If you’ve suddenly inherited a sum of money or you’re approaching retirement age, it can feel overwhelming when you consider what you should do to end up in the best financial situation. Read our guides to find out what financial advice is, what types of advice are out there and how much it will cost you to get different types of financial advice.
Financial advice is given by a regulated financial advisor who will provide you with personal recommendations on financial products, investments or plans based on your situation. Unlike financial guidance, advice recommends what you should do rather than what you could do.
Providers of financial advice are responsible for the suitability of the recommendations they make and are liable for the accuracy and quality of it. Therefore, if you believe that you have been mis-sold or ill-advised, you are protected by the law.
You might want to seek advice when you go through a significant change in your life, for example you have bought or are planning to buy a property, you are nearing retirement age or you are looking for advice on inheritance tax.
In most cases, your first meeting with a financial advisor is free, as they use that session to find out about you, your circumstances and your financial needs. It’s also a meeting for both of you to determine whether you could work well together.
After that initial meeting, how much it costs to see your advisor will depend on what you have asked your financial advisor to help you with. Some charge fixed fees, hourly rates, a percentage of the money you want to invest or a mixture of all three.
Financial advisor hourly rates tend to vary between £75-£350, while the average percentage sits between 1%-2% of the amount you want to invest. Find out more about financial advisor fees.
There are a few things that you should consider and prepare before seeing a financial advisor:
Evaluate your financial situation: Get an idea of your income and expenditure, list all your assets, and grab any financial documents you think will be useful. Your financial advisor should tell you what to bring, but you may need to bring bank statements and tax returns if you do them.
Make sure you’re aligned: If you have a partner, make sure you speak to them about your finances, even if you keep everything completely separate. There may come a time when you want to combine your finances, leave sums of money to each other, or maybe not – but it’s important to be aligned with your partner before you make any decisions.
Consider your goals: What do you want to do with your money? When do you aim to retire? Have a think about your financial goals and write them down. They don’t have to be fully-formed objectives, but have an idea of what your aims are to have the most productive meeting with your financial advisor.
Think about your family’s needs: Consider what your family may need in the future. Do you want to help your children pay for university, or ensure you have enough money to pay for an elderly family member’s care? Make sure you think about how you might want to support your family in years to come.
Prepare a list of questions: Go armed with a list of questions that you want to ask your financial advisor. Even if it seems silly, it’s worth asking – you want to make sure that you understand everything when it comes to your finances.
Only you can decide whether it’s worth paying for a financial advisor. Whether or not they’re worth your money will depend on your financial situation and whether you choose someone that you feel is aligned with your goals and acts in your best interests. That’s why it’s important to compare between a few different financial advisors to ensure you find one that matches your personality and you feel like you can trust. Make sure you read reviews or get recommendations from others to help you decide.
A financial advisor could save you money in the long term. This is because they can give you sound advice to stop you from making mistakes with your money. They can also help you find the best rates on products like life insurance which could save you money over the course of your policy.
It’s important to remember that while financial advisors can advise you on the best investments which could save you money compared to trying to invest without any help, your investments could still go down as well as up. As long as the financial advisor has given you all the information and explained everything to you in the correct format, you cannot recover any of these losses. You can only seek compensation if it’s found that you were misinformed or mis-sold a product.
Regulated financial advice means financial advice that is regulated by the Financial Conduct Authority (FCA). All independent financial advisors (IFAs) have to be regulated to operate within the law. They are liable for the accuracy, quality and suitability of the recommendations they make to you, and if something goes wrong you can take your complaint to the Financial Ombudsman or Financial Services Compensation Scheme (FSCS).
On the other hand, financial guidance is not regulated. This means that if things go wrong, you may not be able to complain to the ombudsman or FSCS. Financial guidance tells you what your options are, but they won’t tell you what products might suit you or name any specific companies. It’s left down to you to make the final decision about what’s right for you.
The average person will most likely need a financial advisor at least once in their lives. Most people will experience at least one big life event, such as buying a home, setting up a pension, or inheriting a sum of money, and when these events happen it can be useful to seek financial advice to ensure you’re making the best decisions for your circumstances.
There’s not really a set amount of money you should have before talking to a financial advisor. It all depends on your personal circumstances and what type of advice you are looking for. For example, you might want to set up a pension which doesn’t require you to have a lump sum of money – you can put away small amounts whenever you have them available. However, if you are looking to invest in stocks and shares, you might want to have a larger sum to make a financial advisor’s fees worthwhile.
Yes, you should be able to trust your financial advisor. If you can’t, you should sever ties with them and look for another one that you can trust.
Financial advisors are strictly regulated by the FCA and have to adhere to regulations, have an annual Statement of Professional Standing (SPS) and take part in continual professional development to stay on the Financial Services Register. That means that you should be able to trust them with your finances.
That being said, just like anyone in life, you may not gel with the first financial advisor you speak to – everyone responds to others in different ways and gets on best with different personality types. That’s why it’s best to find a few financial advisors and speak to all of them to find one that you feel comfortable with.