of personal preference. Below, we’ve given a few tips to help you make your decision.
5 tips for finding the best financial adviser
- Do your own research and planning. Before you even begin approaching financial advisers, it’s best to have a clear idea of your own financial goals and expectations, and the type of advice or products you need. The better informed you are about your potential options, the easier it will be to find an adviser who can help you achieve your goals. Spend some time thinking about how much risk you are open to, as this will help inform your discussions with the adviser and the products they recommend.
- Check their accreditation. All financial advisers must be authorised by the Financial Conduct Authority. You can check an adviser’s authorisation on the FCA’s Financial Services Register. One of the requirements is that they must have minimum qualifications – a Diploma for Financial Advisers (DipFA). However, advisers can also pursue further qualifications, including become a certified or chartered financial planner, or getting the internationally-recognised ISO22222 certificate.
- Consider whether you’d work well together. When you employ the services of a financial adviser, they ultimately become partly responsible for your financial future and livelihood. It’s extremely important that you feel you can trust them, and that you’ll be able to maintain an honest and communicative relationship.
- Confirm the costs. Financial advisers can charge for their advice in a variety of ways, so it’s important to make sure you’re getting the most cost-effective advice you can. If you want ongoing financial advice or planning, it may be better to employ an adviser who charges a low annual percentage fee. If you only need one-off advice, it can make more sense to use an adviser who charges a single flat fee. You’re also free to try and negotiate a better rate if you think they’re overcharging, so don’t be afraid to haggle. Your adviser must give you a copy of their charging structure before providing any services to you
- Make sure you understand the nature of the advice. Restricted advisers can be of some use. Particularly if you need advice on a specific product type and they can cover the whole of the market within that product type. But for a more thorough and holistic approach, it’s generally best to use an IFA. IFAs can provide independent advice that is tailored to your specific financial situation and goals.
How much does financial advice cost in the UK?
This will depend on the type of adviser you need, and the type of fee structure they use. Since 2012, financial advisers in the UK are no longer allowed to accept commission on certain products they recommend to their clients (with the exception of insurance and mortgages).
Instead, financial advisers charge a fee for their services. This can be one or more of the following:
- Percentage fee. This is the most common fee model used by financial advisers. It can be anywhere from 0.5% to 5% of the value of the assets they’re advising you on. You’ll likely pay an upfront percentage fee when you become a client, and then an ongoing fee for each year they continue to manage your finances.
- Fixed fee. Other financial advisers will charge a fixed fee every time you require their services. This can be more cost-effective for those who only need sporadic, one-off advice or recommendations.
- Hourly fee. Similar to a lawyer or solicitor, some financial advisers charge for their services on a time basis. According to MoneyHelper, this can vary from £75 an hour to £350, although the UK average rate is about £150 an hour.
But what you end up paying will vary based on the type of advice you need and the specific adviser you use.
Will financial advice leave me better off in the long run?
That’s the idea. Otherwise what is the point? But a good financial adviser should always be up-front and realistic about if and how their advice can help you.
Bear in mind the benefits of financial advice may not be easily quantifiable, or immediate. For example, in some cases they may not be able to identify products that are better than ones you could have found yourself, but may be able to structure your affairs in a more tax-efficient manner.
Ultimately, though, the benefits will depend on the sums involved, the complexity of your affairs, and a host of other factors. And be aware that, provided their recommendations are suitable for your needs, financial advisers cannot be held responsible for financial issues that are outside of their control – such as investment losses due to unexpectedly poor stock market performance.
Can I get free financial advice?
The short answer to this is almost certainly not. Professional financial advisers have to make a living. They do this by charging for their advice.
The longer answer is a bit more complicated. Many independent financial advisers will offer a free initial meeting to briefly discuss your situation and explain what they can offer. But actual advice will be chargeable.
Some charities and government organisations also offer free financial guidance. This is different to regulated financial advice as financial guidance can explain the general options available to you in relation to a particular type of financial product.
A good example of financial guidance is Pension Wise, a service from government-backed MoneyHelper. This offers over-50s a face-to-face or phone appointment with a pension specialist who will outline the options to access funds in a defined contribution pension pot.
This type of financial guidance can be very useful. However, experts offering financial guidance cannot make any personalised recommendations about which option you should go for, or any particular providers or products that would suit you.
What are the alternatives to professional financial advice?
There are two main alternatives to making financial decisions based on professional financial advice.
- The completely DIY option. If you’re up for putting in a bit of legwork, there is plenty of free written guidance available – including that from sites such as Finder, as well as from charities and government-backed sites such as Citizens Advice and MoneyHelper. Both of the latter also phone and/or webchat-based guidance services, though they won’t be able to advise based on your personal circumstances or recommend specific financial products. And there are lots of online investment platforms and private pension providers that allow you to make non-advised investments. If your situation is relatively straightforward, a mix of free guidance and a good online platform may be all you need.
- The robo-advice route. Robo-advisors are a middle ground between DIY and a fully-advised route. They’re available for both personal pensions and general investments, from the likes of Moneyfarm and Wealthify. After you sign up with a robo-advisor, you’ll typically be asked a series of questions about your goals, preferences, and attitude to risk. Based on your responses, the robotic “advisor” (essentially a clever algorithm) will match you to a portfolio. Typically, the provider will then manage your portfolio on your behalf, rebalancing it as required over time with input from human experts. Find out more about this option in our full guide to robo-advisors.
How can I find the right financial adviser for my needs?
One obvious option is a personal recommendation from a friend or family member. But if they can’t help, or their recommendation isn’t quite right, there are a number of reputable directories to try. Many let you search by location, qualification and speciality. You don’t necessarily have to find an adviser close to you, as many will offer their services by phone and email. But even in our increasingly digital world, you may prefer the face-to-face approach for money matters.
Financial adviser directories to check include:
- MoneyHelper’s Retirement Adviser Directory. This government-backed service helps you find an adviser who may be able to help you make decisions about your retirement and other financial planning issues.
- The Personal Finance Society’s Find an Adviser service. The Personal Finance Society is a professional body dedicated to building trust in the financial planning profession. Its directory includes advisers that cover a range of areas, including retirement planning, mortgages, investments, taxation, and other financial planning.
- Society of Later Life Advisers (SOLLA). SOLLA is a not-for-profit society, and its directory specialises in advisers with Later Life Adviser accreditation.
- The Unbiased directory. Helps to match you to a fully regulated financial adviser, mortgage broker or accountant.
- VouchedFor: a comparison and review site for financial and mortgage advisers, legal advisers and accountants.
Pros and cons of using a financial adviser
Bottom line
Let’s not beat around the bush, financial advice can be expensive. However, it could save you a lot of time and effort, and should also save you money in the long run. Either by helping you to make the best possible financial product choices (and avoid making poor ones), or through other methods such as organising your affairs in the most tax-efficient way. Ultimately the choice is down to you, though. If you’re confident making your own investment decisions, or simply don’t have enough money to justify the cost of a financial adviser, head over to our round ups of DIY investment platforms and pension providers.
Frequently asked questions