Getting Financial Help – Who Should Dentists & Doctors Go To?
If you’re looking for help with your financial planning decisions, there are a number of resources you can turn to:
- The internet / media
- Friends and family
- Your own knowledge
Ideally, it’s likely that you’ll want impartial information upon which you can make objective decisions.
Whilst these three resources can be utilised, they may not ‘do the job’ as you’ll be hard pressed to get an objective view with no emotion (which often runs high when making financial decisions) attached.
The alternative is to seek advice from a financial professional.
The advantage with this route is that, ideally, they will be able to take an objective stance.
The problem with this route is that there are so many different types of financial adviser/ planner to choose from.
How will you know if you are dealing with someone that is 100% impartial, or a slick salesperson who’s focus is to sell you what they have?
Let’s look at the options available to you and also the steps you can take to find the right type of adviser / planner (from the 30,000 or so registered individuals authorised to provide advice) for your circumstances.
The first step is to determine what type of service you need.
Do you simply need someone to help you choose the right income protection plan, or do you need someone to help you create a ‘financial roadmap’ for the rest of your life, so that you’ll be able to see how your future will look until age 90/100?
The Financial Product Retailer
If you have an idea of the type of product you need, then this may be for you.
The ‘service proposition’ from an adviser that offers this service will probably be to uncover exactly what you need and then to match the need with a financial product.
It’s possible that the advice provided will focus only on the areas that you wish to discuss.
For example, if you want some form of life assurance to cover a mortgage / debt, your retirement income requirements may not be discussed at all.
Whether you end up with the best product available on the market will probably depend upon the type of adviser that you are dealing with.
A Tied Adviser is one that only offers the products from one financial institution. They represent the institution, not you (this point is crucial).
A Restricted Adviser is able to offer the products from a few providers. Obviously, as they have more choice to offer you by default this is a better option that dealing with a Tied Adviser.
The downside is that you can never be certain that the product being recommended is the most suitable as they may not have access to all the providers in the marketplace.
Perhaps confusingly, a Resticted Adviser can also mean someone that ‘restricts’ their service, for example they may only deal with clients that require help with their retirement planning.
At the same time, they may offer products from the whole marketplace within this category of retirement planning.
As you can see, it can get complicated!
So, if you are looking to deal with a Restricted Adviser make sure you do your research so you are fully aware of what type of service is being offered.
Next, an Independent Financial Adviser, IFA, (also referred to as whole of market) is able to choose from the majority of providers in the marketplace.
So if all you require is income protection, they’ll be able to select the plan that is most suitable for you.
You’ll notice that I say, ‘majority of providers’.
This is because certain providers, such as banks, will not usually offer their products through whole of market advisers.
Crucially, an Independent Adviser is the agent of the client, not any institution.
Paying for Advice
It’s important to understand that much of the financial services industry operates with a ‘product retailing’ model.
The motive is to find a need that you have and then ‘fill’ that need with a financial product.
We believe there’s nothing inherently wrong with this as much, especially when it can be used to help individuals purchase certain financial products (that they might otherwise have not bought).
If you want to increase your chances of being recommended the right product, we believe you should only deal with an Independent, Whole of Market Adviser.
Why would you take any chances by dealing with a Tied or Restricted (Product) Adviser?
It has nothing to do with how competent the adviser may be. It’s really about the range of products that they can choose from to help you purchase the most suitable one.
A good Independent Adviser should be open enough with you to show you the actual research that they’ve done so you can see why they are recommending certain providers.
So how should you pay for this service?
Since 2012 commission payments from product providers have been banned in the UK for all investment products (note that commission payments are still available on protection products).
This was instigated by the regulator as they had concerns that certain advisers where favouring one product over another if one was paying a higher commission payment, regardless whether or not if it was the right option for the client.
For example, an investment bond may have paid up to 8% commission on the amount invested, whereas a unit trust would usually pay a maximum of 3% initial commission.
Now the way it works is that you agree a fee with the adviser / planner up front, which could be a percentage of the amount you invest or a flat fee / hourly rate.
Now let’s look at the other type of service.
The Comprehensive Financial Planner
An adviser that offers this service will normally (but not always, so beware!) operate a financial planning process that is aimed at helping the client achieve their most important goals in life.
The process may include:
- What goals are important to you (and why) that you want
- What action are you taking to achieve these?
- Are you on track?
- If yes, can you reduce the amount of risk you are taking?
- If yes, can you spend more money without affecting your
current or future lifestyle?
- If no, can you invest more money / increase the amount of
risk that you’re willing to take?
Their service proposition is not about retailing financial products, although they will usually help clients buy the right ones if required.
Often, additional financial products are not needed!
I would suggest that you choose to work with someone who is willing to work with you to create your own Financial Plan.
You will have a great deal of involvement in creating your plan, so be prepared to engage in the process throughout.
So, how should you pay for such a service?
We are of the opinion that you should pay a fee. By doing so, the financial planner will be remunerated regardless of the outcome.
As a consequence, they should have no vested interest in the solutions they devise for you. Of course, there’s no way of guaranteeing this, but we’re sure it will increase the chances of receiving a 100% impartial service.
And remember, impartiality is the key.
How much you’ll pay will depend upon the adviser and their firm. We’ve come across a whole range of figures and ways of charging.
Personally, we favour fixed fees. That way, all parties know where they stand right at the start of the process.
A quick mention about financial adviser / planner qualifications.
There really is an ‘alphabet soup’ of qualifications that any type of adviser could possess.
Let’s look at the ones that we feel are the most important:
- The Diploma in Financial Planning is the the entry level qualification required to work as a regulated financial planner / adviser (with the ability to advise on investments as well as protection), accredited by the Chartered Insurance Institute.
Advisers qualified to this level may use the designation DipPFS after their name.
- The Advanced Diploma in Financial Planning enables professional advisers to develop their specialist planning capabilities, providing clear differentiation from the main body of advisers.
Once achieved, individuals may use the title ‘Chartered Financial Planner’. Note that a company can also achieve corporate ‘Chartered Financial Planners’ status as well.
- The Certified Financial Planner licence, an advanced qualification, being an internationally recognised certification awarded to individuals who have already proven their technical competency by passing appropriate examinations to the level of DipPFS (see above) or equivalent, but who are then tested specifically on their Financial Planning skills to become CFP professionals.
In the UK, the Chartered Institute for Securities & Investment (CISI) is responsible for the assessing and the certification of CFP professionals.
Once achieved, individuals may use the title ‘Certified FinancialPlanner’.
It’s important to be aware that the type of qualification the adviser has is separate to their service proposition and whether they are tied, restricted or whole of market. For example, it’s perfectly possible for a tied adviser to be qualified to Chartered level.
So there you have it.
The full ‘low down’ on the different types of adviser available. Just make sure you do your homework before you sign on the dotted line!
To find an adviser here are some resources: