Do I need financial advice or guidance ?

The world of personal finance can appealing daunting to most people as we don’t teach finance in the school curriculum or via the employment workplace.

So when it comes to buying financial products, a common question asked is, “Do I need to attain guidance or financial advice” to help him.

It can be seen a thin line between the difference of both options.  Many people are easily confused about the difference over what course of action they take.

So what exactly is the difference ?

Guidance: Can be seen as providing information about how products work. Where you may find tools and calculators to help you, as the information provided is generic and not personalised to that specific individual.

Financial Advice:

Any financial advice should be specific and relevant to the person seeking that advice. So it is personal and relevant and the adviser will provide recommendations.

So what can be considered as actual guidance ?

The level of information provided isn’t personalised and specific to the circumstances of that person. It’s more about providing information to possibly make a more informed decision. So you can hopefully improve your finances or basic level of financial knowledge so you can become more confident and proficient in future.

The information provided by guidance is normally free.

So it may cover the following information:

 

• • How may I buy a certain product ?

• • Which tools and calculators are available ?

• • What levels of contributions can I pay into a certain product ?

• • How can I find details on certain financial institutions ?

• • It may be basic information about tax bandings, allowances etc.

A simple example:

If you’re looking for guidance on how to access your workplace Defined contribution or personal pension. You can take advantage of a free and impartial service called Pension Wise. https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment

Offered as part of the Moneyhelper service. http://www.moneyhelper.org.uk

An appointment will also around 45 to 60 minutes, provided by trained guiders through the Citizens Advice network. Either via telephone or face-to-face across local offices.

During the appointment they will do a fact-find into your personal circumstances and finances. What type of pensions you have such as DC, state pension and what are your plans on accessing. They will then go through the options such as drawdown, annuities, number of lump sums or cashing in completely. It would also how the products work, shopping around and tax implications. But they will provide generic information on transfers, scams, comparison tools. With the aim that you can make a more informed decision when contacting your pension provider over accessing your pension.

What is known as your next steps !

So what is considered as financial advice ?

Financial advice is normally recommendations specific to the individual as it is personal, detailed and relates to make actual investment decisions. The information will be provided by qualified advisers who work directly for an investment company or institution and it will cost you fees.

A financial adviser would look at specific savings accounts, investments and ISAs offered by various companies and recommend a specific one that best suits your personal circumstances.

They will be subject to strict code of conduct by their respective employer, in accordance with rules in place by the Financial Conduct Authority (FCA) who regulate all authorised selling of investment products and services.

What types of financial advisers are there ?

There are two types of financial advisers:

 

• • independent financial advisers (IFAs) give unbiased advice about the whole range of financial products from all the different companies available

• • restricted advisers give advice on a limited range of products. They may specialise in one area, for example pensions, or they may only offer advice on products offered by a limited number of companies.

It’s usually best to get independent financial advice. So that you can look at the widest range of advice and products available.

Does a financial adviser have to be qualified and registered ?

All financial advisers must have the following:

 

• • Level 4 or above of the national Qualifications and Credit Framework

• • a Statement of Professional Standing (SPS). This means they have signed up to a code of ethics and have complete at least 35 hours of professional training each year. SPS certificates must be renewed annually so check your adviser‘s is up-to-date.

All financial advisers should be registered with the FCA. This means they meet the right standards and you get more protection if you’re not happy with the service. For example, you can complain to the Financial Services Ombudsman and may be able to claim compensation if things go wrong.

As part of your due diligence of working with an IFA do some background checks. You can even ask them about their qualifications and Statement of Professional Standing.

To check a financial adviser is registered with the FCA see the Financial Services Register.

If a financial adviser is not registered with the FCA, you can make a complaint to the FCA

There’s a full list of the different qualifications a financial adviser can have as well as the professional bodies that represent them on the unbiased.co.uk website. Go to: www.unbiased.co.uk.

Create a checklist of things to do at your first meeting with an adviser

Here are some tips about things to do at your first meeting, so you don’t suffer any surprises, or unpleasant shocks when conducting future business with them:

 

• • check that the adviser you are seeing is qualified to give you the advice you need

• • take notes so that you have a clear record of what was said at the meeting

• • ask lots of questions and make sure you understand everything you are told

• • take time to think about any decisions or to compare products with another adviser. You don’t have to sign up for anything on the spot

• • be prepared to answer questions honestly. A financial adviser will ask you lots of personal questions about your financial plans and personal circumstances so that they can recommend the most suitable products for you

• • check that your personal information is kept confidential, and find out whether it is used for marketing purposes.

How can I be sure I’m getting the right advice ?

When you see an adviser they should give you the right kind of advice for your actual needs.

The financial products that an adviser recommends should:

 

• • be affordable for you

• • take account of whether you want to save for the long or short term

• • be suitable for the level of investment risk you are willing to take in future years

• • take account of your personal tax implications.

• • Should be in parity with your objective, dreams and goals.

If an adviser ignores these points and recommends a product that is not right for you, and you later lose money because of this, you can complain.

An adviser only has to give you the right kind of advice within the limits of what they are qualified to do. For example, if you see a so called restricted adviser. They will only be able to recommend a suitable product for you from the range of products they sell with their respective employer or network. A restricted adviser doesn’t have to tell you that you could buy a similar product from another company at a cheaper price. If you later find this out, you would not be able to complain.

For this reason, it might be better to go to an independent financial adviser (or whole of market) who will be able to look at products from all financial institutions.

If a financial adviser can’t find a product to suit your needs, they must refer you to another adviser who can help you. Ultimately they should have your best interests at heart.

What information should the financial adviser tell you ?

Before you first meet with a financial adviser, they be make you aware of their terms of business and what services and products they offer, including:

 

• • whether the advice is independent, or restricted. If the advice is restricted, the adviser should tell you how it is restricted. For example, whether they are only offering products from certain companies

• • the level of advice you will receive. For example, you may just be looking for information to help you decide what to do, or you may need someone to suggest the best options for you

• • how much you’ll have to pay for the advice.

Your adviser should also give you a key facts document with information about:

 

• • the adviser or firm you are using and the services they offer

• • the products they have recommended for you, and why.

• • the right to change your mind about taking out a financial product and how long you have to do it

• • your right to be given further information or an explanation if there is something you don’t understand

• • how to make a complaint if you’re not happy with the service or product provided

• • who the firm is authorised and regulated by, such as FCA

• • the cost to provider a service or investment product.

So how much would financial advice cost

 

• • You will have to pay for financial advice and you may also have to pay charges on the financial products you buy.

• • You need to be very clear about how much the advice is costing you and what the charges are on the products you are recommended. Make sure you understand all the costs involved and compare fees and investment charges between different advisers before you make a final decision. You may be able to get the same product at a cheaper price with another adviser.

• • Ways to pay, could be by cheque, debit card or bank transfer.

• • Advisers are no longer paid by commission. This means that the advice they give should not be influenced by any commission they may earn on a particular investment.

How can the advice fees be charged ?

 

• • an hourly rate, based on the amount of work spent with adviser

• • a set fee according to the work involved, possibly 1 or 2%

• • a monthly retainer

• • a percentage of the money invested, charged on monthly or annual basis.

• • Your adviser should explain to you how much their advice will cost and together you will need to agree how to pay for this. You could pay them upfront or you may be able to agree that the adviser will take it from the sum that you invest.

• • Your adviser should set out the charges in a clear way and make sure you understand how much you are paying.

• • Fees may vary from adviser to adviser, so you should shop around to get the best deal.

• • There may be extra charges for looking after your investments or providing advice on a regular basis.

• • You could use something called the Pensions Advice Allowance, whereby you can take £ 500 from a pension pot each year over 3 years. So £ 1,500 in total towards the cost of advice. It should be offered by pension providers to cover the cost of financial advice, but it’s normally buried in the middle of war and peace from your provider. So most people don’t know it exists.

How can I make a complaints about a financial adviser ?

You can’t complain to a financial adviser if your investment doesn’t make as much money as you’d hoped. But if you have lost money because of bad advice, wrong or misleading information or poor administration, you can complain to the adviser who originally gave you the advice.

You must follow the company’s complaints procedure. If you’re not satisfied with the response, where you take the complaint next depends on who gave you the advice.

If the adviser you saw was authorised by the Financial Conduct Authority (FCA), you should take your complaint to the Financial Ombudsman. To find out if the Financial Ombudsman can deal with your complaint, you can call their consumer helpline on 0300 123 9 123 (8am to 6pm Monday to Friday). There’s also a special complaints form you can download and send to them by post. For more details, go to www.financial-ombudsman.org.uk.

You can also find out from the consumer helpline whether the Financial Ombudsman can deal with a complaint about a company which is not authorised by the FCA.

If you received financial advice from a solicitor or accountant, who is authorised by the FCA to give financial advice, you may need to take your complaint to the professional body which regulates them.

If you found the above information useful check out my other blog posts on pensions, investments and financial advice. So you can improve your pensions knowledge on https://moneyminted.co.uk