Major financial decisions are likely to be milestone moments in anyone's life, so it is important to ensure you are fully informed and up to speed with the various factors involved in the decision before going ahead.
Whether you are taking out a mortgage, starting a pension or committing to a big investment, getting professional advice is always recommended.
The best way to do this is to go to a financial adviser. New rules governing the way these professionals operate were introduced at the end of 2012, so anyone seeking financial advice should have a clear idea of what sort of guidance they are looking for and their eventual goals.
What do financial advisers do?
Financial advisers can provide information on various products and services, including mortgages. Homebuyers could look for an expert specialising in mortgages, or alternatively use a broker to search the market for you.
Another area in which financial advice could prove highly useful is pensions and annuities. The help of an expert can be invaluable when attempting to understand these products, which are potentially complex and represent an important investment for the future.
Financial advisers can also offer help with things like tax and investments, as well as insurance products such as life assurance, critical illness cover and income protection.
They are recommended for people who don't feel entirely confident doing their own research, or simply don't have the time.
'Independent' and 'restricted' advice
On December 31st 2012, new legislation came into force dividing professional financial advisers into two groups - 'independent' and 'restricted'.
These days, an independent financial adviser (IFA) can only describe themselves as such if they are able to provide information about the full range of investment products available from all providers.
IFAs must also conduct fair and comprehensive analyses of the options on offer, in order to make a suitable recommendation, and must not be under any influence that could prevent them from pointing you towards the best product for your circumstances.
Restricted financial advisers are limited in either the type of product or the providers they can recommend, or both. Restricted firms are prohibited from describing the advice they offer as 'independent'.
Advisers working for high street banks or building societies are likely to fall in the 'restricted' category.
On first glance, it might seem obvious that you should go to an independent adviser, to ensure you get a full and unrestricted representation of the market and the products on offer.
However, it is worth bearing in mind that some restricted advisers are described as such because they specialise in a certain area, meaning they could be better equipped to help you with particularly complicated products and services, such as pensions and investments.
When you are searching for the best financial adviser for your personal needs, one of the factors you need to take into account is cost.
Before December 31st 2012, some advisers did not charge a set fee and made their money by taking commission from product providers.
In a bid to improve fairness and transparency, the new regulations ordered advisers to charge a fee and state that fee upfront when dealing with clients. Commission and 'trail commission' - whereby sums are periodically deducted from products with ongoing payments, such as pensions - are no longer allowed on new business for financial advisers.
There can be significant variation in fees and methods of payment between advisers, so it is important to shop around. You should also decide how you want to pay the fee - upfront, or through regular amounts taken from the money you invest in a product arranged through the adviser.
Avoid the pitfalls
There are a number of pitfalls and 'no-go' areas when it comes to getting financial advice, one of which is using an adviser who is not registered with the Financial Conduct Authority. This would remove your right to seek compensation if their advice resulted in you losing money.
It is also important to check your adviser's credentials. Any professional offering financial advice must have at least a level four qualification in the national Qualifications and Credit Framework, as well as a Statement of Professional Standing.
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