How to choose an IFA: 5 Must-Ask Questions Before You Commit

Finding a new financial adviser isn’t something that you do every day of the week. Knowing how to choose an IFA can therefore be difficult. Most people muddle through the process and hope that they’ve stumbled on the right partner to look after their financial goals. Pensions, insurance, mortgages are all major decisions. Get it wrong and the consequences can be huge, for you and your family. It’s essential therefore to make sure that you go about choosing a new partner in the right way.

So, what questions should you ask your new IFA to make sure there’s a good fit and that you have the best chance of a successful long term relationship? Here are five must-ask questions to get answered:

Question 1: Is the advisor properly authorised?

Not all firms are authorised by the Financial Conduct Authority (FCA) to provide advice in all areas of activity. Whilst a company would be breaking the law if they were to advice you outside of their remit, unfortunately this does happen. You should therefore, not only ask your advisor to confirm that they are authorised to advise you on the matter at hand, but also take the precaution of checking on the FCA’s firms register.

You can check this out on the FCA’s register at:

On the individual firm’s page, check that they are currently authorised and ensure the firm’s permissions include the area of advice you’re asking them to provide.

Note that just because a firm has the relevant FCA authorisation that does not guarantee that you’ll get the best advice. However, authorisation is not something that can be acquired easily and should provide assurance of the minimum standard of knowledge required.

Question 2: Do they have extensive experience in your area?

To get the best advice, you need to choose a firm that specialises in the area of financial advice you need help on. It seems pretty obvious, but an adviser who only transfers a handful of pension schemes each year will not be as familiar with the issues as someone regularly advising on such matters.

So ask how many pension consolidation cases they have advised on recently. You should also consider asking for a reference from someone who has recently received advice from the firm and then make the effort to follow up with the reference.

Many advisers will refer you on to a specialist for some types of advice. This can be to a colleague within the firm, or could be to a different firm altogether. This arrangement can work well but be careful that you don’t get charged twice for the same advice and be careful to clarify who is providing the final advice that you will act on.

Question 3: Are you getting Advice or Advice with On-going Management?

The majority of advisers will give the advice around your initial investment decision and setting up the new products but given the length of time you can expect to be investing, access to ongoing advice is vital. And so is how your funds are reviewed. Many advisers simply place your cash into a “managed fund”, whilst others, such as Reeves, take a highly proactive approach, creating a portfolio of funds for you and moving in and out of assets as markets change.

There are arguments for and against passive versus active management, and much of it depends on how much involvement you want in the management of your funds.

It’s worth choosing an adviser with access to all types of funds so you can agree a strategy that fits you, rather than a one size fits all approach.

Question 4: Is the adviser independent, or are they restricted?

From 2013 firms must now choose between offering independent or restricted advice. Independent advisers must consider all available options and must recommend investment products and solutions which have been selected from the whole market. Restricted advisers, in contrast, offer solutions sourced only from a limited selection of providers.

If you want to be sure that your adviser has proffered the most appropriate solution to your needs, an independent adviser is the best choice.

Question 5: How are the adviser’s fees structured?

Good quality investment advice isn’t free. However, you can now rest assured that your advice will not be biased by the lure of high commissions. These can no longer be offered to advisers on investments.

Fees vary from one firm to another and there is no such thing as a standard rate or standard approach to calculating them. Some will use hourly rates, some a percentage of the fund value, some a fixed price. Your adviser should make clear how their fees are structured early in your conversation. If your adviser doesn’t mention their fees, ask about them.

And, as with any important purchase, consider value as well as cost. If you feel like bartering for a discount, don’t be afraid to ask! As they say in this part of the world “Shy Bairns Get Nowt”!

If you’re receiving pension advice ask if your fees can be paid from your fund after transfer. This effectively makes their fees tax deductible and doing so might provide a significant cash benefit.

So 5 Questions that will help you know how to choose an IFA. Have they helped you? Do you wish that you’d spent more time asking questions before you started working with your adviser? join the conversation below.

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About the Author

By Nigel Reeves: My mission is to provide the quality, honest & jargon-free pension advice that people need to secure the retirement they deserve. At home, I'm a family man and an active supporter of grassroots sports!

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