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We all need professional financial advice at some time in our lives. But how do you find a good financial advisor that you can trust?
You might think you’ll never need a financial advisor – or any professional financial advice at all! But even stock-market savvy people need professional financial advice now and then.
A good financial advisor gives you impartial advice about your options. This could be for:
As a few examples. I’m a strong advocate of accessing financial advice every decade of your life. Things change – and so do your financial needs and priorities. It’s important to keep ahead of your financial decisions to make sure you’re not suddenly left short of cash in the future.
Some people prefer to find a financial advisor who covers everything. And that’s totally OK! Others like to use specific advisors based on their immediate financial questions – such as getting a mortgage or re-mortgaging. Using the same advisor for everything can be useful. You build a relationship and they understand your needs in a more holistic way. However, accessing specific advice can benefit your decision-making. Really, it’s up to you!
There are two main types of financial advisor: tied and independent.
I always suggest going for an independent advisor wherever possible. A tied advisor only offers specific products. For example, a mortgage broker within your local bank branch is a tied advisor. They will talk til the cows come home about their bank’s mortgage products – and nothing else. This means you won’t get the benefit of a whole of market search.
An independent financial advisor has whole of market access. That means they can also access hidden deals with lenders that you wouldn’t be able to find yourself. When it comes to things like a mortgage, an independent advisor acts on your behalf. They can negotiate with the lender in a way you can’t. For example, if your credit score looks dodgy but you have capital assets, an independent broker will manually apply for your mortgage. You’d only be able to apply through online channels – and can’t explain your unique situation. A broker increases your chance of being accepted for a mortgage or loan.
And independent advisor must be registered with the Financial Conduct Authority. It’s vital they offer the best option for your circumstances. If they don’t, and your finances suffer as a result of their poor advice, you could have some legal protection. This doesn’t mean that you can sue them when your stocks take a dive. Investments go up and down by nature! For example, if an advisor told you to put your money in a tax loophole vehicle, and didn’t explain the risks or alternatives, you could have protection when the tax man chases you down.
Some independent financial advisors cover everything from estate planning to pensions. Others specialise in one area like wealth management (read: legitimate tax reduction) or mortgages.
A specific independent financial advisor will have a more in-depth view of their area. They have their finger on the pulse: it’s what they do day in, day out. So, if you want specific advice about tax-efficient inheritance planning, an estate planner will know all the latest options.
However, a holistic independent financial advisor can take into account your current – and future – financial plans in a different way. Many people choose to hire an independent financial advisor within a firm that handles different things. That way, their advisor has a pool of knowledge to draw upon.
There’s no right or wrong way here. It’s up to you and the type of financial advice you need!
When you know you need financial advice, how do you find a good financial advisor? There are a few steps to take.
First, ask friends and family about their experiences. If they wouldn’t recommend a previous advisor, ask for those details too. It’s important to know who NOT to approach!
Next, use a service like VouchedFor. This helps you find a local advisor specialising in the area you need help. All listed advisors are independently vetted, so you know you’re getting a legitimate advisor. You can also check on the FCA register, too. I like VouchedFor as it also combines the next step: reviews.
Finally, look online for independent reviews of potential advisors you want to contact. Make sure you use an independent review site, like VouchedFor or Trustpilot. This will help you sift through testimonials from real customers. Always be wary of things like repetitive reviews that sound similar to each other. Independent review sites are helpful, but some nefarious companies will write their own reviews to boost their score! Read as many reviews as you can to find any patterns to help you spot potentially fake reviews.
You hold consumer rights when accessing financial advice, including:
You can’t sue an advisor for losing you money unless you can prove they deliberately misled you. This could be by withholding information, mis-selling a loan or mortgage, operating fraudulently, or acting for their personal gain (such as moving investments into a company they own without disclosing the conflict of interest).
Financial advice is still just that – advice – and the final decisions are entirely up to you!
A good financial advisor could set you back a few hundred pounds. So should you consider free advice instead?
Free financial advice is less detailed. However, it is a good place to start when you’re working out your options. For example, a mortgage broker offering a free half-hour consultation will tell you whether you’re likely to be accepted for a mortgage or not. A free consultation won’t be in-depth, though.
When you have significant amounts of money to invest, or want to do Big Things like move your pension investments around, it’s time to pay for financial advice. The cost of an advisor’s help is significantly offset by the savings (or wealth growth) as a result of their advice. It also makes sure you’re not falling into a scam trap or potential tax nightmare.
Here’s a more detailed article about free vs paid financial advice for more info.
Good financial advisors help with everything from stock market investments to pensions to inheritance tax planning. You’ll get the most out of your advice if you’re already armed with some knowledge about investing! Try these articles next.
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Greatly appreciated, very well-articulated and the detail is superb.