Independent Financial Advisers - the basics

What is an IFA?

IFA stands for independent financial adviser. An IFA is a professional financial expert who will establish your specific needs and then can for the best deal or product for you.

Can anyone set up as an IFA? How do I know my adviser is not a cowboy?

All IFAs must be authorised by the Financial Services Authority (previously the PIA) or, if they are also accountants or solicitors, by their professional body (eg Law Society). If you are not sure whether your adviser is authorised, you should check with the Financial Services Authority register on 0845 606 1234.

Am I protected if my adviser is authorised?

Authorised firms have to follow many rules and meet certain standards designed to protect you, the customer. These include a basic standard of knowledge achieved through qualifications and a range of clear documents designed to help you understand your financial products and the associated charges better.

If an authorised adviser sells you a product which is unsuitable for you, there is also a formal complaints system and a mechanism for redress.

Why would I want an IFA?

Sifting through financial products is time-consuming, confusing and costly. Some products, such as pensions and annuities are very complex and it can be a false economy to avoid taking advice.

How do I find an IFA?

There are two main ways - either via a recommendation from a friend or relative or by using the listings on which give you three IFAs in your local area.  The first route may be best for existing and former Army personnel who would benefit from finding a specialist firm.

What should I expect from the initial meeting or conversation?

The adviser will explain that s/he is independent (which means s/he can advise on the products of any company). S/he will assess your financial position and will ask you questions about your income, employment, dependants and goals. S/he will suggest a financial strategy and then research the most suitable product for your needs.

You should expect to answer questions about you, your existing investments and expectations plus your attitude to risk. This information will usually be gathered together by the IFA in one document called a 'factfind'.

You should also write down any questions for the IFA or financial products in advance.

But my bank gives financial advice - won't that do?

Not if you want independent, impartial advice. Advisers who are 'tied' to the products of one bank, building society or insurer cannot look across the entire market for the right product for you - they may only have a choice of one or two of each type of investment.

How is my IFA paid?

Your IFA is paid in one of two ways: either through fees agreed directly with you, or by commission paid to your IFA by the company providing your product. It is entirely up to you and your IFA how you choose to settle the bill.

If your IFA is paid by commission from the insurance company then you will be told the amount payable in advance of any decisions you have to make about products or advice. You will receive information about the amount payable in a separate document and it will specify the amount in pounds.

If you are not clear about any aspect of the payment, ask the adviser to explain it until you are - it is their job to help you. Towry Law advisers work on commission or fees.

IFAs must give you advice which is suitable for your specific needs. This means that they cannot just choose a product which pays them the most commission. Your adviser will also discuss the reasons for his or her recommendation which should reassure you that they are not biased.

If you have any doubts about this, ask for further details or opt for an adviser who is paid through a fee rather than commission.

I have heard of 'execution only' business - what is this

This is a an option for more sophisticated investors who have done their own research and just want to buy a specific product from a specific company without receiving any advice. With this you have to sign a declaration that you received no advice at all. The adviser then carries out your instructions and rebates much of the commission to your account. It makes sense for people who know their way around the investment business, but is not appropriate for those who do not. If you are in any doubt, ask whether you are getting advice.

Continued below......
The benefits of using an independent financial adviser

Authorisation - to ensure that your adviser is trained and supervised to a certain standard; provides clear information and is accountable for the advice they give.

A qualified expert - before giving anyone any financial advice, an IFA must pass exams designed to test both knowledge and capabilities.

Thoughtful advice -before giving any advice, an IFA must first conduct a proper assessment of your financial position.

Impartial advice - an IFA must consider the products and services offered by a large number of companies and make an unbiased recommendation.

Complete confidentiality - all information about your finances is subject to the terms of the Data Protection Act and regulatory rules. This means that access to information about you must be restricted. · A proper complaints procedure - this is laid down and monitored by the regulators. If necessary, a complaint can be placed before the appropriate Ombudsman who provides a free, independent adjudication.

Financial protection - whether your adviser is authorised to hold your money or it goes direct to the product company, your assets are protected under the terms of the Investors Compensation Scheme and, if appropriate, the Policyholders' Protection Act.

Be prepared - tips to get the most out of your IFA

  • Write down any questions in advance.
  • Think about where you want to be financially. Determine your long-term goals-five years ahead, 10 years, and at retirement.
  • Think about how much money you can invest and for how long.
  • Consider how much risk you are prepared to take with your investments.
  • Prepare your paperwork - assess what investments you already have and keep the documents in one place. The adviser will need to factor these details into their advice.
  • Put together a basic budget plan - set out two columns for all money coming in and going out. This will give you a feel for how much you can afford to invest - it may be a lump sum or a regular amount each month.

Be confident - tips for use during the meeting or conversation with your IFA

  • Use a notepad - date and keep anything your write down.
  • Speak up if you do not understand something. Your adviser should be able to explain things clearly, without using jargon.
  • Do not sign anything you do not understand or feel pressured into. A professional adviser will expect you to take time to think it over.
  • Do not sign a blank form for the adviser to complete later.
  • Stick to a level of risk and time commitment that you feel comfortable with and do not be seduced by higher returns.
  • Do not be afraid to say no. Be reassured - things to think about after your initial meeting or conversation:
  • Are your questions answered clearly and sufficiently? If not - do not be embarrassed to go back and ask for further explanation.
  • Do you have confidence in your adviser in general? This is important. If you doubt their knowledge or professionalism you should shop around until you find an IFA you feel comfortable with.
  • Read everything the IFA gives/sends you - even if it seems lengthy, complicated or dull. Make a note of anything you do not understand and ask your adviser to explain it before you sign anything.
  • Keep everything the IFA gives/sends you in a safe place.

Protect your money - what to avoid

  • An adviser who is not authorised.
  • Any deals or offers which sound too good to be true - they probably are. The same goes for anything which an adviser says will disappear if you do not sign up straight away.
  • Putting all your money into one investment.
  • Cashing in existing investments to buy new ones - this is called 'churning' and almost always means you will lose out.
  • An adviser you do not feel comfortable with, that you cannot trust or who does not seem to understand your needs.


War Hero
Dear F_S,

When I joined my first unit in Germany a guy called Bluey Davis (Hohne) used to come walking around the block the day a new guys from training came in.  I was 18, very green and suddenly this smooth talker arrives and within seconds has you signing for kit insurance, some life policy or a saving plan.  He used to be known by everybody and as an ex-soldier, was trusted!

His credentials were basically that he knew everybody in the Regiment!

Great advice and the website looks good, what do all the qualifications they list mean , most imporantly which ones can you buy on the internet and which ones are worth having.
BS - good point - see my comments about making sure your adviser is regulated.  This is the most important thing.  Off course, as with any profession, there are some bad apples among the regulated advisers.  But at least you will be able to get regdress/compensation through the regulatory support system if they give you dud advice, sell products you do not need or run off with your cash.

Interesting issue about being overseas though - be very careful about buying financial products abroad.  Basically, the UK has the best financial regulatory system in the world apart from the US.  In many other countries (esp in Europe) there is next to nothing.  Buy financial products aborad from someone who is based there and you will only be entitled to whatever standards and redress is on offer from that country's regulatory system.
Flip flop - good question....

FPC? FLIA (Dip)? Impressive professional qualifications or just an O’Level in art?

The FPC (Financial Planning Certificate) is main one - it is one of the most basic qualifications an IFA needs.  The rule of thumb is to ask them what the initials mean.  Many relate to affiliation of professional bodies.

For a full list, click on and then click on the 'Booklets and factsheets' button.

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