Many of us will face big financial decisions during our lifetime, whether it's deciding how best to maximise our income in retirement, or where to invest a lump sum. Working out which course of action to take can be difficult, which is why many people seek professional financial advice on the various options available...
Here, we explain what a financial planner does, and how they can help you.
What is a financial planner?
A financial planner is someone who helps you manage your finances, so that your money is working as hard as it possibly can for you.
There are two main types of financial adviser, 'restricted' and 'independent'. If an adviser is restricted, they may either specialise in a specific area, such as investments, or they may only be able to recommend products from a certain number of providers. If they are independent, they can recommend products from across the whole of the market.
Key benefits of independent financial advisers
What is an independent financial adviser?
Independent advisory firms provide personalised financial advice to their clients, many of whom have complex financial needs.
Because these advisers are independent, they are not tied to any particular family of funds or investment products. They are held to the highest standard of care and are required to act in the best interests of their clients at all times.
Why does it matter if your adviser is independent?
Investors with complex needs are increasingly seeking out personalised advice - and one way to ensure you’re getting that is to work with an independent financial adviser.
Benefits of working with an independent financial adviser include customised guidance based on your entire financial picture, building a strong understanding of your situation and tailoring advice based on what is best for you.
Independent Financial Advice vs. Restricted Advice in Summary
The current regulatory environment has provided a distinct line between advisers that are Independent and those that are Restricted. Using the definition and explanation provided by the Regulator (the Financial Conduct Authority - FCA, see www.fca.org.uk
The Independent Adviser will provide independent advice and is able to consider and recommend all types of retail investment products that could meet your needs and objectives.
Independent advisers will also consider products from all firms across the market, and have to give unbiased and unrestricted advice.
A restricted adviser or firm can only recommend certain products, product providers, or both. The adviser or firm has to clearly explain the nature of the restriction. If you are not sure you should ask for further information, but some examples of restricted advice are where:
- The adviser works with one product provider and only considers products that company offers
- The adviser considers products from several - but not all - product providers.
- The adviser can recommend one or some types of products, but not all retail investment products
- The adviser has chosen to focus on a particular market, such as pensions, and considers products from all providers within that market
Restricted advisers and firms cannot describe the advice they offer as 'independent'. All advisers have to make it very clear to you what status they have.
The importance of this distinction is further highlighted by the Citizen's Advice Bureau (www.adviceguide.org.uk) - their web site supports the value of the Independent Adviser over other options you may have.
This article was published on the Gibbons IFA blob on 6 November 2017.