What are the advantages of consulting an independent financial adviser?

Navigating major financial milestones, such as buying a house or planning for retirement, can be difficult, as there’s more to consider than you may realise. This is where an IFA can come in handy. 

This article explains what an IFA is, what they offer, and the pros and cons worth considering, as well as how to find a qualified expert. 

What is an independent financial adviser, and what services do they offer? 

There are two types of financial advisers: independent and restricted. 

An independent adviser can recommend financial products from the entire market, rather than just those from specific providers or particular products.  

A restricted adviser can only recommend certain types of financial products or from a select number of providers.  

It’s worth stressing that regardless of whether you choose an independent or restricted adviser, they should both have a Level 4 diploma in financial advice and be regulated by the Financial Conduct Authority (FCA).  

Both types of financial advisers look at your financial circumstances and long-term goals to offer tailored recommendations. 

Here’s what a financial adviser can help with: 

• Retirement planning, including how to ensure you have enough money during your golden years, accessing your pension funds in a tax-efficient way, and the best ways to keep your pension pot invested if you choose to do so. 

• Investing, such as creating a diversified investment portfolio in line with your risk appetite and long-term goals. 

• Buying a home or becoming a buy-to-let landlord. An expert adviser can help with the homebuying process by offering advice on mortgages and available schemes, although a mortgage broker may be more specialised in this area. 

• General financial planning. This involves looking at your long-term goals, assessing your finances, optimising your savings and investments, estate planning, and ensuring you’re not paying more tax than necessary by using available tax allowances. General family planning, including savings and paying for your child’s education, may also fall into this category. 

• Paying for care costs. This is particularly important if you’re retiring soon or have already stopped working, as it enables you to prepare for unexpected care bills, which can be expensive.  

• Estate planning. A financial adviser can help you with estate planning by ensuring your assets are passed down to your loved ones in a tax-efficient way, as well as making sure you use available gifting allowances. An adviser can also help you legally minimise the amount of inheritance tax your beneficiaries may have to pay after your death.  

• Insurance: Whether you’re seeking life insurance, income protection or critical illness, a financial adviser can help you find the right policy to protect your loved ones. An insurance broker can also help with this.

• Equity release: This has become increasingly popular over the years, as people over the age of 50 seek to access the equity in their homes.  

A financial adviser may also be able to help with business growth and tax, but a qualified accountant may offer more specialised expertise in these areas.  

What are the pros and cons of consulting an independent financial adviser? 

There are many advantages and a few disadvantages to weigh up.

Pros of an independent financial adviser

• Tailored guidance: A qualified financial adviser can offer you personalised advice based on your specific circumstances. 

• You benefit from their expertise: Whether you need help reducing your tax liabilities or support building a diversified investment portfolio, a financial adviser can offer their expertise, so you make the right decision for your circumstances. 

• You can save time and money: An adviser can save you time by helping to manage and plan your finances, alongside saving you money by recommending the most competitive policies. An adviser can also manage your investment portfolio, but this will incur an ongoing fee.  

• Personalised recommendations: An independent adviser can access and recommend financial products from the entire market, rather than those from specific providers or particular areas, unlike a restricted adviser. This means you’re likely to find the most suitable policy for your needs.  

• Extra support for your finances: If you have a financial adviser, you can ask them any questions you have, which can be useful during difficult times, such as a recession or when new policy changes are announced. You can also schedule an annual review to ensure your long-term goals stay on track. 

• Peace of mind: Financial planning can be complex, and it can be easier than you think to get caught out by tax rules. Talking to a professional adviser can provide peace of mind and reduce stress. A recent Unbiased study discovered that one of the key benefits of advice is a clearer understanding of financial goals and lower financial stress. 

• Advisers are regulated: As financial advisers are regulated by the FCA and the Financial Services and Markets Act 2000, they have to act in your best interests and meet certain standards. If you’re unhappy with the service provided, you can complain, including to the Financial Ombudsman Service. 

Cons of an independent financial adviser

• The cost of financial advice: The amount you pay for financial advice can vary depending on your circumstances and the specific needs you require assistance with. While you can get an outline of the fees in advance, it can be expensive to get expert advice – but the benefits should outweigh the costs.

• You need to ensure your adviser is right for you: It’s essential to verify that the adviser is a good fit for your specific needs. For example, do they specialise in the areas you need help with? Have they helped clients with a similar issue? Do you have a good rapport with them? 

• Potential conflict of interest: While financial advisers should recommend the right financial product for your circumstances, they may have a conflict of interest. It’s worth asking about any potential conflicts of interest and why they’ve recommended certain products.

• Overreliance on external help: A financial adviser can help with your finances and help you reach your long-term goals, but it’s important not to rely solely on them. So, it’s good to stay informed of any policies or news that could affect your money.  

How do I find an independent financial adviser? 

There are many ways to find an independent financial adviser. 

You can conduct your own research, including consulting with family and friends for their recommendations. 

However, it’s worth stressing that while the adviser may have offered good advice on that occasion, they may not be suitable for your needs.  

Unbiased can quickly match you with a single qualified financial adviser best suited to meet your needs, or you can use the directory to find a local adviser. The initial consultation should be free.  

The directory will also specify whether an adviser is restricted or independent. There are also client reviews available, contact details, and additional information on the firm's advisers.  

During your initial free consultation, make sure you ask about any questions and enquire about any qualifications and fees, to make sure they are suitable for you.