What to look for in a true Financial Planner
We often come across financial services firms which call their advisers “Financial Planners”. They might call themselves Financial Planners, but what most of them offer is financial product sales. The purpose of this post is to give you an idea of what we do as Financial Planners, compared to other Independent Financial Advisers, who might work for a firm or a bank.
We do this because we feel that the role of a Financial Planner is actually distinct from that of the rest of the financial services profession. By consequence, we believe that it is very difficult for you to determine the differences between the various services on offer – we would prefer for the role of a Financial Planner to be enshrined and protected, just like that of a Chartered Accountant or Solicitor.
Much of this information is cribbed from the Institute of Financial Planning website, which is aimed at promoting the Certified Financial Planner qualification and standards (to which we subscribe).
What is Financial Planning?
Financial Planning is the process of developing strategies to help you manage your financial affairs so you can build wealth, enjoy life and achieve financial security. Financial Planning is an effective way of ensuring you are fulfilling your life ambitions without having to worry about your finances. Financial planning is about building towards financial independence, and is not focused on goals, income, assets, expenditure etc. This process is not about product sales (although obviously, products would be used towards the end of the process to achieve the goals set). Financial Planners tend to be fee-based because they charge for the creation and maintenance of a plan rather than selling a product. This means you get what you pay for – advice rather than sales.
What is Financial Advice
Financial advice is what is supplied by the overwhelming majority of UK financial advisers. This tends to be bespoke, targeted, transactional advice leading to a financial product sale. As most financial advisers are commission based, they rely on selling you a product to get paid for their work.
The role of a qualified professional Financial Planner is to look at all aspects of your lifestyle, goals and requirements and develop a financial strategy suitable for you. To make sure you are receiving the best financial planning advice you should search for a CERTIFIED FINANCIAL PLANNERCM professional in your area. A CFPCM professional is someone you can trust and know has completed a high level of qualification. Naturally, we are only telling you about this because we fit this criteria!
- What is their experience?
Obviously, this is important; but as important is to ask their experience in dealing with situations similar to those faced by you. - What are their qualifications?
This is more important than many financial advisers will lead you to believe. Having advanced and specific qualifications shows a technical expertise, and a commitment to keeping up to date with the current trends. After all, would you go to a doctor who only had a basic level of qualifications, and hadn’t kept up to date in 20 years? - What services do they offer?
They should be able to easily define the services they offer to clients so you can decide if these are right for you. You need to decide whether a comprehensive ongoing review is right for you, or you just want transactional advice on a one-off basis. - What is their advice process?
How they go about delivering their service is also important – after all, you want to ensure that you will get a robust and consistent delivery of your service. Our advice is to avoid advisers who cannot easily articulate their process. - How are they paid?
This is important to your pocket, but also to know if you need to watch out for signs of bias. You also need to know up-front the extent of your liabilities. Our preference is for a fixed fee agreement, but many people prefer to operate on commission. - What is the typical cost of their services?
This will help you to decide if the service is affordable and fits in with your expectations. Ultimately, you want to avoid an open-ended commitment on your side. - Who else benefits from their recommendations?
This is a question often missed. You may have been referred to the adviser following a recommendation. Does the introducer receive any payment from this arrangement? We are aware of some local independent financial advisers who regularly pay out up to 50% of their income to professional introducers such as accountants. While this is fine if the client agrees, we would be concerned that the client is not aware of the arrangement. If you think about it, if the introducer receives payment (of such a large amount), your adviser will be forced to increase the fees or commission charged to you to achieve their profit margins. - Have they ever been disciplined by the Regulator?
You would probably want to avoid advisers who have been sanctioned by their professional body, but you can actually check this out yourself by searching for the firm or adviser on the FSA Register. All financial advisers must be on this register to be able to off you financial advice. If they are not registered, then you are not covered (and the ‘adviser’ should be reported).
Tags: cfp, Financial planning, ifa, independent financial adviser
