Independent Financial Advisers (IFAs)
What is an Independent Financial Adviser (IFA)?
An IFA is an Independent Financial Adviser. They can offer you products from the whole range across the whole market, so they cover all the product providers and all the products.
What is the difference between a financial adviser and an IFA?
A financial advisor as a general term, will cover all financial advisors, and there are several types of financial advisors. An "IFA" is an independent financial adviser who will offer the whole range of products across the whole range of providers. A "tied" advisor will offer products just from one company they're tied to. It may be a bank, or one insurance company. They are only able to offer those products. We also have "multi-tied" advisors that are tied to several companies but not a huge range. It may be 5 or 6, but usually it will be fewer than that. They offer a limited range of products from a limited number of providers.
What advice can an IFA provide?
An Independent Financial Advisor (IFA) can provide very general advice. Some of them will be qualified in specialist areas, so they can give you further advice, but many Independent Financial Advisor's (IFA) are like general practitioners. If you go to see your doctor, they will cover a whole range of illnesses. An Independent Financial Advisor (IFA), in many circumstances, is like that. They are like general practitioners in financial services. They can help you across the board with all of your needs: life insurance, investments, protection savings, the whole area, really.
Are IFAs for individuals of companies?
IFAs work for both individuals and companies. Some will specialize in the corporate field, others will have clients that are both individuals and companies. They'll often find that the individual may be their client, and then if they have their own company, the director of a company will take over servicing the company too, so they'll arrange the pensions for the employees in the company if it's a group scheme.
What does an IFA do?
When you first go to see an IFA, they'll gather quite a lot of information about you. It will cover your income, your career, and that sort of thing so that they know where you're going in the future too. Obviously, a lot of these products are long term products, so you don't want to be tied into something that would only be suitable for you for a short while. They'll gather that sort of information. They will then find out from you what exactly you want, and you can come to some compromise. If it's not going to be doable immediately, you can have some compromise where they can put you on the path towards meeting your goals.
Why should I use an IFA?
There are a huge number of products that are available across the market. Deciding which one is the right one for you can be quite difficult. A financial adviser would be able to help you do that, and they'll be able to work out whether you need protection first. That's generally a first point of call, if you've got family responsibilities, particularly. They'll want to make sure that you've got life cover. If you have any spare cash, you want to make investments. If you want to plan for your pension and for the future, that's something your financial adviser will steer you towards.
Who regulates IFAs?
The Financial Service Authority is the regulator in the UK, and they cover all financial services. They make the rules. All firms have to be authorized and all individuals in the firms do too.
How do I find out if an IFA is authorised?
The Financial Services Authority has a public register of all authorized financial advisors. You can contact them, they have a website or you can give them a call, and they would be able to check the information for you.
What is a 'keyfacts' document?
A key facts document is something financial adviser would give to you when the first you go to see them. There would be two initially; the key facts document about all the services, which would detail exactly what services you could expect from the adviser, and it will let you know the type of the adviser they are, if independent, tied or multi tied and also the types of products they can advice you on. The other document would be the key facts about the cost of all services, which would detail the way you pay for the advice you're getting by commission or fee.
What qualifications do IFAs have?
All IFAs have to have benchmark qualifications. The most popular ones that we see at the moment are the Certificate in Financial Planning that's offered by the Chartered Insurance Institute, or the Certificate for Financial Advisers which is offered by the Institute of Financial Services.
Are there any advanced qualifications for IFAs?
Once an IFA has a benchmark qualification, they can go into further study if they want to. There's the advanced financial qualifications, and there's quite a number of them, and they're in specialist areas if you require. So if someone has particular interest in pensions, they would go that way, taxation, trusts, it's all part of financial advice. There are specialist qualifications for many different areas.
Should I pick an IFA with advanced qualifications?
The benchmark qualification for IFAs makes them a general practitioner and they will be experienced in many fields. However, you may feel more confident speaking to someone who has an advanced qualification in the particular area that you're looking for advice.
Are IFAs really independent?
IFAs are independent. They can recommend products from the whole range of product providers, and they're working for you. They're going to advise what's best for you.
How much does an IFA cost?
The cost of seeing an IFA can vary tremendously. Some will offer free consultation upfront. You get to meet them to see if you feel comfortable with them. Others will charge you for an initial consultation too. The costs can vary considerably. It can be anything from eight pounds upwards for a general practitioner. Some may charge from 250 pounds upwards per hour. It's very different depending on where you're located, the expertise of your adviser, and the qualifications they have. Those are some things that you need to consider when looking for an adviser.
Is it worth shopping around for an IFA?
You can shop around for IFAs. They all have to give you information about the services they're going to offer in the KeyFax documents and also the cost of their services, so you're perfectly within your rights to shop around for one. If you don't feel comfortable with one, even on a personal level, you don't interact particularly well with one, then yes, shop around, for sure. You need to be confident in your adviser.
What are the advantages of using an IFA?
If you use an IFA, you know that they're going to be looking at the whole of the market - all the insurance companies - to find the product that's right for you. One of the most important things is that they are working for you; they're going to find something that suits your needs.
What are the disadvantages of using an IFA?
If you feel very confident about the decisions you are making with the product, you may have done a lot of research yourself into the types of things you're looking for. You may not want to use an advisor because of the cost involved, and you can go directly to insurance companies if you want to do it that way. But generally, an IFA can help you. It may not cost a lot. There may not be a lot of information needed if you've done some research itself. You'll be able to put that on the table with the IFA, and they may just hope you make the right decision for you.
What are risks in involving an IFA?
If you use an authorized financial advisor, there shouldn't be any risks. There are so many rules in place, the Financial Services Authority makes sure that they abide by the rules. They do monitor firms, so they do know what's going on within firms. It's very important that you do find an advisor that's authorized and regulated. If they're not, it's illegal for them to be trading in the UK, so you have to be very careful about that. Make sure that they're properly authorized and you should be okay. If there are problems in the future, there is a complaints procedure that all IFA's have to follow, so you do have some protection there anyway.
Are IFAs paid by fee or commission?
You can pay an IFA in several ways. Some will take commission from the product provider when they give you the advice. You can pay others by fee. Others will offset the commission against the fee. It's something that will be talked about when you first have your meeting with the IFA, and they will discuss with you which way you'd like to pay. It's entirely up to you and there's no hard and fast way about it at all.
Do IFAs receive commission from the product providers?
Independent Financial Advisors (IFA's) will receive commission from the product providers as long as you agree to that. It's something that has to be agreed up front before any advice is given, so you'll know exactly what you're paying for from the advice to how it's being paid.
Do IFAs specialise in certain products and services?
Some IFAs will be specialists in certain areas. You'll often find in a big practise that there'll be a number of advisors. Many of them will be general practitioners, others will be specialists, so it may be that you start off seeing one advisor, and they'll refer you on to one of their colleagues who has a particular expertise in a different area. But you certainly do get specialists. When you're looking for an advisor, it's worth talking to them about the services they can offer and if they do have any special areas. If you're looking for pension advise, obviously you want to take if from a pensions advisor.