How to navigate a route through the alphabet soup

Getting good financial advice does not have to be as confusing as it can seem
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The Independent Online

Finding someone you can trust to help with your personal finances has become an increasingly daunting task in recent years. Pension, endowment and precipice bond mis-selling scandals have all played their part in reducing confidence in the financial services industry. In many cases, people would now rather put their money under their mattress than put their trust in a professional adviser.

But finding good financial advice does not have to be as hopeless a task as it may feel - and for your more complex financial needs, you'd be crazy to go without. Although there have been plenty of nasty stories of advisers mis-selling to, or even defrauding their customers in recent years, tighter regulations are helping to eliminate such practice - and by following a few guidelines, it's fairly simple to ensure that you end up with a trustworthy and competent practitioner.

If you're amongst the majority of people in the UK that keeps only a loose handle on their finances, then it's worth getting into the habit of reviewing your finances on a regular basis. However, if you don't have any complex needs, you may be able to avoid an adviser altogether, and make use of one of the increasing number of free online and telephone-based resources. These can help you get a grip on whether you should be saving more, borrowing less and whether you're adequately insured.

Last month, the Financial Services Authority - which regulates financial companies - teamed up with the BBC to create a new financial health check site, which can be found at www.fsa.gov.uk/consumer/healthcheck. This spits out a handful of helpful suggestions based on the answers to just 16 multiple choice questions, and acts as a handy tool to get you thinking about which parts of your finances are suffering from neglect.

If your needs are a bit more complex - or you don't feel the financial websites provide you with enough guidance - then it's time for a financial adviser.

For many people, the first port of call is their bank or building society - especially for products such as mortgages or simple investment products. However, these advisers are often restricted on the range of products they can sell you, and are unlikely to be qualified to as high a level as you may find elsewhere.

Under new rules which came into force this year, financial advisers fall broadly into one of three categories - multi-tied, tied, or independent. Tied advisers will only be able to sell you the products of one company, while those who are multi-tied will have agreements to only sell the products of a handful of companies.

Independent financial advisers (IFAs) have the advantage that they can offer you products from the whole of the market. Furthermore, as part of the new rules, IFAs are obliged to give their customers a choice between paying for their advice by either fees or commission, while tied or multi-tied advisers are more likely to operate on a commission-only basis.

Unlike your local plumber or electrician, financial advisers can be relatively easily differentiated by how well qualified they are - so looking out for what letters they have after their name is the first good indicator as to how competent they might be.

Although this so-called "alphabet soup" can be confusing at first - with around 40 or so different acronyms that financial advisers can acquire to put after their names - online guides such as the one at www.unbiased.co.uk/website/brochures can help you to decipher which of these are relevant.

If you looking for relatively basic and generic financial advice, you may find that an adviser with the minimum "Financial Planning Certificate" is enough. However, if your needs are more complex, then you may be better off visiting advisers with more qualifications. Bear in mind, however, that the most qualified advisers may charge more.

The easiest way to find an independent financial adviser is to visit IFA Promotion's website ( www.unbiased.co.uk) or call their helpline (0800 085 3250). As well as being able to find you the closest adviser to your home from its 9,000-strong database, the site also includes details of adviser's qualifications. As an extra level of comfort, the service verifies every qualification, and makes weekly checks with the regulator to ensure that the adviser is properly authorised.

David Elms, the chief executive of IFAP, says: "Consumers haven't got a chance of understanding the 'alphabetti spaghetti' of qualifications, so we've taken it upon ourselves to help them. We try to divide the incremental qualifications into product specific areas, so consumers can see which ones are relevant for the service they need."

Elms says that in the future he hopes his service may go one step further and provide its own individual assessment of each adviser on its site, to ensure that only the best are signed up.

If trying to get your head round the qualifications is too daunting, another service, called The Personal Finance Society, has launched its own initiative to tackle the alphabet soup. Like IFAP, it has a facility for finding advisers on its site. However, it guarantees that all its advisers have obtained the Advanced Financial Planning Certificate, and insists that its members sign up to a good practice code of conduct.

Advisers that you track down through the PFS website ( www.thepfs.org) may not be independent, however. The society's members also include tied and multi-tied advisers. Bob Bullivant, the chairman of the PFS, says his society's code of conduct adds a further level of security. "Someone who is a member of the PFS must agree to live by a code of conduct, and part of that is that they continue with professional development to keep their skills up to date," he says. "The idea is that we only provide advisers that are fit for purpose."

While putting your trust in a financial adviser may feel like a big step, if you're considering making any major financial decisions - such as investing a large inheritance, drawing down from your pension, or even taking out a mortgage - the leap of faith is likely to be well worth it.

'You just pay your money and take your chances'

Peter and Kay Robinson, from Hinchley Wood in Surrey, both retired in recent months and decided to seek financial advice when Mrs Robinson was told by her employer that she could draw down a lump sum from her pension.

Under UK pension law, you can draw down up to 25 per cent of your pension as tax free cash once you reach the age of 50.

Mr Robinson, a retired accountant, admitted that he was nervous about putting his trust in an adviser, and had not used one for more than 20 years. However, after reading about IFA Promotion, he went to its website and found a handful of advisers located within a few miles of his house.

He was confused by the list of qualifications that the different advisers on the site claimed to have, and decided not to spend too much time trying to make sense of the different acronyms.

Eventually, he opted for the one that was closest to his home, Robert Douglas Associates.

"How would I know what the difference between the qualifications are?" he says.

Although the couple were given the choice to pay by fees, Mr Robinson said that he felt most comfortable paying by commission.

Having been advised to go ahead and draw down the money from Mrs Robinson's pension, the couple were presented with three medium risk investments, which Mr Robinson says have all seemed to perform well so far.

"It was a bold step," he says. "But you pay your money and take your chances."

Financial adviser qualifications

* FPC - Financial Planning Certificate - the basic qualification which all independent financial advisers need.

* AFPC - Advanced Financial Planning Certificate - a much more advanced qualification, which advisers need if they are to advise on matters such as pension transfers and other more complex financial moves.

* Dip PSFS - Member, the Personal Finance Society - must be qualified at least to AFPC level, and must adhere to code of conduct

* APFS - Associate, the Personal Finance Society - candidates must sit six AFPC papers and must have three years' relevant experience.

* ACII - Associate, Chartered Institute of Insurers - older qualification focusing on general insurance.

* CFP - Certified Financial Planner - must have either AFPC or equivalent as well as three years' industry experience. Must continue to update knowledge.

* FIFP - Fellow, Institute of Financial Planning - must have AFPC exams or equivalent and five years' experience. Includes two additional six-hour exams.

* BSc (Hons) ACIB - Degree in Financial Services and Associateship - well respected degree-level qualification

* CeMap - Certificate in mortgage advice and practice - required for those who wish to provide mortgage advice.

* APMI - Associate Pensions Management Institute - advanced qualification on pensions

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