Financial Advice Fee Change – What Questions Should you be Asking?
Happy young couple in discussion with a financial advisor (Photo credit: SalFalko)
At the start of the year there were changes to the way financial advisers should charge clients for their services, but how do you know whether you’re financial adviser is playing by the rules?
The new regulations were introduced to increase the transparency of financial advice fees and make it easier for clients to calculate exactly how much they are paying. Financial advisers should no longer be taking their payment in the form of commission, and should instead charge clients a set fee for their advice. They must also provide more clearly defined services and achieve a higher level of basic qualifications.
However, according to research from the Financial Conduct Authority (FCA), not all advisers are abiding by the new rules. The financial watchdog has evidence that some financial advisers are receiving payments from life insurance providers, which could potentially influence the products they recommend to their clients.
Following a review of 26 financial advice firms, the FCA tracked payments made by insurance providers to financial advisers. This could compromise the supposed independent nature of the advice provided to clients, leading to decisions based on the commercial benefits for the adviser rather than the best interests of clients.
With the mistrust endemic in the financial advice industry, here are five questions you should ask to ensure you receive the very best advice…
Do they provide independent advice?
Is the financial adviser truly independent? If they have links to a select number of providers you will not necessarily receive advice on those products that are best suited to your goals and aspirations. Independent advisers will scour the whole market to provide the most appropriate solutions for you.
What level of service do they provide?
One of the crucial first stages of the financial advice process should be a detailed assessment of your current financial situation and recommendations of products which can help to improve your situation. These should be aligned to your future goals and tax position.
Ongoing monitoring of the performance of your financial investments and on-going support throughout this process is essential. How will they deliver this service? Some financial advisers may provide annual reports, whilst others will keep you updated with regular emails.
Are they well qualified?
You are well within your rights to ask to see their statement of professional standing certificate. Every advisor must hold such a certificate which details their professional qualifications and their membership of an appropriate professional body. If you’re looking for specialist advice in a more specific area, makes sure they are qualified to provide advice in this field.
How much will it cost?
The new rules were brought in to counter the typically opaque nature of financial advice fees. Before you agree to the service, make sure you know exactly how much it will cost, and how this cost is calculated. Will you be charged by the hour, a fixed fee or on a project basis? If you’re worried about escalating costs then ask about setting up a maximum fee. Also, what are your payment options? Whilst some financial advisers may prefer payment upfront, others will be happy to deduct their fee from the cost of a product.
Will they conduct ongoing reviews?
Are reviews included as part of the ongoing service or will you have to pay extra? You should also find out if the review will be conducted by the same financial adviser you have been working with, and what the contingency plans are should your financial adviser move to a different firm or retire.
Author: Are you looking for a chartered financial adviser? Cardiff based Bartholomew Hawkins have an expert team of professionally qualified advisers who specialise in independent pension and investment planning. Call 029 2050 8000 for a free initial consultation.
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Category: Financial Education, Financial Planning
