What To Look For In A Wealth Advisor

When you start to consider getting financial advice, whether it be for investing, or pension and retirement planning, it can be daunting:

• Will the advice cost much?
• Will the advice make me better off?
• How do I choose the right one?

Here is Investor Weekly’s checklist for selecting good value financial advice that will work for you:

Registered and qualified

Financial advisors must be qualified and registered in the FCA register. When you first make contact with a potential IFA they should give you a business card or electronic equivalent which has their FCA number.

You can then check that they are on the FCA register, in which case they have been fully vetted and are qualified and regulated.

Independent Financial Advisor

Only ever use an Independent Financial Adviser (IFA).

This term is regulated and policed under financial services laws called MIFID II which began on 3 January 2018.

Independent Financial Advisors can give advice on all financial matters and looks across the whole of the market. This is the important part, as they can find the best products for you in the market at the time.

Advisers who are not independent do not look at the whole of the market will be tied to a small number of firms - or often one firm - and can only recommend products from those firms.

These are called 'restricted advisers’ but they probably won’t use that term when introducing themselves to you.

BBC Money Journalist Paul Lewis comments, “Never ever use an adviser who is restricted by products. If you ask 'do you offer independent financial advice' and the answer is anything but a clear 'yes' then reject them. Many work for a bank or insurance company and of course only recommend you buy their products. That is just sales masquerading as advice.

Optimal Returns

A quality independent advisor will be able to explain the following to you:

• What is a optimal return, given your risk profile and circumstances
• What are the likely ups and downs that you need to be prepared for
• Why their proposed strategy is better than the alternatives

There are always lots of entrepreneurial investment schemes in the market, promising huge returns, but with that goes huge risk. Inevitably while some succeed, many fail.

The job of your financial advisor is to invest your money - whether it’s your pension, ISA or other investments - to optimise your returns without taking risks you cannot afford.

Pricing

Financial advisors are NOT allowed to be paid in commission.

They can charge in one of these ways:

• Flat fee (agreed in advance)
• Hourly rates
• Percentage of funds under management
• Exit fees - beware!

Beware of hourly rates and large upfront percentages

Solicitors, old fashioned accountants and even garage mechanics have made fortunes by spending hours on tasks, and then presenting customers with a huge bill that they can’t do anything with but pay.

By charging a percentage fee for ongoing management, your advisor has a healthy motivation to be focussed on making good decisions and achieving good returns as they profit from the growth of your wealth. So ongoing management based on a reasonably low percentage makes sense.

However, this publication advocates asking for planning and set up work prior to managing the funds to be based on a fixed fee (agreed in advance).

This forces the advisor to set out the work they will do and explain the value of that work rules they still charge you for this ‘advice.’

It also means, if you don’t like the plan they put forward you can walk away rather than invest with them.

Being able to walk away from an advisor or provider is an important right to maintain, because things change.

Beware of exit fees

Do not agree to invest or move your pension to an advisor who charges exit fees.

You may be very happy when signing up, and for many years to come, but if things change in your life or in the service you receive you want to be able to leave without being hit for a exit charge.

See related article how much do advisors charge

Online video meetings

Many advisors will offer to visit you, or invite you in to their comfortably appointed offices.

Some will even take you to lunch - beware advisors that offer this kind of informal meeting, no matter how glamorous the restaurant choice. This can be a pleasant and even exciting way to meet and discuss your finances.

It is a natural way to build rapport and trust.

But this is a double-edged sword.

Advisors are human and can make mistakes.

Face to face meetings, while very natural,

cannot be recorded in the same way as an online video meeting.

If there is ever a problem, or there is simply a need to look back and understand why a decision was made, the online recording is the best solution.

Most people can think of a time when they understood something in the moment, but later after they left a meeting, lost that clarity of their mind.

Online meetings can be recorded in full, including all the information presented.

With a video record, the points can be replayed as much you need to.

It is also convenient and cost efficient.

Family members can also join from different locations (including work during a break rather than taking a day off).

Plus advisors don’t need to charge you for travel time or their expensive office coffee, reducing upfront costs.