What Is Independent Financial Advice, And How Do You Ensure You’re Getting The Best Advice Possible?
Efficient, professional advice can help to protect and build your finances to secure a better long-term future.
This is because financial advice is not as narrow as giving investment guidance or estate management. The world of financial advice is vast and all-encompassing.
It can help anyone get the specific guidance that they need, and, in doing so, protect their interests, save more money and – most importantly – give them peace of mind that they are being steered in the right direction, whether they’re saving for a house, looking to invest, or preparing for inheritance tax.
Being a broad area, however, it can be difficult to narrow down what financial advice actually means and how it can work for you.
First, What Do We Mean By Financial Advice?
Financial advisors are there for you when you are unsure about the next steps. As mentioned previously, the average earner – or high earner for that matter – does not claim to understand everything to do with finances.
At times, they can be tricky and complex, and this is when a financial advisor can step in to make sense of things. They can do this for a number of reasons.
You might need a financial advisor to handle your investments and ensure you are not placing your money in the wrong interests – for instance, a recent study showed that investors with a financial advisor earned 3% more per year than those without an advisor. You might have savings that you are attempting to split between investments, trusts for your children or grandchildren, and your property. On the other hand, you may be looking to gain more in the short-term – equity or pension release, for instance, are both matters that should be talked through with an expert first.
The right financial advisor can also help with retirement. This is a fact of life that everyone will have to deal with at some stage, and yet as many as 78% of Brits retire without any plans created by a financial advisor. Heading into retirement does not have to be a solitary venture, and it can make all the difference to have a financial planner who will ensure it is as smooth and comfortable as possible.
So, When Do You Need A Financial Advisor?
A financial advisor is needed for a variety of reasons, not least when there is a specific challenge in front of you that is new and unfamiliar. Say, for instance, you are going through a divorce – one of the most complex and stressful factors is the financial settlement between the two parties, so having an expert by your side is key.
Although it is possible for a separating couple to reach an agreement solely by themselves, this is not always so easy. Most of the time, there can be misunderstanding and conflict, which is why it is important to ascertain the complete financial position of each party, as well as the financial impact that the divorce might have.
Likewise, a financial planner might be necessary when you are purchasing a new home. Taking on too much mortgage debt can lead to several issues down the road, and it will make reaching financial independence all the more difficult – if not impossible. With the right advice, you can balance what you want in the moment with what you want in the future, ensuring that you make the right call in the short and the long-term.
- Ease Stress
This is, in many ways, the most valuable service financial advisors offer. According to a 2020 survey, 60% of UK residents reported that money is a significant source of stress. Sound financial advice can de-stress the concept of money and provide that peace of mind simply because it covers all of the areas that make money a concern in the first place. Pensions and retirement, savings, investments, mortgages, loans, inheritance tax; financial planners can be there to navigate the situation and help clients make the most out of what they have and ensure that the result is positive.
- Build On Assets
It’s also important to note that financial advice needn’t come into play only when you are attempting to save money. Inheritance, for instance, can mean that you come into a large sum of money without really understanding what to do with it.
Most parents are not comfortable discussing finances with their children, which means many heirs are hit entirely unaware by the amount that they receive. A financial advisor can ensure you are protected and guided to make the correct decisions to enhance the longevity of the inheritance – as well as ensuring every penny is going to the right areas of your life plan.
- Plan For Anything
If you are noticing a pattern here, it is because a financial advisor is ultimately needed in any stage of life. That’s not to say they are always necessary, but everyone stands to benefit if they have a financial advisor by their side – especially a financial advisor with whom they have developed a professional relationship, taking them through their career years, all the way to post-retirement.
What Is The Difference Between Independent And Restricted Financial Advice?
With this relationship in mind, it is also important to note that not every financial advisor is the same. In fact, they come in two different sizes: independent and restricted. If you are to receive the correct advice – or an appropriate relationship that stays the course – then it is essential that you distinguish between the two, and understand why one is so much more worthy of your time and attention than the other.
Put simply, independent advisors (IFA) can give unbiased and unrestricted advice. They have the freedom to span the whole market and ensure that the client is given the full picture, and that recommended routes are not based on some sort of necessary bias. Restricted advisors, on the other hand, typically specialise in a particular area and can only offer advice based upon a limited number of companies that they are paid to represent. A good example of this is the mortgage advisor most banks will offer. They can offer financial advice about planning for a mortgage, but the products they suggest to you will be products that their bank offers.
Both advisors will be qualified and registered, whether that’s a Level 4 Qualifications and Credit Framework or an SPS (Statement of Professional Standing). However, an independent advisor offers much more valuable advice.
What Are The Downsides To Restricted Financial Advice?
A restricted advisor will generally only offer advice on a limited range of products, rather than conducting independent research on the entire marketplace to determine what is right for you.
An independent financial advisor, on the other hand, has no restrictions on what they offer and will always choose the best option based on your best interests and the market as a whole.
To break it down further – and to help aid in your decision – here are simplified point-to-point reasons as to why independent advice is often more beneficial than restricted:
- The services or products that are offered or advised are within a restricted proposition. They are not necessarily the most appropriate option in the market, but rather the most appropriate option from the restricted solutions that the advisor is authorised to give.
- Without full knowledge of the open market, the advisor will not be able to identify a potential option if it is outside of their range of field.
- If a restricted adviser specialises in a particular field, then they might not be able to advise on your financial situation as a whole.
- A restricted company will choose a panel based company partnerships, cost or investment choice. In terms of the client, not all of these factors are going to be beneficial or appropriate for what you are looking for.
- The services or products that an independent advisor chooses is the most appropriate solution for you, based on full market analysis.
- Being involved in a number of fields – as discussed earlier – the advisor will be able to assess your financial situation holistically, with a wealth of knowledge that can aid you in finding the right path.
- Being able to advise on your financial situation without restraints means that you can stick with that advisor and build up a relationship which benefits your life going forward.
- This means that you are not only getting solid financial advice, but consistent advice that is tailored towards your life as a whole.
How Can You Tell Whether A Financial Advisor Is Truly Independent?
If you’re going down the route of attaining a financial advisor, you might be wondering how to tell if they are truly independent. In any situation like this, it is important to check the firm that you’re dealing with is on the register and regulated by either the PRA or FCA – or both.
A free consultation is also beneficial, as you will be given clear information on the services the advisor is offering and must be told outright whether that advice is independent or restricted. You can also take this opportunity to scope out the ways in which the chosen planner will be able to help.
The next thing to do is list out what you want your advisor to do and what your own personal financial goals are. The advisor can then specify how they will help and work with you to achieve those end goals. It’s also important to research other clients’ experiences and find trustworthy and relevant reviews that match what you are looking for.
For the most part, reviews will give you a clear understanding of whether an advisor is truly independent, as well as how they operate. Not just in a professional sense, but a personable one too.
Remember, you will want to feel comfortable with your advisor on a personal level, otherwise it will be challenging to establish a long-term relationship. Ensure that they are attentive and are going to do everything they can to set you on the right financial path.
What Should You Look For In A Financial Advisor?
When it comes to choosing your financial advisor, you should always be looking for the best. In this way, it is not just about having a personable and professional advisor, but an advisor who has comprehensive expertise and uses market leading technology.
Your financial advisor will also need to be specific to your own situation and location, which means you should look for an advisor with a good reputation in the local community. Even with great self-promotion, you can’t feign a genuinely strong position among clients.
As well as this, they should also offer an ongoing service, which means annual meetings to review the plans put in place, as well as regular communication on account performance, tax changes, legislative changes and any market updates that may impact you. An annual cash flow forecast will also be beneficial, as well as a client portal to track your accounts and a regular newsletter that will ensure you receive the latest updates on the financial landscape.
Most of all, however, you should ensure that the financial advisors are there for you when you need them. Ongoing access is one of the key factors to having peace of mind about your finances. As mentioned before, one of the most significant causes of stress and anxiety in the modern age is money. Financial advice is for anyone, and it is there to help you cut out that stress and anxiety with a fully-fledged plan that you can rely on.
If you are about to venture into a difficult financial situation, or if you are simply looking for a professional to support and guide you, then get in touch with us today.
Perennial Wealth offers truly independent financial advice that is centred around the client. This means you can ensure your finances are protected and – most importantly – placed into the right areas to maximise your wealth and keep your life as simple as possible.