Financial planning: Get advice on putting your money to work

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The Independent Online
Setting your financial affairs in order is no easy task. Over time, you may have started up savings, investment and insurance schemes. But are these still appropriate for your needs or could your money be put to better use elsewhere? Abigail Montrose seeks advice.

Choosing the right investments can mean the difference between a mediocre and a good return on your money, while a review of your insurance and pension provisions could save you thousands of pounds over the long term.

An independent financial adviser (IFA) can review your overall financial situation and give you expert advice on making the right provisions for your financial security.

All financial advisers seek to give good advice but only IFAs can give "best advice". This is because IFAs scour the whole market, looking for the best financial products most suitable for your needs, unlike tied agents and appointed company representatives, who can only advise on and sell products from the company they work for.

Being able to choose from the whole market tends to be better than only being offered one company's products. No company will always have the best products or best performing funds in every investment sector. And few companies offer the full range of investments and savings products available on the market. With an IFA, not only do you know you are getting expert advice, but it also is unbiased. Of course, this advice does not come for free.

IFAs make their money in one of two ways. Either you can pay a fee or they can receive commission from the financial products they sell you.

IFAs working on a fee basis charge from pounds 50 an hour. The rate may vary depending on the type of advice you want. This may seem steep, but other professionals, such as accountants and solicitors, can charge more.

Alternatively, your IFA may be commission-based.You will not have to pay any money up-front for the advice you receive, but you will pay it indirectly. Many financial companies pay commission to advisers when they sell one of their products, and this is added to the cost of the financial product you buy. If your IFA is fee-based, he or she can ask for no commission to be charged or paid. Alternatively, the IFA can split the commission with you.

By law, your IFA has to tell you how much commission he or she is being paid. Commission payments vary between 1 per cent and 5 per cent of the amount you invest, depending on the product. Beware a sting in the tail: commission on some regular-premium products is based on a calculation of the premiums you are expected to pay over the lifetime of the product. This is typically an up-front payment, which means most of your first year's premiums will go in commission.

IFAs have to hold professional qualifications. The basic qualification is the Financial Planning Certificate, but some IFAs go on to take more advanced exams and will specialise in a particular area such as investments, tax planning or mortgage business.

Choosing an IFA you are happy with can take time, bearing in mind that you want to deal with someone you are comfortable with and who you can trust. Recommendations from friends, a solicitor or an accountant can be a good starting point.

"You may even find your solicitor or accountant is able to help you himself," says Anne-Marie Martin, acting chief executive of IFA Promotion (IFAP), a body which promotes financial advice.

"Some solicitors and accountants are qualified to give independent financial advice. If they are not qualified themselves, they may have an IFA arm or someone in the company who is qualified and deals specifically with financial planning."

To check if your solicitor or accountant is authorised to offer independent financial advice, you can call the Financial Services Authority central register on 0171-929 3652.

If you are unable to find an IFA via a recommendation, you can call the IFAP hotline on 0117-971 1177 for details of three IFAs in your area. IFAP recommends talking to at least a couple of IFAs before deciding which one to select. Most firms are happy to give potential clients the names of two of their clients.

When you meet an IFA, he or she should carry out an in- depth fact-find into yourfinancial arrangements. This enables them to build up an overall picture of your financial affairs. Your IFA can review your arrangements. It could be that some of your investments are no longer performing particularly well and you could do more with your money elsewhere.

IFAP has produced a guide on the types of financial advice that are available, as well as a factsheet on how your IFA is paid. For copies, contact the IFAP hotline on 0117-971 1177.