How to make the most of your financial adviser

Just like you’d go to see a doctor for your health, a financial adviser is there if you need information on your financial wellbeing - and their help can be worth its weight in gold (literally sometimes!) in terms of a product’s suitability for you and the potential benefits it can bring. So how do you know if you need an adviser - and how can you make the most of one if you do?

When do you need a financial adviser?

There are times in your life when it’s wise to seek help from a financial adviser. These are when you’re weighing up meaty decisions about your money. For example, when you’re approaching retirement, considering pension consolidation, or figuring out your estate and tax planning.

It can also be a good idea to speak to a financial adviser if your life changes in a big way, such as following the death of a partner or a divorce. Working out the best way to navigate these ‘life events’ can be confusing and stressful to say the least – often made worse by complex financial rules and jargon - so it may be a good idea to get extra help from an expert if you find yourself faced with a major shake-up in your life.

However, there are many events and circumstances which can trigger the need to seek financial advice. Click the link below to read our article on how to know when you need it, with some examples to help you identify if you're in need of an adviser or if the lighter-touch "financial guidance" would serve you better.

How can a financial adviser help you?

The range of what a financial adviser can help you with includes so much more though - information and recommendations on products including mortgages, insurance, pensions, savings, ISAs and other investments, inheritance, equity release, will planning and more general family finances.

For investments, you may want to seek the help of an investment professional rather than a financial adviser. If you have over £300k to invest you might want to seek out discretionary fund management (DFM), where an expert does bespoke portfolio management.

For smaller amounts of investments, you will need to understand if the adviser you are using is whole of market or allied to a specific platform and the products available on that, in which case they are offering restricted advice. Your banks or building societies may also be able to provide information about some products as well.

An independent financial adviser (IFA) will have access to a wide range of products, and can likely highlight a greater number of suitable options than if you are researching for yourself. Their advice can give you the confidence to act. And when it comes to investments, your adviser will help you make the most of the tax freebies you can access from HMRC.

5 things to do to get the most out of your financial adviser

1. Communicate your financial goals

When you have your initial meeting, your adviser will conduct a Fact Find – which consists of a detailed questionnaire into all aspects of your finances. The answers you provide will help them to identify your financial goals, a detailed picture of your current financial situation – income and expenditure – and your attitude to risk, which will inform the types of products you should look at if you’re considering investing.

2. Establish a sense of trust

When the subject is money, trust is essential - however Boring Money research from June 2023 shows this may be easier said than done for people who haven’t experienced advice. And it’s a bit of a vicious circle, as in fact this lack of trust is the biggest barrier to seeking advice (17% of respondents told us their lack of trust in financial advisers prevented them from taking advice).

However for advised adults, it’s a totally different story with 91% saying they had complete trust in their adviser. And 95% of people who currently have an adviser are satisfied with them.

When asked what they value most in a financial adviser, advised customers mentioned the following: Trust & Peace of Mind, which accounts for 26% of the value in an advice relationship, followed by Planning (25%), Information (20%), Performance (16%), and Fees (13%).

Before you sign up with a firm, it’s important to know the answers to the following:

1. Is your adviser independent or restricted? If they’re independent, this means they look at the whole of market when it comes to products and providers - so you get more choice. Restricted advisers look at a more limited range.

2. Check they are what they say they are. Is your financial adviser authorised by the Financial Conduct Authority (FCA)? If not, they can only sell unregulated products (wine, art, property) which means your money is completely unprotected. Steer clear. The best qualified people to help you with your money are either chartered IFAs or certified financial planners.

3. How are they paid? Financial advisers are regulated and do not get paid commission on what they sell. They also have to act in your best interests. However, clarity on the charging structure for your adviser is important and there is much confusion on this topic which we have tackled in more detail below.

3. Understand the fees and charges

“One in five advised customers don’t know whether the fees charged by their adviser are fair or actively believe that they are unfair,” says Holly Mackay, Boring Money’s Founder and CEO. “One reason for this could be all the confusion that surrounds fees, and the difficulty in comparing like for like across various advice firm providers.”

So how can you get under the bonnet of what you are paying? A good place to start is to work out if you are paying what is called an ‘initial fee’ or an ‘upfront fee’ for the adviser to get all of your assets together and to work out the best course of action for you/make a plan. This is usually charged on a % basis of around 3%. You will also pay an ongoing fee for advice which is typically a percentage of your invested funds – typically between half a percent and 1%. What you pay may depend on the services and products you take out with your adviser, or if you just have a one-off session – which could also be charged as an hourly rate of between £150-250. Some advisers will charge a fixed flat £ fee, agreed with you in advance, to help with a specific query or need.

A good way to think about the value of what your adviser is delivering is to get under the skin of the business model most advisers use, and to separate out the two roles or ‘jobs’ an IFA performs for you.

The first job is that they create a financial plan for you, based on an understanding of your future goals and what your current financial situation is. This includes your income and expenditure (so they understand, for example, mortgage affordability), where all your different money might be held at that moment - whether in pensions or investment accounts for example - and what your financial priorities are. Are you saving for your first home, wanting to top up pension savings, or planning to consolidate your retirement pots for example?

The plan is very valuable to you – not to mention costly for them to produce – as it involves the adviser doing a deep dive into your personal situation, and financial modelling, to check that you can achieve your goals with the right investment strategy. There may also be quite a bit of paperwork and chasing of providers they need to do as well.

The other role that your adviser performs is the purchasing of financial products and this is where advised clients often attribute value. There will be fees you will need to consider here. You will likely have to pay an admin charge to the provider of the product of around 0.25-0.75% – to cover their overheads such as running the product – a fee will go to where your money is kept, the salaries of the fund managers, etc – and a platform fee on top potentially. The platform, where you buy, sell and hold your investments can charge around 0.25-0.45%.

In practice, many advice firms will add all this up and present you with one fee. If you are seeing one of the UK’s big brands – like a St James Place, a Quilter, a Brooks Macdonald or similar, I would generally expect to pay between 2% and 2.5% a year all-in for this (to include all advice, all admin and all investments and pensions) , although you can always try and negotiate which will be easier the higher the balance of your assets.

Some advised clients can get lost over what and when they are paying their adviser. Boring Money research shows that people tend to engage early on in their relationship with their IFA on the fees and charges, and then accept that they are being ‘fairly charged’. Comparing costs and fees is not easy as the charging models are hard to compare. So how do you know if you are paying too much? It may not be top of your to do list, but it definitely pays to spend a bit of time looking at your paperwork and asking the following:

• How much are you paying for your adviser?

• Do you understand what you’re getting for that fee?

• Is your fund via an investment platform that is also charging you, when you could be buying it direct from the provider to save yourself money?

• If you are paying a platform, do you feel the percentage fee you are paying is worth it to you? For example, does using a particular platform enable you to see several products at one time – e.g. a pension, life insurance and critical illness all under one roof?

4. Insist on regular reviews

A good time to check in with your adviser on the fees you are paying is at your annual review but if you are not sure on any of the above, ask for a meeting sooner rather than later.

Your annual review meeting should happen every year, and your adviser will talk to you about the performance of your investments and what your financial needs are for the following 12 months. These questions could be along the lines of: Are your financial goals still broadly the same? What sort of mortgage is right for you now the fixed interest term is coming to an end? Should you be paying in more to your pension? Should you rebalance your investments to take advantage of market changes?

5. Be proactive and stay informed

Another way you can make the most of your adviser is to get ahead of any changes you may be thinking of making, and ask them for their help and suggestions on next steps. Whether that is consolidating pension pots or moving investments from underperforming funds.

In summary, your relationship with your adviser hinges on trust. Make sure the foundations for that are firm by understanding how much you are paying and for what – then you can sit back, relax and know you have done your best for your finances.