Financial Adviser

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What is a financial adviser?

  • A financial adviser is a financial expert who is employed to assist people in their financial decision-making.
  • They help you organise your money and work towards long-term financial goals.

Independent financial adviser

  • These advisers are independent of any company offering financial products and can advise on any financial matters, conducting research and making recommendations across the market.
  • They can offer unbiased and impartial financial advice.

Restricted financial adviser

  • As the name suggests, these advisers can only offer restricted advice. However, this does not mean they are inferior.
  • This means the adviser only recommends from a smaller pool of products or services.
  • Given the restriction to a few fields or types of financial advice, the advisor may, in fact, be hyper-specialised.

What does a financial advisor do?

The key duties, responsibilities and services offered by financial advisers are, but are not limited to:

  • Establishing their clients’ financial and life goals.
  • Making long-term financial plans.
  • Advising on how much you should be saving to meet these goals and how or where to do it.
  • Advising on how to invest your money – be this stocks, shares, bonds and ETFs etc. They will ensure that you make good investments which fit your risk tolerance and capacity for loss.
  • Retirement planning – pension, investments, property etc.
  • Advising on what insurance coverage you may need.
  • Advising on how to minimise any tax you may be liable to pay, making sure you take advantage of all the exemptions you qualify for.
  • Advising on your home and other properties – e.g. equity release, mortgage payments, whether to downsize, whether to invest in other property or renting a property out.

Additionally:

  • Financial advisers carry out market analysis and research to help offer you the best options.
  • Many advisory firms have dedicated economists to track long-term economic trends – this is especially helpful for investing.

Advice vs guidance

Often confusion can arise between what is financial advice and financial guidance. To help clarify the difference between the two:

  • Financial advice is professional, paid-for advice.
  • It is provided by experts who have training and certification to prove their credentials.
  • Financial advisers play a more active role in carrying out the actions that they recommend.
  • Financial guidance is often a cheaper, free or charitable service, such as The Money and Pensions Service, which is sponsored by the Department for Work and Pensions.
  • It gives more of an overall view of the options available to an individual rather than strongly recommending one over another.
  • Financial guidance should act as a supplementary aid to someone’s own personal research rather than replace it.
  • Financial advice is FCA protected.
  • Financial guidance has the advantage of being cheaper or free and can help raise your overall level of knowledge and awareness of financial matters. However, the decisions you make because of it are your responsibility and are not FCA protected.

Do you need a financial adviser?

  • Financial advisers are most useful for medium-to-long-term financial planning.
  • For more complicated financial products like private pensions, a financial adviser may come in more useful than for simpler products.
  • For information on things like ISAs and savings accounts, financial guidance may be more appropriate.
  • When investing large sums of money, a financial adviser can provide peace of mind that you are making the right decision, as well as FCA protection in some instances.

Alternatives to traditional financial advisors

This section will discuss and explain some of the more modern alternatives to the traditional (and often prohibitively expensive) financial adviser.

  • Robo-advisors – these are a much lower-cost alternative to a traditional financial advisor. They usually require you to answer a range of questions about your financial situation and risk tolerance which they will use to dictate your financial strategy. The lower fees and lower minimum deposits are made possible as the transactions don’t rely on human time.
  • Online advisors – these often rely largely on Robo-advisors but combine them with human advice.

Moneyfarm

  • Digital advice – Moneyfarm carefully matches investors to an investment profile so they are on the plan that suits them the best. This advice continues to run for as long as they invest with Moneyfarm and their investment portfolio(s) will reflect this.
  • Investment guidance – Moneyfarm offer investment support on the phone, in person, or via chat. Their advisors can help with retirement planning, market insight and account support.
  • Discretionary management – Moneyfarm portfolios are fully-managed and carefully researched by professional experts who keep a constant eye on your progress. Our proven investment strategy keeps the investment costs low, using tactical adjustments to make the most of opportunities.