Finding financial advice that you can trust isn’t as easy as you would imagine. Doing a search for ‘financial advice’ on the internet returns more than 20 million hits! It’s hard to know where to begin as there are so many different organisations trying to sell you so many products, some with advice and some without.

If you are starting from scratch, a good place to begin is by asking friends and family if they are able to recommend anyone. Even the experts acknowledge that this is a good idea. ‘A satisfied customer is the best way of finding a good financial planner and is a great place to start,’ says Sue Whitbread, communications director of the Institute of Financial Planning (IFP). If you take this route, bear in mind that the financial needs of your family and friends could greatly differ from your own.

The general approach

If this proves unsuccessful, there are lots of other services that can help you with your search. One of the best-known is the service provided by IFA Promotion (IFAP), which lists details of independent financial advisers (IFAs) throughout the UK. If you enter your postcode online, IFAP can help you find an adviser in your area (see contact details below). The website even lets you specify the expertise you would like your adviser to have – offshore or retirement planning, for example – and the relevant qualifications they possess. Alternatively, you can search the Financial Services Authority’s (FSA’s) website for a list of authorised advisers (see contact details below).

Whatever route you choose, it is important first to ask if the adviser and the company they represent is authorised by the FSA. If this is the case, you will be protected by the regulator and have access to the Financial Ombudsman Service, which can help you settle any disputes that may arise between you and your adviser and ensure that compensation is paid out where appropriate.

The next step is finding out whether your chosen IFA meets your individual needs. Some advisers can only give you specific advice, while others can give you more general advice. ‘I would say the first requirement is to find an adviser who is able and prepared to advise on all types of investments, not just a range limited to, say, OEICs [open-ended investment companies] or life company products,’ suggests Chris Fletcher, head of retail for Baillie Gifford.

How it works

Usually, IFAs will let you have a free initial consultation with them to inform you of the services they provide. During your consultation, which doesn’t oblige you to commit to using their services, your financial adviser will conduct a “fact find” to ascertain what you are looking for. This is where you can find out whether the adviser suits your needs. ‘It is important to find out the range of services that your adviser provides. For example, in our case we only deal with high-net-worth individuals,’ says Mark Worrall, managing director of the Route Group.

You should also use this opportunity to find out more about the person who will ultimately be in charge of your finances and your future. Don’t be afraid to ask about their experience and when they qualified, as well as for background information about the company they work for.

It also helps if you come to your initial consultation prepared, so that your meeting is productive and the adviser has a clear idea of where you stand financially. ‘Before your exploratory meeting you should draw up a list of your assets and liabilities in the form of an overall budget statement, as that information is invaluable to the financial planner,’ advises Whitbread. ‘Also, give some thought to your finances, consult your partner and think about what your family’s goals are. Think about your retirement and whether you want to put money away for something such as your child’s tertiary education.’

The question of cost

The next thing you need to establish is how you are going to be charged for advice. These days, IFAs increasingly charge a fee, but some are paid by commission or a combination of the two. ‘Fees vary and there is no general rule as to how much it can cost. It is usually based on the type of service and the nature of the work involved. So that is why it is important to go to more than one financial adviser and get more than one quote, so that you can compare them and see if you are getting a good deal,’ adds Whitbread.

Finally, you should ask if your financial adviser is tied to selling you any particular products or if they can provide you with a choice. ‘You should ask your adviser what they are regulated to do, irrespective of what your circumstances are. In my view, it is important that an adviser acts as an agent for the client and not the product,’ says Fletcher.

A broader choice

You are not limited to using a financial adviser, independent or otherwise, to get financial advice as there are professionals, such as stockbrokers and accountants that can help. If you decide to seek the advice of a broker, you need to ensure that you find one that meets your needs. Advisory services are offered by almost all members of the Association of Private Client Investment Managers and Stockbrokers (APCIMS) (see contact details below). Do check, however, that the broker provides advice, as some will only execute deals under express instructions from you.

Just like IFAs, advisory brokers will typically conduct an initial interview free of charge or obligation to find out what your needs are. Brokers used to just advise clients about stocks and shares, but these days they offer much more.

Going it alone

If you have confidence in your financial knowledge it may be worthwhile to cut costs and construct your own portfolio. However, be warned: if you do select the DIY route, you will need to ensure that you have time to do thorough research and to constantly adapt your portfolio to meet your needs. ‘Starting something is fine, but how do you subsequently monitor your assets and follow the market. It is not just about confidence, it’s about your ability to measure risk,’ says Worrall.

If you feel you have the knowledge to construct your own portfolio, technology has made it possible to go it alone through the internet. Over the past ten years, the provision of financial advice has evolved in leaps and bounds, and financial platforms can give you the ability to manage your own account with access to advice should you need it.

‘A number of factors are helpful in promoting the availability of good advice, which is of course a topic now being examined by the FSA,’ says Fletcher. ‘One of these factors is the development of communications technology supporting the growth of broadly based administrative platforms, which offer different investment forms – such as investment trusts and other equities, and OEICs – as well as offering an interest-bearing cash account. The basis of adviser remuneration can be agreed by the customer with the adviser.’

Running your own portfolio

Alternatively, you can manage your portfolio through execution-only brokers (see contact details below). ‘They all offer a very reasonable service for those who feel they don’t need advice,’ adds Fletcher. And you are not completely on your own even if your forego the services of an adviser or broker. There are plenty of websites that can provide you with information and advice on collective investments as well as non-investment products, such as insurance. This group includes investment comparison websites (see contact details below).

There is a wealth of information available, but the general consensus is that it is best to get financial advice, particularly if you are unsure or don’t have the time to follow your investments closely. Chris Fletcher adds, ‘There are a number of people out there who know what they are doing. I am hoping that the number of people who are financially savvy will increase, and I believe that will happen with the greater availability of financial data.’

Contact details

Access IFA Promotion’s database online at www.unbiased.co.uk or call 0800 085 3250

The Financial Sevices Authority’s (FSA’s) website, www.fsa.gov.uk, includes a list of authorised financial advisers APCIMS members can be found using the directory on the website www.apcims.co.uk or by calling 020 7247 7080

You can also find advisory brokers on the London Stock Exchange’s website, www.londonstockexchange.com, or on the general financial website Find.co.uk

Execution-only stockbrokers:

Stocktrade – www.stocktrade.co.uk
Selftrade – www.selftrade.co.uk
RBS Online – www.rbs.co.uk

Investment comparison websites:

www.moneysupermarket.com
www.moneyfacts.co.uk
www.moneyextra.com

This article is from the September 2007 issue of What Investment.