Personal finance

The Importance of Employing a Professional Independent Financial Advisor

professional-advisorWhen it comes to making informed decisions surrounding your personal finances, it makes sense to employ the services of a professional independent financial advisor to ensure that you receive advice which allows you to reach your financial goals, regardless of what they may be. Of course, those not familiar with the concept of discussing your financial situation and goals with an advisor may be wondering why it’s something we suggest so strongly and how the fee’s can be justified and, as such, we thought we’d take a brief look at the importance of employing the services of an IFA and take a look at why we feel it’s absolutely necessary for anyone looking to invest their hard earned cash in either savings or investments.

1. Understand Why You Need One

The first step to appreciating the importance of employing the services of an IFA is to understand why you need one. As we’re sure you’re already aware, a financial advisor isn’t there to help you cut your household bills, however is there to give you guidance on financial products such as pensions, investments, mortgages and others deemed to be a little more complex. You’ll find professional financial advice invaluable if you’re not 100% confident in making significant financial decisions yourself and would prefer to have an industry professional advise you as to the best options and the cost of an advisor can easily be justified when you take a look at the potential risks involved sometimes. It’s far more sensible to employ an IFA and have the reassurance that you’re making the right financial decision as opposed to making a costly mistake for the sake of saving on fees.

2. Understand The Difference Between an IFA and Restricted Advisor

Perhaps a little off the topic of the importance of employing an IFA, however as far as we’re concerned, it’s absolutely vital to understand why you should always opt for the services of an IFA (independent financial advisor) as opposed to those of a restricted advisor. An IFA is completely unbiased and is able to sell and advise you on products from across the market. Their job is simply to give you the best level of advice at all times and advise you on the best products based on your needs, requirements, situation and goals. A restricted advisor, on the other hand, is generally tied to a bank or financial institution and they are able to sell only products from a restricted portfolio. You may be getting advice on the best product they can sell but that doesn’t mean it’s the best product overall! Always, and we mean always, opt for the services of an IFA to ensure you’re getting the best advice which is tailored to your own bespoke needs.

3. Understand Why Their Fee Is Justified

As of December 2012, financial advisors are no longer able to accept commission on the sale of products and, as such, much charge a fee for their services to you, their client. This fee can take the form of either an up-front payment or a percentage, however that is up to the individual IFA to decide upon. What you need to ensure you understand, however, is the value and justification for their fee. You need to consider the potential cost of making an investment mistake should you decide not to take advice as well as the additional returns which you’ll undoubtedly receive through taking professional advice. “Sound financial advice is an investment for the future” (quoted from here) and the sooner you understand the value in that, the better.

All in all, there are many reasons why you should seek independent financial advice prior to making any significant financial decision, however as opposed to it being a one-off task, it needs to become something you do on a regular basis. By knowing you’ve got a financial advisor on hand to advise you as and when decisions need making, you can be sure you’re making the best decisions and that your money is in safe hands. After all, in difficult economic times, you need to make sure your money works as hard as possible for you and by employing the services of an IFA, you can ensure that’s the case.

If you have any questions, please ask below!