As you may or may not be aware, financial advisers come in two types: independent and restricted.
Distinguishing between the two is important, as it may affect the advice that you receive.
Here we outline the differences between IFAs and restricted advisers and examine which one is right for you.
Firstly, independent and restricted advisers essentially do the same thing - provide expert advice to individuals and businesses on how they can reach their financial goals.
What's more, both are authorised and regulated by the Financial Conduct Authority to provide financial advice, and the minimum qualification criteria (Level 4 Diploma) applies to all financial advisers regardless of their status.
The similarities end, however, when it comes to the access they have to products and providers.
Let's look at a definition of each:
- Independent advisers can recommend financial products spanning the whole of the market. This means that their advice is unbiased and unrestricted.
- Restricted advisers can only recommend products from certain providers. In some cases, they will recommend products from a single company.
Which one is right for me?
When you first meet with a financial adviser, they must tell you in writing whether the advice they offer is independent or restricted.
If the adviser is restricted, they must explain the nature of the restriction. For example, this could be that they can only advise on products from a handful providers, or only offer advice in certain areas such as pensions.
In many cases, while restricted advisers or firms can cater for a broad range of financial planning needs, if you want access to the widest possible range of products and solutions, then you may wish to consider independent advice in the first instance.
It’s important to note that whether an adviser is independent or restricted is only one part of the process when selecting a suitable adviser. There's lots more for you to weigh up. We’ve got a handy guide here on everything you need to think about.
Learn more: can I have more than one financial adviser?
How do the costs differ?
You may assume that because an adviser has limitations on the products or providers they can recommend, the amount they charge will be less.
This is not the case. In fact, a report published earlier this year found that restricted firms tend to charge more on average than their independent counterparts.
Before engaging with an adviser’s services, it’s important to ask how they are paid and what the fees will be. And always be wary about making decisions based on cost alone.
Just because an adviser is cheaper, doesn’t necessarily mean their services will offer the best value.
How can Unbiased help?
If after reading this you feel that financial advice is what you need, you're in the right place.
Whether your goal is to grow your wealth, generate sufficient income in retirement or shelter your estate from inheritance tax, we can connect you with the right adviser for you.
We have both independent and restricted advisers on our platform, but our restricted advisers can go off-panel should you request them to.