Types of Financial Advisors

Choosing a Financial Advisor

Searching for a financial advisor will throw up a range of categories and titles that may not mean much to you – but before you make any decisions, it’s important to understand what type of advice and advisor is available to you.

This is because advisors are categorised by the type of advice they can offer to you, and the way in which they are paid. So some initial research is recommended. Alternatively, at the start of an appointment, it’s strongly recommended you ask an advisor about the type of advice they can offer and how they will be paid should you act upon it.

As it stands today you can choose from independent financial advisors, whole-of-market advisors, multi-tied advisors and sales representatives of product providers such as banks and building societies (tied advisors). Some are paid commission for their advice (paid for out of the charges levied by the product provider), others charge fees instead; or a mix of the two.

With commission-based advice, you pay nothing upfront, but you do pay indirectly – as for every product you take out, the advisor earns commission from the product provider. As well as commission for setting up a plan, there may also be annual ongoing commissions, known as trail commission, which is paid to the advisor by the product provider for as long as the plan is in existence.

Which type of advisor could be right for you?

If you have already made a decision to invest in a specific product with a particular company…

…you might prefer to go direct to a single-tied or multi-tied advisor – who can only advise on products offered by their own company (or, in the case of a multi-tied advisor, a small number of additional providers). It’s important to note, however, that they will only be able to recommend a limited range of products, which may not be the most suitable for your personal needs.

If you are looking to receive advice suited to your individual circumstances and are prepared to pay an upfront fee…

…independent financial advisors have no restrictions on the advice and recommendations they can present you. They are required to offer you the option to pay a fee for the advice they provide to you, rather than receiving commission from any products you invest in based on their recommendation. However, if you decide not to act upon the advice offered, you may still be charged for receiving it. Because the fee is often calculated on an hourly basis, it could prove more expensive. If they do offer the option to operate on a commission basis then they operate similarly to whole-of-market advisors as described below. 

If you would prefer to receive no-obligation advice suited to your individual circumstances…

…whole-of-market advisors don’t charge an up-front fee, meaning you pay nothing if you don’t act on their advice. Like independent financial advisors, they can search the entire marketplace to make personalised recommendations suited to your financial objectives. They will receive a commission from the product provider if you go onto invest in a product upon their advice. Therefore, although you are not paying a fee, you are paying indirectly as the commission paid to your advisor by the product provider is taken into account when they design their products.

When making a decision, you should also bear in mind the importance of receiving ongoing, regular financial advice from your advisor; because what might be right for your needs now may not always be the case.

Independent financial advisors (unless working on a commission basis) are likely to charge additional fees to review your investments, which could add up considerably over time. Whole-of-market advisors and advisors who receive ongoing commission from the product provider – the level of which often depends on the performance of your investments – are more likely to monitor and review your investments on an ongoing basis, because they have a vested interest in ensuring they perform well for you.

More on:
Retirement Planning - Financial advice
Inheritance Tax - Financial advice
Making a Will
Investing your money
 

Plus see our separate guide called Making the Most of our Money

LINKS TO OTHER LATERLIFE FINANCIAL SERVICES PAGES

Retirement Pension Planning - General Guidance, Inheritance Tax Planning - General Guidance , Equity Release, Long Term Care, Making a Will, Annuities,  Finding an Independent Financial Adviser