Financial Advice Defined
What is a financial adviser?
A financial adviser is someone with expertise in the whole range of financial products. They can help you through decisions that you're going make through your life. It can be when you're staring a job, for when you start saving to buy a house, getting a mortgage, investing for your pension and things like that.
Why would I need financial advice?
There are a thousand of different types of products around and a financial adviser will help you find the one that's right for you. It could be that you need protection if you're getting married and you want to provide for your family in the event that something happened to you. You might want to think about your time and planning fairly soon in life. The earlier you start, the better. So that's a good one to start with early on and a financial adviser will be able to put you in a direction, one that's going to be right for you.
What is a 'product'?
A product is what we would call a policy or a contract that you have with an insurance company, which we would refer to as a product adviser. A life insurance, for instance, would be a protection product. Pension would be an investment product because you're planning for your retirement. Your savings that would be an investment product too. That's basically what we call a product.
What is a 'product provider'?
A product provider is a company that designs and distributes products. It could be a protection product like a life insurance or an investment product like a pension. They will then distribute them as they are the contracts you would have that planning your future.
What is an authorised financial adviser?
An authorised financial adviser is someone who has the authority of the financial service authority to conduct the business. All financial advisers in the UK have to have authorisation; they can't practise legally without that.
What is the Financial Services Authority (FSA)?
The Financial Services Authority is the regulator in the UK. They make the rules that all financial advisers have to abide by. The rulebook is very long, they don't just cover financial advisers, they cover banks, building societies, indeed anyone in the financial service sector is authorized by the Financial Services Authority.
What is 'risk appetite'?
Risk appetite is how you would feel about taking out a product. Some products aren't risky at all. If you want life insurance, that's not really risky. You know that if you die, it's going to be paid out. But, for instance, if you're investing, you might want to take more risk with a pension if you've got a long time to plan for your retirement. If you're getting nearer to your pension age, you would want to be more cautious, because obviously you wouldn't want to risk losing any of the money you're investing and so your risk appetite basically changes at different times of your life. At different times of your life you might have different risk attitudes to different products. It varies from person to person, too. Some people won't want to take a risk at all with any of the money they have. Others will have a spare bit of cash they want to put into savings and they maybe have to risk that in return for a higher benefit, or a better return from their product.
How does my risk appetite affect my financial decisions?
Your risk appetite will make a huge difference to the product you have necessarily or the funds you're investing in. You have to be aware of what your risk appetite is. The longer you have for the investment, then you may want to take more risk. You may not want to risk any of your money at all. If you want higher returns, then obviously there's definitely going to be high risk, or higher risk anyway. It's something you have to bear in mind when you're considering what products you take.
How does a financial advisor decide what products I need?
When you first go to see a financial advisor, they will usually ask you some information about yourself, about your circumstances, how much you're earning, any other products that you may already have, and that sort of thing. Based on that and also what you're looking to achieve from the visit to the advisor; they will ask you if you're saving for anything in particular, or if you're looking to buy a house. This is the sort of information they will gather and from there they will decide which product will best suit your needs.
