The burgeoning choice of financial products on the market – more than 30,000 (source IMA, DTI, AKG) at the last count – can be daunting and lead many people to leave their money languishing in the wrong place. Yet when headlines present a bleak picture of our financial future if we don’t start saving more wisely for our retirement, right now, then it’s clear we should be doing more about putting our money through its paces. Whether you’re looking for the best way to save for retirement, a mortgage, advice on how to invest for the future or protect you and your family with a life assurance policy, the most suitable product for you is almost certainly out there. It’s simply a case of how to find it.
Now perhaps more than ever it is important to get sound, unbiased advice on what financial products you should have, especially those of us who are too busy or who lack the confidence to research the market on our own. If you are wondering what sort of advice is out there, where and how to find it and how much it will all cost, read on.......
There are currently three main ways of seeking financial advice for products such as life assurance, pensions and collective investments like unit trusts/OEICs, Individual Savings Accounts and Child Trust Funds; either through an independent financial adviser, a multi tied agent or a tied agent.
The big advantage of independent financial advice is that you have access to all the products on the market through a qualified practitioner (more about qualifications later). An IFA’s job is to research and recommend the most appropriate financial solutions after asking their clients a whole range of detailed questions about their circumstances, their financial goals and their attitudes to risk. IFAs are answerable to the FSA to ensure that they keep to the rules. As they act on your behalf they provide personalised written reasons why they have recommended particular products or a course of action.
Many people buy financial products through multi-tied or single-tied agents, such as the sales staff who work at their bank or building society. When they want a pension or investment product they often find it easier just to nip into their bank and accept what is sold through that organisation’s relationship with one or a few financial product providers. The person providing you with product information (unless they are an IFA) are acting on behalf of the company they are employed by or have a tied relationship with. Many people buy products this way, usually because they feel more comfortable buying from a big name organisation and assuming, sometimes incorrectly, that they are bound to get a good deal. What they are actually getting is limited information from a small selection of products. Confusingly, some banks also have an IFA available upon request!
The FSA has recently proposed to changes to the current system under its Retail Distribution Review (RDR). We will therefore update these pages to reflect industry changes as and when they are introduced.
Your first job, buying a house, getting married, starting a family, saving for your children and planning for retirement... these are just some of the big stages in your life that put additional pressures on your finances. It makes sense to take control at each stage and revise your financial plans to match your changing lifestyle. If you are too busy to take the DIY approach, then an independent financial adviser (IFA) can offer a helping hand through the maze of products and financial planning strategies.
An IFA can help clarify your financial priorities and your short, medium and long-term financial goals. He or she asks detailed questions about your financial circumstances, your existing investments, debts, state of health, your future goals, your risk tolerance and what you want from life. Then he or she will advise you on how to develop a budget and make recommendations that will help you manage your finances and allow your money to grow for the future whilst ensuring you and your family are financially protected.
An IFA can also take the pain out of the research required and pinpoint the most appropriate products to meet your aims such as saving for your first home, your children's future or your retirement needs.
To help you arrive at the best route for your financial advice needs you can use this online interactive decision tree.
Independent financial advice is considered the gold standard of financial advice since it offers access to and guidance on a huge pool of products.
But before you go ahead, ask yourself the following questions:
If the answer to any or all of these three questions is ‘yes’, then independent financial advice is likely to match your needs.