Independent Financial Advisers (IFAs) are professionals who offer independent advice on financial matters to their customers and recommend suitable financial products from the whole of the market. IFAs must offer their customers the option to pay for advice by fee as an alternative to commission.
From 2013, charging commissions on new product sales has been outlawed. Typically an IFA will conduct a detailed survey on their customer’s financial position, preferences and objectives; this is sometimes known as a ‘factfind’. They will then advise appropriate action to meet the customer’s objectives; and if necessary recommend a suitable financial product to match the customer’s needs.
All Independent Advisers (IFAs) must have the following:
- Level 4 or above of the national Qualifications and Credit Framework.
- A statement of Professional Standing (SPS). This means they have signed up to a code of ethics and have completed at least 35 hours of professional training each year. SPS certificates must be renewed annually.
All IFAs should be registered with the Financial Conduct Authority (FCA) who regulates the financial services industry in the UK. This means IFAs meet the right standards and the customer gets more protection if they are not happy with the service, including the right to complain to the Financial Services Ombudsman and potential eligibility for compensation if things go wrong. If a Financial Adviser is not registered with the FCA, the customer can make a complaint to the FCA. To check a Financial Adviser is registered with the FCA click here.
In order to be called an Independent Financial Adviser, the Adviser will need to:
- Consider a broader range of products than before (retail investment products)
- Provide unbiased and unrestricted advice based on a comprehensive and fair analysis of the relevant market
- Inform customers before providing advice that the provide independent advice
Restricted Financial Advice
If a firm or Adviser only gives advice on certain types of product or on products from one of a limited number of providers, they need to describe the advice as ‘restricted’.
They must tell the customer that they provide restricted advice and how it is restricted – by product or by provider. They must do this in writing and also orally before giving the customer any advice.
Later Life Advisers
Later Life Advisers specialise in the financial needs of older people. Advisers will have the following minimum professional standards/qualifications:
- (Level 4) financial planning qualification and a Statement of Professional Standing (SPS)
- Hold an appropriate equity release qualification (covering both lifetime mortgages and home reversion plans)
- Hold an appropriate long term care qualification such as CF8 or CeLTCI (Certificate in Long Term Care Insurance)
They will also be independently accredited under the Later life Adviser Accreditation Scheme for advice skills of those Advisers who specialise in the older customer market. The Later Life Adviser Accreditation Scheme is audited and endorsed by the standard-setting body the Financial Skills Partnership (FSP) and was developed in collaboration with the specialist financial services consultancy SVARfair. The LLAA is awarded to an individual Adviser rather than their firm.
Financial Advisers are no longer paid by commission. This means that the advice they give or products they recommend should not be influenced by any commission they may earn on a particular investment. This does mean however, that charges for advice are therefore passed on to the customer. Fees can be structured as:
- An hourly rate
- A set fee according to the work involved
- A monthly retainer
- A percentage of the money invested
The Adviser must explain to the customer how much their advice will cost and should set out the charges in a clear way, ensuring the customer understands how much they are paying and what for. There may be extra charges for looking after a customer’s investments of providing advice on a regular basis.
Finding an Independent Financial Adviser
The Financial Services Register is a public record of all the firms, individuals and other bodies that the FCA regulate. It holds information on all firms that are, or have been:
- Authorised by the FCA;
- Registered with the FCA to conduct regulated activities; or
- Provide certain regulated products or service in the UK.
The register also lists individuals who are approved to carry out particular functions, and other bodies. The FCA must approve an individual before they are able to conduct certain types of business, such as selling or advising on investments like personal or stakeholder pensions, life assurance policies, shares or collective investment schemes.
Online Search Sites
The following organisations also provide on line search facilities for qualified Financial Advisers in a given geographical area: