All financial advisers have to be approved or authorised by the regulator, the Financial Conduct Authority. They must all pass the same qualifications and meet the same requirements to ensure they are providing suitable advice.
However, there are differences between advisers depending on whether they are ‘independent’ or ‘restricted’. Their different status can affect the advice you are given. When you approach a firm, they have to tell you in writing what type of advice they offer.
Independent advisers are also known as independent financial advisers (IFAs). They must give unbiased and unrestricted advice. They must be able to consider and recommend all types of retail investment products that could meet your needs and objectives. Sometimes they are also known as ‘whole of market’ advisers because they must be able to consider products from all firms across the market.
Restricted advisers may sound inferior to independent but it is important to consider in what way they are restricted. Some are restricted by the company, others by products or product areas.
The first group of restricted advisers may be able to advise about a range of products but only those offered by one company or a limited number of product providers. This means they will not tell you if another company offers a better version.
The second group of restricted advisers are those which only give advice on one particular product area, such as pensions, or type of product, such as funds. But they will consider products from all the companies in those markets. This type of advice can be useful if you know what type of product or investment you are looking for.
Simplified advice is a form of restricted advice which may be available at a lower cost, though it must be delivered by fully qualified advisers. Recommendations relating to specific areas can be given, for example, advice about a suitable ISA. But advisers must make clear the limitations of this type of advice to clients.
Another type of ‘advice’ that has emerged since the Retail Distribution Review (RDR) proposals is called ‘guidance’. This can be provided free of charge. A guidance service can provide you with information about various products and what options are available to you. But you will not be recommended which course of action is best for you. That will be your decision. It’s the type of services provided by the government-backed Money Advice Service and Pension Wise.
Where to go for advice
A personal recommendation is best, although make sure to check the Financial Conduct Authority register (www.fca.org.uk/register) to ensure the adviser is properly authorised. If not, websites such as www.unbiased.co.uk and www.vouchedfor.co.uk can provide you with a list of advisers in your area. Both websites enable you to stipulate the type of advice you require to find the most suitably qualified adviser. Vouchedfor.co.uk includes ratings and reviews by advisers’ clients.
Try to talk to at least three advisers before making a final decision. Be prepared to tell the advisers all about yourself and your circumstances. They are normally required to undertake a ‘fact find’ to ensure they have taken everything into account before providing you with advice.