When you are entering the world of finance, it may seem to you sometimes that everybody is trying to make a buck from you. So perhaps you find it hard to know exactly whom you can trust.
This may apply especially to an independent financial adviser. A great deal hangs on the advice the IFA gives you being correct. So how can you be sure that the advice is trustworthy?
Well, there are some points you can bear in mind that may help you to make up your mind about whether you can trust your IFA.
1. Your independent financial adviser has no contractual ties to the companies or providers whose products they select. When you consult someone with the job title “Financial Adviser” at a bank or building society, you need to be aware that this person is a “tied” adviser who has a contractual obligation to that company. The IFA is free to choose from the whole market – hence the name “independent”.
2. The independent financial adviser is your agent. You are their client in the same way as you are the client of your solicitor or accountant. That means the IFA is professionally bound to act in your interests.
3. When the independent financial adviser has provided advice or a recommendation, they have to follow this up in writing, setting out the reasons why they have provided this advice or recommended this product and why this should be suitable for you. This gives you the chance to consider the advice in detail, and assess whether it is in your best interests, before acting on it.
4. Of course the independent financial adviser is paid for giving advice – this is how they make a living. However, before you receive any advice, the charges must be clearly set out and explained to you. The charges may be paid directly to the adviser by way of a fee, or the adviser may receive commission, which is added to the charges you pay to the provider. A good IFA will usually make no charge for the introductory session, during which you can find out about the adviser’s qualifications, how long he/she has been practising etc., as well as whether he/she is someone you can get on with.
5. Under the regulations, the independent financial adviser is obliged to give you the option of paying entirely by fees, rather than by commission. So you can use this option to dispel any doubts as to whether the advice is influenced by the commission on the product.
Of course an independent financial adviser cannot foresee future events. The adviser uses his/her experience and skills to select the product he/she judges to be most likely to perform well and suit your requirements. This may occasionally go wrong, especially in the current financial climate. But the adviser is professionally bound to act in your best interests and is as keen as you are for it all to go well. After all, the adviser’s reputation depends on you being satisfied with the advice you get.