Financial AdviserA financial adviser is someone who can help you get started with a savings/pensions plan, guide that plan, and assist in setting goals for the future. He or she is an objective party with experience and relevant education who can assess your current situation and ask questions to help you outline where you want to be at various points in the future. Knowing that, the financial adviser will help you create a plan to reach your goals, taking into consideration your current situation, your income, and your tolerance for risk.
Financial advisers may be paid from the company that employs them, from commissions from the investments they make for you, directly from you, or from a combination of all those things. Ask any potential adviser how he or she is paid; the method may make a difference when you consider using his or her services.
Typically, financial advisers employed by a firm are "tied"—in other words, they are tied to one company's products, and promote them exclusively. This is fine if the company provides exactly what you need; it can also mean that you don't even hear about other products that might be better for you. Tied financial advisers are typically employed by a financial services company.
Some financial advisers are multi-tied, meaning they promote products from a selection of companies' offerings. They are typically paid from commissions obtained via those sales. They may work for a company, or be self-employed.
Independent financial advisers are required to offer their clients the option of paying for the advice via a fee (which you can find out in advance), or via commission. Independent financial advisers offer the broadest range of products, since they are not tied to any company or companies.
All UK financial advisers are regulated by the Financial Services Authority, an agency of the government that issues licences and keeps track of complaints regarding a company or adviser. Financial advisers, whether self-employed or working for a company, must pass an exam and become licensed before they can offer paid financial advice.
All financial advisers must have available a Terms of Business letter, a 'Key facts' About our Services letter and a 'Key facts' About the Cost of our Services letter. You can also request a letter comparing the advisor's commissions or fees against other advisers or firms. This will allow you to compare the services and fees and make a more informed decision.
One primary service of a financial adviser is to help a client prepare for retirement. A financial adviser has knowledge regarding savings rates, risk, taxation, asset allocation and other factors that can make thousands of pounds of difference by the time someone reaches retirement age.
While many people consider financial advisers after they've already accumulated some assets, an adviser can actually have a much larger benefit when hired earlier, when a person is still accumulating assets.
Learning to budget and save early in life, which a financial adviser can help you with, can mean the difference between allocating assets and watching other allocate them. The benefits of that can far outweigh any cost associated with hiring the financial adviser.