Types of Financial Advisers

For every individual, there’s a time when each one of us will have to seek financial advice. Most of the time we inevitably turn to financial advisers to help us choose an ideal financial path that is coherent with our individual goals and objectives. In the search for a suitable adviser, you will encounter many titles and categories of advisers. However, it is crucial to know beforehand the advisers that are available and the kind of advice you’re seeking to enable you to determine which financial adviser will suit you.

There are various avenues in which people look for advice. They include:

  • pensions
  • stocks
  • mortgage
  • life insurance
  • retirement
  • home insurance
  • car insurance
Photo Credit:  usnews.com

Photo Credit: usnews.com

This list has not exhausted all avenues, but it outlines most of the avenues people look for advice from financial advisers.

In a general sense, a financial adviser is supposed to advise you on how to utilize certain financial products in order to fulfil your personal goals and objectives. A financial adviser could either be an individual, company or a group of companies who possess vital financial knowledge, experience, and expertise.

It is important to know that all Financial Advisers in the UK are regulated by the Financial Conduct Authority (FCA).This is the regulatory body with which all legitimate financial advisers must be registered. To follow up on the registration of a financial adviser, you should utilize the Financial Services Register.

We have two types of financial advisers in the UK. They include:

  • Independent advisers
  • Restricted advisers

Independent Financial Advisers are individuals or companies that provide financial advice on nearly all available products in the market. They are able to advise you and guide you on all types of products that may suit your individual needs and preferences. Their scope is not limited to one particular market; rather they deal with products from virtually all firms across the financial market. Their advice could be said to be an unrestricted one and unbiased one.

The characteristics of Independent Financial Advisors include:

  • They give a comprehensive market analysis
  • They are unbiased, with no undue influence whatsoever from providers of financial products.

Independent Financial Advisers are the best pick for anyone seeking general advice with regard to their finances.

Restricted Financial Advisers, on the other hand, as the name suggests are advisers that are limited in the scope and extent of advice they can give you. They specialize in a specific financial product as opposed to knowing the whole market. They only recommend specific products, specific product provider, or both.

Characteristics of restricted financial advisers include:

  • They work with a single product provider hence they recommend only the product that the provider offers
  • They recommend one or a few more products but not entirely all investment products.
  • They may consider products from many providers but not entirely all of them.
  • They purposely choose to focus on a particular market segment, for example, life insurance, mortgage or pensions. Thus, they consider all products offered by providers in that specific market segment.
  • Most of the restricted advisers in their profiles or description they do not indicate that they offer independent advice

It is under restricted advisers where you will find that there are more specific titles of advisers with regard to the adviser’s area of specialization. Examples of such advisers include:

  • Investment Adviser
  • Pension Adviser
  • Financial Planner

The Financial Conduct Authority has stipulated specific rules that govern the work of Financial Advisors. It is imperative that all advisors carry out a ‘fact find.’ This is typically a deep inquiry by the financial advisor to understand your financial needs, circumstances, and position. They are required to ask you detailed and objective questions to assess your attitude towards risk. The information they obtain during this fact find is used to assess which type of product or products that would best suit you.

With regard to quality of advice, all financial advisers will give the same quality of advice. The distinction between an Independent Adviser and a Restricted Adviser has no bearing on the quality of advice they will give you. In fact, the advice will be quite the same, regardless of which Financial Adviser you choose. The only underlying difference will be that a Restricted Adviser will narrow down your options. Another factor that may differ is the cost and the convenience. Even so, you have rights as a customer regardless of the financial adviser you choose. You are assured of protection for as long as you made a purchase after getting advice.

Most Financial advisers use platforms. Most of these platforms are in the online space. They put a range of investment in a single place for access purposes. Platforms have become a convenient way for Independent Advice in contemporary and are quickly gaining acceptance.

A common working practice of some financial advisers is the use of model portfolios. A model portfolio is a predesigned collection of investments. It is constructed with special consideration of various investment risk profiles. One could be having high risk, low risk or intermediate risk. The financial adviser endorses a certain portfolio after assessing whether its investment profile suits your investment needs and objectives.

Costs of Financial Advisers

There is always a cost that will accrue when being provided financial advice. Some advisers would prefer being paid through commissions, mostly between 1% -8percent of your investment value. However, prior to 2013, it was not really clear how financial advisers got paid. After 2013, every adviser was required to discuss with prospective clients and come to a consensus on the cost. He/she has to clearly stipulate the charges for their services. Most advisers may prefer being paid by the hour, after the completion of a task, or they may prefer a monthly retainer. Others may make a claim of a certain percentage of the total money invested. All terms are negotiable.

In a comparative sense, Independent Financial Advisers will be more likely to impose additional charges in order to do a review on your investments. Thus, it is important to find out beforehand about all pertinent information concerning fees

The choice of a specific type of financial adviser should be made after you carefully analyse your individual circumstances and financial needs. You should choose the most appropriate adviser that is best suited to your needs.

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