Tips on dealing with the bowler-hat brigade

Hard-headed experts will help you to choose from the bewildering array of financial products on offer. Tony Lyons introduces a two-page special report

When it comes to looking after our finances, most of us will need advice at some time or other. Much information can be picked up from friends and acquaintances, and from media coverage of personal finance.

This can often be enough. Once you know what you want, there are plenty of direct providers of financial services in the market. Steve Roberts, head of Eagle Star Direct, says: "People coming to us direct know more or less what they want, are looking for good value for money, good service, and don't want to be bothered by a salesperson."

Some direct providers, while not giving advice, do ensure that the customer is eligible to buy the plan, especially when it comes to pensions. Virgin Direct's Tony Wood says: "If customers want advice, which many do, it takes on average 30 minutes while we do a short fact-find. This enables us to find out what their investment aims are, and whether the products are suitable. If they only want the brochures, this takes just a few minutes."

But when faced with the thousands of investment schemes available, most of us do not have the time to do our own research, so we will seek professional advice. Today there are strict rules about who can give such "best advice". Advisers are strictly regulated and monitored.

There are just two basic kinds of professional advisers: tied agents and independent financial advisers (IFAs). The former work directly for the companies whose financial products they are selling. They will give you the best advice, but only out of the products their employers offer. IFAs are meant to scour the market to find the most suitable financial product and provider for their client.

Some IFAs charge for their services. Those who do will generally expect a fee of pounds 100 an hour outside London, or double this in London, where their overheads are generally higher. Most, however, still make their money from commission payments given by companies whose products they sell.

Often, as with PEPs, these may amount to less than 5 per cent of your investment. But sometimes, as with traditional life assurance or pensions, the sums can be quite sizeable, amounting to more than the first year's premiums.

This has led to some cynicism about the quality of the independent advice. Is a product being recommended because it is the most suitable, or because it pays a good commission? So always ask an IFA how much they are getting. You never know, they might even split their commission with you and rebate some of the money.

How do you find a good independent adviser? Start by asking for recommendations from family and friends. If they don't know of anyone, try your solicitor or accountant. Most will be able to put you in touch with an IFA.

Some of the larger practices, especially law firms, have their own advisory services. "These are especially suitable for those with pounds 150,000 or more to invest," says David Lough of Cripps Harries Hall, Tunbridge Wells, one of the largest law firms to give financial advice. These firms are best equipped to handle those who want their own share portfolios rather than just unit trusts.

Most of us do not have that much to invest and would be better off using an IFA. Local telephone directories will list those in your area; or contact IFA Promotions (IFAP), which will recommend three or four near you. Of Britain's 14,000 qualified independent financial advisers, 8,500 are members of IFAP. Its members display a blue sign in their windows.

By contacting IFAP, you will get a voucher for a free 30-minute consultation with an IFA. Use it to establish whether you want to do business with him or her.

Before any advice can be given, you will have to take part in a full fact-find, which can take two or more hours, to find out the shape of your finances and what your investment aims are. "It can seem quite a gruelling, if very necessary, experience," says Ann Marie Martin, chief executive of IFAP. "Make sure you have all the information you need with you, even if you have to take it in carrier bags. Also, don't be afraid to ask plenty of questions to see if the IFA is on your wavelength."

Getting good financial advice will enable you to make adequate provisions, whether for retirement planning or any other general savings. Asking the right questions will allow you to sort out the right adviser for you from the chaff as well as give you an indication of what they can do for you.

Contact: IFA Promotions on 0117 971 1177

Overleaf: commission vs fees: how advisers are paid