If you’re looking to invest, buy a financial product, manage your money more effectively or simply plan for the longer term, financial advice can be a good investment. Whether you need financial advice will depend on a number of factors, such as the product or service you’re looking for, your goals, your own financial understanding and experience, the complexity of your needs and your personal circumstances.
What services do financial advisers offer?
Financial advisers can provide a wide range of products and services, and help you with your financial circumstances at different stages of your life. Those products and services include:
- savings and investments
- pensions
- insurance
- mortgages
- equity release
- tax and estate planning
- retirement planning
- family finances.
When you go to a professional financial adviser, they’ll carry out a ‘fact find’. This is where they ask you detailed questions about your circumstances, such as:
- your goals
- your current financial situation
- your appetite for risk (how much risk you’re willing and able to take with your investments).
They’ll then set out a plan for you based on that information, including recommending financial products that are suitable for you.
Types of financial adviser
With investment products, some advisers are ‘independent’. This means they offer advice on the full range of products and providers in the market.
Others offer a ‘restricted’ service where the range of products or providers they’ll look at is more limited.
When you speak to an adviser, they should explain what type of financial advice they provide and, if they’re restricted, what they’re restricted to.
Find out more in our guide Choosing a financial adviser
What are the benefits of getting advice?
There are many reasons why financial advice can be helpful. For example:
- If you buy an investment product based on financial advice and a recommendation, you’re much more likely to get a product that meets your needs and which is suitable for your particular circumstances.
- Depending on the type of adviser you use, you might also have access to a wider range of choices than you’d be able to find realistically on your own.
- Advisers can provide expert guidance when you have important and potentially difficult financial decisions to make, such as approaching retirement.
- An adviser can put a plan together to help meet your short, medium and long-term goals. They can then keep you on track to reach those goals and make changes where necessary.
- If you have money to invest, an adviser can make sure that it works hard for you and that you make the most of the tax reliefs and allowances available.
The difference between advice and ‘non-advised’ sales
Many banks, building societies and specialist brokers will talk you through your different options but then leave it up to you to decide which product to take.
In this case you’re buying based on ‘information’ or guidance, and they generally won’t be assessing whether a specific product is suitable for your specific situation/needs. This means you’ll have fewer rights to complain or claim compensation if the product turns out to be unsuitable.
When you get regulated advice, however, the financial adviser will give you a personalised recommendation based on your circumstances and the information you have given them. This means that if you end up with an unsuitable product after getting advice and a recommendation, or you think you were mis-sold something, you can take your complaint to the Financial Ombudsman Service
Be aware that this doesn’t protect you against investment losses if the market goes up or down.
Find out more in our guide Financial mis-selling – what to do if you’re affected
What do you pay for financial advice?
Did you know?
Many advisers offer a first consultation for free. If you’re not sure if you need advice, you can make an appointment to find out what they can do for you.
If you’re looking for general financial planning advice, or for advice on buying particular investments, you’ll likely pay a fee.
Advisers must be clear upfront about what their fees are and agree with you in advance how you’ll pay them.
Some mortgage brokers might also charge upfront fees for advice, while others receive a flat rate introducer’s fee from the product provider. Getting mortgage advice directly through your lender is usually free.
You won’t have to pay an advice charge if you invest without getting advice, although there will often be other charges to pay, such as investment fees.
Find out more in our guide Financial adviser fees
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When do you need financial advice?
The answer will depend partly on the product or service and partly on other factors.
Financial planning
Advice is often about plans as much as it is about particular products and services.
Expert financial advice can be invaluable if:
- you need help making certain decisions
- you want to make sure your tax and general household finances are in order
- you’re dealing with financial issues that can become complex and time consuming.
Cash savings products
Are you looking to put money into savings accounts, cash ISAs or fixed rate savings bonds? Then you might feel confident enough to assess your own options using comparison sites and tables.
As these products can be relatively easy to understand, you might feel that you don’t need financial advice. You can also buy directly from providers very easily.
Find out more in our guide Bank accounts to keep and save your money
Investments
Are you thinking of investing in shares, unit trusts and other investments? Then you might have the knowledge and confidence to buy these directly from a broker, provider or fund supermarket without getting advice.
But these products are harder to understand than cash savings products, and it’s not always easy to work out exactly what to expect from them or how they work.
By not getting advice, you might not be considering all of the options available to you. And you could risk buying a product that’s not suitable for you.
So you really need to do your homework. Ask yourself these questions:
- Can you afford to lose any money?
- Do you have the time to do the research?
- Do you have much experience, knowledge or skills when it comes to investing?
- If things go wrong, are you comfortable taking responsibility for any bad investing decisions?
- Do you have the time and resources to review your finances regularly, to make sure everything is still on track?
If the answer to any of these is ‘no’, then getting financial advice might be your best option.
When trying to decide, also bear in mind the cost of fees against the financial and emotional cost of getting it wrong if you buy without advice.
Insurance or mortgages
Some insurance products and mortgages can be bought using price comparison websites, or directly from suppliers.
But you might also want to speak to specialist brokers. They’ll talk you through a range of options and might be able to get you a better deal. It’s up to you whether you buy with or without advice.
Find out more in our guides:
Mortgage advice: should you use a mortgage adviser?
When to use an insurance broker
Pensions
If your employer offers a workplace pension, they might also offer you access to advice or provide guidance about joining their scheme. It’s a good idea to take up this offer if available.
If you’re looking to invest in a personal pension, boost your existing pension or merge different pots from existing pensions, it’s best to get advice unless you really understand how these products work.
Pensions are long-term investments. so you need to be sure you understand:
- the types of funds you’re investing in
- the risks
- the suitability for your particular situation.
