Choosing an IFA - questions to ask

Unless you have had previous experience with an IFA/wealth management adviser, you would probably turn to family or colleagues for a recommendation but how can you compare one adviser to another? For example, did you know some advisers are restricted whereas others are independent?

Costs vary from adviser to adviser and most advisers work on the old-fashioned percentage model. Typically, this ranges from 3% to 5% upfront with an ongoing fee of 1% p.a. Percentage charging doesn't always give value for money and there is no transparency on the amount of research/work carried out for you for the fee.

Below, we've prepared 6 questions for you to ask a potential wealth manager/advisor. We've also given you a little information to support why we think you should ask each question.

Are you independent or restricted?
What services do you offer?
Do you charge fixed/hourly fees or percentages?
What is your investment approach?
What qualifications do you have?
What are the future plans?

A restricted adviser can only recommend products from a limited (restricted range).

An independent adviser selects the most appropriate solution from the whole of market with no bias or preference. An independent adviser works for you as they have a fiduciary duty.

What Services do you offer

If your adviser is independent, they will earn their fees by providing advice. Most restricted advice firms only earn fees if they ‘sell’ a product. If you are planning to build a trusted relationship with an adviser, you need to make sure that the adviser you work with has experience and expertise.

A good adviser puts your interests first.

For example:

Retirement planning
Tax efficiency
Estate/IHT planning
Mortgages

Percentage vs Fixed/Hourly Fees

With percentage charging, the more you invest the more you pay. Hourly rates can offer transparency

For example – Diane has £200,000 to invest at 3% = £6,000. If her adviser has an hourly rate of £200 and it takes 15 hours of time = £3,000. Which is more transparent and more beneficial to her?

Percentages can be expensive and only work in certain circumstances. It pays to shop around.

Most firms will have their own in-house investment solutions, which every client is invested into. Who does this benefit? The client or the adviser?

This comes back to independent vs. restricted. Ask the question how are they independent?

What is your investment approach?

Some firms have a bias in terms of their investment approach. A good adviser will take the time to explain this and understand what approach would suit you best.

A financial adviser is not an investment manager.

How large is the firm? Do they have a team who can provide investment advice? Do they go to whole of market or do they have one provider?

What qualifications do they have?

All advisers must hold a level 4 qualification in Financial Advice. So if 4 is the minimum, appoint a Chartered Financial Planner who is level 6.

Why?

They have to pass rigorous and challenging exams
High professional standards to meet
Seen as the gold standard in the industry

What are the IFA/wealth manager's future plans?

The average age for an adviser is 60. It may seem odd to be asking what your adviser's plans are when the focus should be on you but what happens if they are retiring in 5 to 8 years?. Most advisers will look to sell and exit the market. How do you then build trust? ,

If you are looking for long-term advice you will need an adviser who has the experience and expertise but will work with you for the next 20 to 30 years.

For more information you can call 01628 626333, download our brochure or you can book a free no obligation consultation here

This article was brought to you by Haresh Raghwani - Head of Wealth Management at Craufurd Hale Group