If you’re considering using a financial adviser to help you make more informed decisions about your investments, it is important to be aware of the different types to find out which adviser is best for you. Getting sound financial advice can make your money work harder for you and finding a reputable adviser will increase your chances of getting good returns on your investments.
All reputable financial advisers will be approved by the FSA – the Financial Services Authority. The FSA has a public register of all approved advisers, so if you’ve been recommended one by a friend or have found one you like, make sure you check their status on the FSA Register.
The three main types of adviser
There are three main types of financial adviser authorised by the FSA: independent, multi-tied and single-tied.
Independent financial advisers
Independent advisers are unbiased and are obliged to advise you on the best financial products in the marketplace. They are not tied to any particular provider.
This type of adviser is tied to advise upon the products of a limited range of providers.
These advisers are usually found in high street banks and building societies and are tied to one provider of financial products only. They can therefore only recommend the products of their employing company, which may not be the best on the market.
How much does financial advice cost?
The amount you pay for financial advice depends on the type of adviser you choose and the product you invest in. Typically independent financial advisers will charge a flat fee or a commission as a percentage of the total value of the investment, and this can be agreed before any investment is made on your behalf.
There has been some research by the Consumers Association which found that tied-advisers may actually cost more than independent advisers, contrary to what many would expect. Martin Lewis at Money Saving Expert suspects this may be due to the fact that people who are inclined to use tied-advisers are less likely to shop around for the best deals and most competitive advice and therefore may end up paying more as a result.
For financial advice that’s not related to investment decisions like life insurance and critical illness cover, there are a range of other specialists you can seek out. These may include mortgage brokers, specialist debt advisers and tax accountants.
Christopher Jones is a writer about business and finance including topics on consumer finance such as ISAs & pensions .0