publication date: Jun 16, 2009
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
Top 10 Reasons why YOU should work with an Independent Financial Advisor
If you are buying, selling, letting or investing in property it’s essential you at least consult an independent financial advisor. If you don’t you may not secure the right mortgage or insurance to suit you and your family.
An independent financial advisor (IFA) is someone that has passed their FPC 1-3 qualification and they search products/companies from across the market. A mortgage advisor is someone who has passed the CeMAP 1-3 qualification.
They can charge in various ways, although a number of IFA’s offer a free no obligation initial consultation, lasting about an hour. During the initial consultation, the IFA should discuss any fees payable by the client, including the amount and the circumstances when they are payable. Fees can be on a fixed fee basis determined prior to advice being given. Alternatively, you may have to pay per hour for the advice, which can be around £75 per hour; the IFA could opt to keep the commission from products you buy or they could take part fee and part commission.
Here are our top 10 reasons why you should choose an IFA rather than just ‘going it alone’ in the financial world:-
1. Financial services advise from pensions to financial investments, life assurance and especially mortgages. It is regulated by the government’s Financial Services Authority (FSA) so you know that if you have any queries over the advice, you have an independent third party to complain too.
2. To ensure IFAs can give the right advice for your circumstances, they need to pass the Certificate in Financial Planning or equivalent to be deemed a fit and proper person to give you advice.
3. IFAs have to search what they refer to as ‘the whole of the market’, in other words they aren’t tied to a certain financial services company, and they search as many companies as possible. However, they won’t deal with companies such as Direct Line as they don’t work with IFAs.
4. When you instruct an IFA to work for you, you know that they have to act ‘in your best interests’. Unlike someone working for your bank who can only sell you the products they have.
5. An IFA cannot recommend products or services to you until they have understood your full financial circumstances and they must explain why the products they have chosen are the most suitable.
6. As it takes some time to see the benefits of financial products and services, all IFAs have to keep records of information to allow the recommendations to be scrutinised by a compliance officer/department, who report directly to the FSA.
7. Unlike other organisations that can sell you almost any financial product they have, an IFA could be prosecuted for not keeping accurate records or acting in your best interests, so they have a major incentive to look after you.
8. To make sure IFAs can’t ‘hide’ from independent checks on their work, files are checked on a regular basis by a compliance officer/department as well as spot checks. They receive no warning and any file can be checked.
9. To avoid IFAs being able to switch you to products that earn them more commission than others, IFAs have to justify why a different product is being recommended and prove it’s in your interest. This was put in place to combat issues in the 1990s of miss selling endowments and pension products.
10. An IFA cannot take into account the commission they earn when recommending a product. They must also declare any commission earned to you.
For independent property advice, visit the Designs on Property website, contact us or telephone 0845 838 1763.
Designs on Property would like to thank Eternal Growth for their help in compiling this list of top 10.