Personal Finance: How to scale the market peaks

The road to riches is littered with the shirts of those who took high risks and lost, so here are some ways to avoid bad advice
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Taking the high-risk route to making money can be both rewarding and very frightening. The way ahead is littered with individuals who thought they had a near-certain bet of high returns - and discovered too late that it was anything but.

For anyone who has followed this series on high-risk investments, finding someone who is able to guide you on the path to good returns is as essential as a sherpa to a would-be Everest climber. Expert financial advice is needed - but how do you find that expert? Here are some of the key questions to ask.

Are you genuinely independent? Advisers fall into two categories, those who sell the products of one company only, in which case they are better described as salespeople, and independent financial advisers (IFAs), who can advise on any company's products. You definitely need this second type. Stockbrokers are another potentially useful source of advice.

Who are you regulated by?

The most common watchdog is the Personal Investment Authority (PIA) which regulates most IFAs. The Securities and Futures Authority (SFA) watches over stockbrokers.

Later this year, all advisers are set to come under the control of a new regulator, the Financial Services Authority.

How long have you been in business? Someone who has been in business for a decade or more, is likely to be more reliable than someone who has been around for a few months.

What are your professional qualifications? All financial advisers are required to have qualifications. There is some confusion around because many professional bodies and trade associations award so-called "designatory letters" to people who join them. This means that a person can have a string of initials that refer to one single qualification.

The most basic one is the Financial Planning Certificate (FPC). One step up from that is the Advanced Financial Planning Certificate (AFPC), which contains a range of modules to provide advisers with extra information on specialist topics, including investment.

More qualifications are better: one of the minimum qualifications in this area is the Investment Management Certificate. If in doubt about any qualification, check with the awarding body or the regulator.

Are you large enough to cater for my needs? Go to a firm which offers a team who specialise in the investment field you are interested in. They should be able to complement and be in close contact with brokers and managers.

Does the company provide dedicated products and services in this area? Some firms have developed sufficient expertise in the market that they can not only advise on it but offer a special product for that market. Some may have ISAs, which offer the benefits of tax-free investment.

Not all packaged products are good. But if someone has designed something which offers quick and easy access to a high-risk investment area, possibly with some risk-spreading, this can be a positive factor.

What is your record in this field? You should be shown evidence of clients whose funds have shown significant gains. Not just one or two but at least a few dozen. Ask to be put in touch with that client so that they can confirm what you have been told. If the adviser pleads client confidentiality, be prepared to walk away. The only acceptable alternative is for the adviser to show, perhaps by means of something in the financial press, that his claims are true.

Have you published anything on the subject yourself? Following on from the above, many companies who claim expertise in certain areas will want you to know about it. They will publish brochures and publications which explain what they are talking about.

Are you speaking my language? There is nothing worse that talking to a car mechanic and not understanding what they are on about.

Of course, some subjects are difficult, but it should not be beyond the wit of any adviser to discuss matters intelligently with clients, without patronising them but able to explain exactly what is involved.

Some advisers find this difficult. That should not be counted against them. Beware, though, of the difficulties involved in dealing with someone you don't understand.

The first is that you become unclear of what is happening to your cash, always dangerous. The second is that your adviser is unclear of what he should be doing with your money and takes liberties as a result. That is dangerous too.

The third is that the adviser doesn't think this is a subject for your ears. He deliberately baffles you so you don't know what he is on about. If so, that's patronising: your long-term relationship would be built on unsound foundations if you stayed with him. Stay away.

The fourth possibility is that the adviser's gobbledygook is caused by the fact the he doesn't know what he is on about. Forget it.

`The Independent' is offering a free `Guide to High Risk/High Reward Investment', which outlines the commonest ways in which savers can obtain higher-than-average returns on their funds, including finding an adviser, by taking a more aggressive approach with their money. The guide, sponsored by Whitechurch Securities, is available by calling 0845 2711003

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