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4 questions to ask before choosing a financial adviser
From costs to qualifications, we explain how to get the most out of financial advice
Nearly 25 million people in the UK have never accessed any kind of financial advice or guidance, according to a new report.
St. James’s Place (SJP) found a third of people who hadn’t had guidance didn’t think it would be necessary for their individual situation.
However, SJP's survey claims that more than eight in 10 of those who had received financial advice said they have benefited mentally or emotionally as a direct result.
Here, Which? lays out the key questions to ask to ensure you can get the most out of financial advice.
Please note: the content contained in this article is for information purposes only and does not constitute financial or investment advice.
1. What do you charge, and how?
Financial advisers can apply charges in different ways. The most common is by taking a percentage of your investment.
According to the Financial Conduct Authority (FCA), the average is 2.4% of the amount invested for initial advice and 1.9% a year for ongoing advice, with product and portfolio charges factored in.
Some advisers instead charge a flat hourly rate. The average rate in 2023 was £196 per hour, according to VouchedFor.
Often, advisers don’t display their charges on their website. Which? research in 2022 found that 15 of the top 20 firms in the FTAdviser Top 100 Advisers list made no mention of their fees online.
In an initial meeting with an adviser, you can get a firm quote of how much advice will cost based on your specific circumstances and needs. You may wish to get quotes from a few advisers to compare your options.
Even if you’ve been with your adviser for a long time, you can ask about costs if you’re unclear on where your fees are going. You could find you’re paying more than you should be and need to make a change, whether that’s to cheaper products or another adviser entirely.
Your financial adviser should be transparent about how much you’ll be paying in fees, both to them and for the products you’ve invested in.
If an adviser suggests there are ‘no fees’ because they’re taking money from the investment, they’re misleading you.
2. Are you independent or restricted?
When you work with a financial adviser, they use their knowledge of your circumstances and how much risk you can take on, as well as their investing expertise, to pick products for you.
An independent adviser can invest your money across the whole market, outside the influence of any product provider.
An adviser could be restricted in the sense they can only advise on one area, such as pensions.
Some advisers are attached to a company and can only recommend their products. You should generally avoid this option, as it's likely you won’t be able to access the best funds at the lowest cost.
How to find a financial adviser.
3. What qualifications or memberships do you have?
Beyond the basic level of qualification a financial adviser needs to have to give advice in the UK, there are accreditations and certificates available that reflect a greater depth of skills.
One example is an ISO 22222 certificate, which means an adviser has had their work assessed and meets an internationally recognised standard, and that they are subscribed to an ethical code of conduct.
Beyond general qualifications, advisers can pick up specialised certifications. Having an adviser that can advise on a broader set of circumstances can give you more value for your money, especially to navigate any unexpected changes in life.
If, for example, you’re looking to purchase an equity release product, you should only consult advisers with CeRER, CER, or ERMAPC qualifications.
Which? has partnered with HUB Financial Solutions, which can also advise on whether equity release is right for you, and how to take out a suitable product if it is.
If you take out an equity release product recommended by HUB Financial Solutions, Which? will earn a commission to help fund our not-for-profit mission.
Besides qualifications, advisers can also become accredited members of societies, which show their expertise in an area.
Advisers specialising in later-life care funding can be accredited by the Society of Later Life Advisers (SOLLA), and you can find advisers in their directory.
Similarly, if you're interested in ethical investing, you should look for advisers who are members of the UK Sustainable Investment and Finance Association (UKSIF).
4. Are you regulated by the FCA?
To make sure the advice you receive is safe and in your best interests, it’s important to check that your adviser is regulated by the Financial Conduct Authority (FCA).
If an FCA-regulated financial adviser recommends inappropriate investments that cause you to lose money, you may be able to complain to the Financial Ombudsman Service in an attempt to recover some of the money you lost.
As extra security, ask for a hard copy of your adviser's recommendations and if you don't understand something, ask them to explain it.
You can double-check your adviser is on the FCA register by searching their name. If they have a common name, you can narrow your search down to a specific area, and the results will say to which firm the adviser has a connection.
- Find out more: are your investments protected?
Do I need financial advice?
Financial advice can be helpful in a number of circumstances, including investment, pensions and tax planning.
However, it's not always the right option. To learn about the pros and cons of taking financial advice, the types of advice available, and more on the fees involved, see our comprehensive guides:
- How to find a financial adviser
- How much financial advice costs
- How to get retirement and pension advice
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4. Alan Boswell Insurance Brokers Ltd (FRN 301), for the introduction of non-investment landlord insurances, who are authorised and regulated by the Financial Conduct Authority to provide advice and arrange insurance contracts. Alan Boswell insurance brokers Ltd is registered in England at Prospect House, Rouen Rd, Norwich NR1 1RE, company number 02591252.
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