[An explanation of ] how financial advisers charge for their services and where to get the help you need 

10 tips to get the best advice 

1. Do all financial advisers give independent advice? 

No. Tied agents sell only the products of one company. They include direct salesforces and the financial advisers in most banks and building societies. Independent financial advisers, commonly known as IFAs, can recommend any product on the market. IFAs can be sole traders or national firms. Some IFAs operate through a network that offers technical support and help with regulatory compliance. The biggest networks are DBS and Countrywide. Bradford & Bingley is the only high-street institution that gives independent financial advice. 

2. How do I know which adviser is which?

An adviser must disclose his status at the outset. All advisers must also conduct a fact-find -- an in-depth financial interview to assess your needs -- and explain any recommendations in writing. 

3. How do I know the adviser is genuine? 

Tied agents and IFAs must be authorised to give advice by the Financial Services Authority, the City watchdog. You can check whether your adviser is genuine by calling the central register on 0171-929 3652. 

4. Do advisers have professional qualifications? 

The regulators insist on a minimum standard of competence. The most common qualification is the financial planning certificate. There are three papers so you may want to check your adviser has passed all the exams. Some advisers specialise in investments or pensions. It is worth seeking out an adviser who has experience in the relevant field. 

5. Where do I get advice on stocks and shares? 

Through a stockbroker. Stockbrokers fall under the auspices of the Securities and Futures Authority, which also sets their professional exams. For an advisory service, you usually pay an annual fee of up to £500, plus a dealing charge when you buy or sell shares. 

6. Who should I consult about mortgages? 

Home loans are not regulated by the government. As with financial advisers, some mortgage advisers work only for one company, others are independent. All mortgage advisers should abide by a recently-agreed code of practice, but it has so far proved pretty ineffectual. A survey highlighted widespread abuse of the code. If you talk to a mortgage adviser it is always worth getting a second opinion on any recommendations before you arrange your home loan. 

7. How much do I have to pay for advice? 

Tied agents make their money from commission. Although there is no upfront fee to pay, the charge is deducted from your investment. Most IFAs also make their living from commission payments, but a number of firms also operate on a fee basis. 

If you pay a fee for advice, the commission is paid back into your investment. Some advisers charge the fee as a percentage of a minimum investment requirement, which could be as high as £100,000. Others charge at an hourly rate, anywhere from £70 to £200, depending on the seniority of the adviser and the complexity of your affairs. 

8. Is it better for me to pay a fee upfront? 

Consumers are often reluctant to pay a fee. However, research shows that commission can lead to bad advice. If an adviser is paid only by commission, it often proves too tempting to recommend only those products that pay the highest rates. In a recent survey, the consumer magazine 'Which?' (similar to the German Stiftung Warentest) found commission-based advisers repeatedly recommended inappropriate policies. 

9. What should I do if I get bad advice? 

If a financial adviser recommends an unsuitable product, write with details of your complaint. If he cannot resolve the problem then he should give you details of the regulator or its ombudsman scheme. The ombudsman can award compensation, which is binding on the firm involved. If you are not satisfied with the ruling, you can still appeal to an ordinary court. 

Remember, you have no redress if you take out a suitable investment but it performs badly. You are also on your own if you take out a financial product without advice. 

10. How do I go about finding a good adviser? 

Ask among your friends or colleagues for recommendations - first-hand experience is always best. Your accountant or solicitor may also be able to suggest a good IFA. A number of accountancy and law firms even have their own IFA departments. 

If you are stuck, call IFA Promotion on 0117 9711177 for a list of three IFAs in your area. The Association of Private Client Investment Managers and Stockbrokers will send you a list of its members if you write to 112 Middlesex Street, London E1 7HY. 

Source: Sunday Times 11 April 1999