Financial Advising: Is having a Financial Advisor really worth it?

This article, the second in a series continues my effort to help you understand the financial services available to you.  In my first issue we discussed Financial Coaching. In this article we tackle; Financial Advising.

In my twenties and thirties I had a limited view regarding financial advising and didn’t understand its benefits. For me there was negative connotations associated with this service. Since then after much research and discussion my opinion has changed and now that I am in my forties with a family I recognise the advantages of hiring a Financial Advisor. This service is not for everyone but hopefully this article will give you the information you need to make an informed decision.

A new change

The period 2013/ 14 brought about a positive transformation to this sector with new standards to Financial Advising.

Financial advisers now charge clients for their services. They cannot take commissions from product / service providers, making their recommendations influence free.

This new policy is a game changer helping clients to trust the recommendations and insights of their ADVISERS. This allows for greater transparency.

Financial Advisor definition

Financial advisers are professionals who provide guidance to their clients based on their needs and goals. They recommend specific financial products, services or advice a few I have listed below;

  • Pension and retirement planning—An advisor helps you manage and achieve your retirement goals. They will comb through the many pension options available with the different rules and regulations. Narrowing down the range of solutions that are most suitable for you.
  • Investing—knowing your attitude to risk, guides a FA in their investment portfolio recommendation. A financial advisor works with you helping manage and investing your assets, to achieve your future financial goals.
  • Tax planning—including inheritance planning; a FA can structure your investments minimising your current and future tax liability e.g. use of ISA’s or other tax efficient methods.
  • Insurance planning—A complex area for many people, an advisor can guide you through life insurance planning, health insurance etc and can recommend the insurance route to suit your needs
  • Mortgage advice – provides a wide range of products and rate choices. FA’s assess the level of mortgage repayments you can afford, helping you choose a mortgage ideal for you.
  • Paying your children’s college/ university fees—Sitting down with a FA can help you devise a realistic, workable plan to achieve this outcome. A FA will know the tax efficient methods available to you when planning for your children’s future.

A financial advisor can search the market to find the investments and products for your situation.

Some advisors specialise  in investments, while others focus on tax planning, retirement, insurance or estate planning. Each person’s situation is different so make sure you choose the right advisor for your needs.

The Regulators

Financial Advisers are regulated by the Financial Conduct Authority and have a code of conduct and rules to adhere to. A Financial Advisor has to hold an appropriate RQF Level 4 qualification or higher. Listed on the Financial Conduct Authority (FCA) website are the qualifications needed to practice. The FCA is the main UK financial services regulator.

The benefits of hiring a FA

  1. The personal recommendation you receive on how best to manage your money/ assets
  2. Helping you understand the basics of pensions and pension planning. Educating you about the different pension products and options available to you upon retirement.
  3. You can avoid costly mistakes through tax planning, estate planning, etc.
  4. Clients like knowing what their peers similar to them are doing. This provides them a sense of validation
  5. Having the option of an ongoing review. The advisor meets with you through the years managing your financial portfolio.

A financial advisor can help bring peace of mind to a family/ individual knowing their financial future planning is in capable, experienced hands.

Fee structure of an independent financial adviser

  • An hourly rate; the UK average hourly rate varies from £75 an hour to £350 with £150 being the recommended average.
  • A one of set fee for a specific work—this price widely varies and can be costly depending on the advice needed.
  • A percentage fee of the money invested. An advisor manages your investments charging a percentage of your portfolio total value, anywhere from 0.5% to 5%.
  • A monthly flat fee agreed between the two parties.
  • Ongoing fee for an ongoing service, where you are paying off an initial charge over time through regular payment.

It is worth noting there is flexibility, as a client you should feel comfortable negotiating a good price structure that bests suits you and your advisor.

Choosing a Financial Advisor

  • One of the best ways to choose an advisor is through a friend or family recommendation. Firsthand knowledge and experience is good.
  • Through an employee scheme your workplace offers. You can ask employee members about the service offered again giving you firsthand information.
  • Bank/ Accountant recommendation
  • Internet /web research
  • The Financial Conduct Authority operates a free register of allowed individuals, firms and bodies

Individuals trust independent advisors more than an advisor connected to a big bank/ institution.

A Financial Advisor must be someone you feel comfortable with and have trust that they have your best interest at heart.

In closing not everyone needs this service but there are many who can benefit from it. If you have a family or have certain financial responsibilities and commitments, then having an advisor can help you save money and mitigate costs.

For the first article from this financial service series, please click this link ‘Financial Coach: Everything you need to know’

The information provided in this article is not intended as financial advice. Please contact an authorised financial advisor for specific advice regarding your situation.

Written by Neala Okuromade

  • Qualified Accountant (FCCA)
  • Diploma in Financial Advising (MLIBF)
  • Practising Financial Coach and Author of the successful book series ‘What’s Your Financial Gameplan?’

Neala Okuromade is an experienced and reputable financial coach. Neala is taking on a new cohort of clients looking for guidance and help. Click this link for more information.

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