What is a free financial checkup and do I need one?
Updated 24 March 2020
When you search for an adviser on Unbiased, you may notice that some display special offers: a free financial health check, pension check, investments check or mortgage review. Here you can find out what each could include – and why they can be so useful.
Can I see a financial adviser free of charge?
If you’ve never seen a financial adviser, or not for a while, then it may not be clear why you should. Unless you have a specific concern (such as ‘I’m moving house’ or ‘I want to draw my pension’), it may not occur to you to seek advice. Never mind the answers – you don’t even know what questions to ask.
That’s why many financial advisers offer a free initial meeting. This is a chance to discuss your current circumstances informally, so you can find out whether formal advice would be useful to you. If you don’t proceed to advice there’s no charge (but you may have learned some useful things nevertheless).
However, many advisers take the free initial meeting a step further. You can ask them to focus on a particular area of your money such as your mortgage, your pension, investments, or just your finances in general. Every adviser will have their own distinctive approach, but here are some examples to illustrate broadly what you can expect from these check-ups.
What’s in a free pension review?
A pension review is helpful no matter what your time of life – whether you’re close to retirement or still in the saving-up stages. However, to get maximum benefit you should try and arrange one at least 10 to 15 years before your intended retirement date. Regular check-ups every few years are also advisable, to ensure your plans remain on track.
As with a mortgage review, an IFA will assess your pension in the context of your finances as a whole. ‘You need to ask yourself, “What is your pension for?”’ says Raj Shah, director of Blue Wealth Capital. ‘Obviously, it’s to provide you with income in retirement. But what do you want to do in retirement? That’s the big question. You can only tell whether your pension will be enough if you ask first, “Enough for what?” So we would need to assess your aspirations and your other finances as well as your pension pots.’
Your IFA will project your likely income from pensions and other assets, and measure these against your retirement goals to see if they are realistic. If there is a mismatch, you may need to adjust one or the other. When considering ways to boost your retirement income, the adviser should assess your attitude to risk. ‘We use a Finametrica scale to assess your risk tolerance out of 100,’ explains Raj. ‘A pension check will give you insights into your attitude to risk, which you may not have been consciously aware of. You may find that you are willing to take on more investment risk than your current pension fund offers, and so take the opportunity for higher growth. Conversely, you may discover that you are exposed to more risk than you’re comfortable with. It’s about tailoring the pension to the person.’
A pension review won’t offer any formal advice about what you should do, but it will make you more aware of both your own needs and of the opportunities that are available. It’s also a great way just to engage with the issue of retirement in good time, rather than putting it off until the last moment.
What’s in a free investment healthcheck?
If you hold investments, you’ll recognise the dilemma: part of you wants to be patient and let them grow in their own time, while another part wonders if they’re growing as fast as they could. An investments healthcheck can put your mind at rest by assessing your portfolio objectively from an expert perspective.
As with a pension check, this is as much about finding out what you’re like yourself. When you have an investments healthcheck, an IFA will first assess your risk profile. They may then look at your existing investments to see if they are suitable from a risk perspective and aligned with your life goals – which are closely related.
This check-up will also look at any fees or charges your current investments might attract, as you may find you are paying more than you need to. Your adviser will also be able to tell you whether formal advice could enable you to find more suitable investments (this would involve a full fact-find that goes beyond the scope of a free healthcheck). You should go away with a clear idea of whether or not advice could deliver value for money.
What’s in a free mortgage review?
These days it’s easy to go on a price comparison site to try and find yourself a better mortgage. But that’s not at all the same as a proper mortgage review, says Dave Penny, managing director of Invest Southwest. ‘We will of course scrutinise your existing mortgage deal, but we’ll look at much more than that. We start with a detailed fact-find that examines your current circumstances. Why? Because choosing the right mortgage means finding the one that fits the best with your other financial arrangements. As your biggest commitment money-wise, you simply can’t view it in isolation. So we “measure you up” first before we even look at any mortgages.’
Having done this, a mortgage broker can then search the entire marketplace for the best deals, including those not found on the high street or even price comparison sites. As well as interest rates, they compare charges, penalties and other potential pros and cons for a proper all-round comparison. A mortgage review may also turn up unexpected savings. ‘One thing we find is that when people remortgage by themselves, they are often sold term insurance each time,’ Dave explains. ‘I’ve known people to accumulate two, three, even five different insurance policies on the same mortgage without realising it. Some have then managed to save up to £100 a month by getting rid of the unnecessary insurance.’
The result is typically a mortgage far more suited to your circumstances – but occasionally it can deliver much more. Dave cites a particular client who, as a result of her mortgage review, discovered that she could not only clear her mortgage, but also retire – neither of which she had expected. ‘She threw a party for us,’ Dave recalls.
What’s in a free financial healthcheck?
If you’re not sure which aspect of your finances needs more attention, or whether you need advice at all, this type of check-up is the easiest way to find out. Adrian Kidd, a financial planner at Radcliffe & Newlands, explains his straightforward approach.
‘I’d generally offer one or possibly two free consultations, taking about an hour, and these can be as specific or as broad as required. When someone books a financial healthcheck with me, I ask them to bring along all their documents relating to their finances – savings, investments, mortgages, loans, insurance, pensions, the works – so I can build up a complete picture of their affairs. I then go through these in more detail after the consultation, and follow up with an email that gives a summary of their overall financial situation.’
The meeting itself is focused on the individual, talking about plans, lifestyle and long-term goals. This, along with the financial summary, provides a template for any possible future advice.
One thing that may surprise some people about these free financial check-ups: generally, advisers won’t talk to you about products at all. The process of choosing the right products comes later, after the adviser has built up an understanding of you as a person and your financial planning needs. Only then will they recommend products, if asked to do so – but what an IFA will never do is ‘sell’ you a product, because by definition they are not affiliated to any providers and earn no commission from them. Any recommendations they make are thus solely based on your best interests.
Last but not least, a free check-up from an IFA is simply a great way to learn more about financial advice.
How do I know it’s time for a financial check-up?
Here are the telltale signs that might point to underlying issues with your finances. Some of them might indicate problems, while other may alert you to opportunities. If you recognise any of the following, it may be time to find yourself a financial adviser or mortgage broker.
1. You can’t remember how many pensions you have, or how much is in them
If you’ve had several jobs that provided a workplace pension, it can be hard to keep track of them all. Up to one in ten pension saver have actually lost track of at least one pension, according to research from Friends Life. You can track down a lost pension using the Pension Tracing Service (call 0845 6002 537). As for the rest, ask a financial adviser about whether you should consolidate them (sometimes a good idea, sometimes not). If you have several pension schemes out there, bear in mind that you’ll be paying service charges on all of them, not just one – and that one of them is likely to be outperforming all the rest.
2. You no longer know what interest your savings are earning.
If you don’t know offhand the interest rate of your ISA or regular savings account, you’ve probably had it quite a while. Many people don’t realise that the interest rate they start upon may only be a temporary special offer (which is why you should always read the small print). So your initially generous rate may plunge to almost nothing after a couple of years. Keep checking, and switch if necessary.
3. The balance on your current account is rising every month
This is a good sign, right? No, it’s not. Money sitting in your interest-free current account is losing value all the time, thanks to inflation. You should aim to keep your monthly balance as static as you can, with just a few hundred pounds as a cushion against unexpected costs. Any obvious excess should be regularly siphoned off into a savings account.
4. You get letters from a financial provider, but you bin them as junk mail
Ask yourself, why is this bank / lender / credit card company writing to you? Were you once a customer? Do you still have savings with this bank that you’ve forgotten about? Do you still have a credit card with that provider which you no longer use? (This can adversely affect your credit rating and put mortgage applications at risk). Investigate these mysteries – they could end up being significant.
5. Your ISA provider writes to you about changes in your stocks & shares fund, but it’s all jargon to you
Your ISA provider has a duty to keep you informed, but you also have a responsibility to yourself to understand the information they provide. Don’t just assume that everything is all right, and do read the regular reports that they send you. Actively monitor what is going on, and discuss any issues with your financial adviser if you’re unsure. You need to know when to leave your funds where they are, and when you need to start checking out the competition.
6. Your mortgage repayments seem suddenly much bigger
When you took out your mortgage, you probably got a limited term offer: a fixed rate, a tracker rate or a discount. But these generally last only for between two and five years (depending on the deal), after which the rate reverts to the lender’s standard variable rate (SVR). You should always set a reminder to remortgage once your deal expires, but planning several years ahead catches many people out. Play it safe and review your mortgage annually, and get a better deal if you can escape without a penalty.
7. Your home has gone up in value
More good news! Well, not exactly bad. But it could mean that you’re now paying more than you need to on your mortgage. If the value of your home has risen, then you could be eligible for more competitive mortgage deals – e.g. lowering the rate of interest that you have to pay. So you can remortgage to arrange lower monthly payments, or even better, a shorter mortgage term.
8. You manage your finances as a couple, but have separate bank accounts
There are many reasons why married or civil partners might want to keep their finances separate, whether for a sense of independence or just to avoid the hassle of moving their current account. However, this can make it tricky to balance the household finances overall. It becomes harder to judge how earnings compare to expenditure, or to keep track of savings, or indeed to tell how ‘fair’ the overall setup is on both partners. This in turn can lead to tensions in the relationship. An impartial overview can help you balance joint finances and improve overall efficiency, without necessarily removing anyone’s independence.
9. A major change has taken place in your life
Different lifestyles demand radically different saving and spending plans. Getting married, moving house, starting a family, a major career change or starting a business are all what might be called ‘advice moments’ – pivotal points in life where you need to rethink your financial affairs, ideally with professional help. Bereavement features on this list too, with the potential issues of inheritance and/or loss of family income to consider.
10. Something out there has changed
It only takes one large-scale development like Brexit or the coronavirus pandemic to redraw the financial playing field. Geopolitical events can send stock markets or the value of the pound falling or rising, and knowing how to respond is key.
Other events that can impact on your finances (directly or indirectly) include house prices, interest rate changes, tax legislation, adjustments in the state pension age, and of course development such as pension freedom. If you have any long-standing retirement plans that you haven’t yet reviewed in the light of the new pension system, you should go back to the drawing board and reconsider your new range of options.
All of this boils down to one key point: your financial affairs, like your physical health, need constant care and attention. It’s only sensible to book in a regular check-up from a financial adviser.
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