It is strongly recommended that professional advice is sought when trying to plan your future finances. Anyone who provides financial advice to the public must be registered with the Financial Conduct Authority to be able to practice. You can check through the FCA whether your proposed adviser is authorised to practice, the level of authorisation, the types of business they can undertake and if there are any compliance issues. They also publish general information on how to find and use advisers.
All financial advisers dealing with the public are required by FCA regulations to give 'best advice'. In order to do this they must know their customer and no recommendations should be made without taking full account of your personal, family and financial circumstances. This may result in the adviser asking you to complete a detailed questionnaire. All advice must fall within your 'needs' and 'pocket'. It is important that they understand your position otherwise their advice may not be appropriate.
Investments may be purchased in different ways; through advisers, directly, or through specialist brokers. The purchase may or may not include an advice element depending on how you buy.
The Financial Conduct Authority
25 North Colonnade
LONDON E14 5HS
Tel: 0800 111 6768 (Consumer helpline)
www.fca.org.uk/ (Click on Register, Publications or Consumer)
Amongst FCA registered advisers there is a wide range of experience and knowledge. Some members deal almost all the time with mortgages while others may specialise in equity investments, pensions etc. You should check that your chosen adviser is suitably qualified and fully experienced in the range of investments relevant to your personal circumstances.
Financial advisers may be independent (IFAs) or restricted advisers. Advice is also available from specialist companies, some accountants or solicitors. You may also choose to take control yourself and deal directly.
Changes in the rules means that all advisers, independent or restricted, can only charge fees for their services for any investment product. They are no longer able to take commissions.
The new rules stipulate that as of 2013, all independent and restricted advisers will have to ensure that they have an upfront, transparent agreement with each of their clients about fees before giving financial advice. The adviser and client will agree on how the fees are going to be calculated, for example on an hourly basis, or a flat rate. If the client wishes to continue to have annual reviews and advice, this will also have to be paid for by fee with the rates agreed upfront. This change in the rules means that investment companies cannot attract advisers to them to sell their products because of higher commission levels.
Advisers must give details of any fee agreement in writing to their clients, together with key features of any investment and with an explanation of the suitability of the product to the client.
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Finding a financial adviser
A list of three independent financial advisers in your area can be obtained from IFAP, a trade organisation covering both fee and commission based advisers. They will also send leaflets covering, among other subjects, how your adviser is paid.
IFA Promotion (IFAP)
Tel: 0800 085 3250
Other general websites either have lists of advisers or offer advice on finding an adviser, including;
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A Financial Advice Checklist
- Has the adviser said whether they are 'restricted' or 'independent' and explained what that means? How long have they been trading? Do they cover all aspects of financial planning? What level of qualification do they have? And what resources do they have for research and monitoring?
- Does your adviser specialise inpersonal investment planning?
- Does the adviser fully understand your...
- tax position?
- Has the adviser explained and do you understand any risks involved in the proposals?
- Has the adviser offered you a choice and spread of investments suited to your needs?
- Have you seen and understood the comparisons of performance with other products of the same type?
- Are the investments intended for the long term and, if so, have the consequences of early encashment or surrender been explained fully?
- Has the adviser given you information about the fee structure both immediate and longer term? Have different products or companies been discussed?
- Do you understand the investment company's management charges and how they could affect your returns?
- Has the adviser set down proposals in writing so you can study them on your own? (Not just given you copies of brochures)
- Does the adviser want you to sign a 'Terms of Business' letter? If so, do you understand its detail and implications? If necessary get separate advice.
- Make cheques payable to the investment company not the adviser
- Make sure that your name, address and any other personal details are correct on any 'Documents of Title', e.g. share certificates, insurance policies.
- Make sure that where appropriate, Documents of Title are in your keeping - not the adviser's
REMEMBER - SEE MORE THAN ONE ADVISER
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Complaints and compensation
It should be remembered, of course, that investment advice is not an exact science. It involves some anticipation of what is likely to happen in the future. However, FCA regulations require that any advice you receive from a professional financial adviser will be appropriate to your particular circumstances. If it is not, you may have a right to compensation for any loss through the Financial Services Compensation Scheme.
Financial Services Compensation Scheme
1 Portsoken Street
London E1 8BN
Tel 020 7892 7300
Complaints about advice or an adviser should first be made to the Compliance Officer of the adviser's company. If a satisfactory outcome does not result, a formal complaint should be made to the FCA or directly to;
Financial Ombudsman Service
South Key Plaza
183 Marsh Wall
London E14 9SR
Tel; 0845 080 1800
If you feel that you have been mis-sold a pension product or have been wrongly advised to transfer a pension contact the FCA Pensions Unit
Tel: 020 7417 7001
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A successful future must be based on careful financial planning. It is vital to review your income and expenditure as your circumstances change.
Calculate the difference in outgoings when you leave work - less tax, possibly no National Insurance, no pension contributions, work expenses, travel costs etc. Are there other things you can cut out without feeling their loss?
What will be your net income when you leave your job (before any new investments) after all these items are considered.
Adjust your spending to meet your new income level and make all the adjustments to routine spending that you feel are reasonable?
Allow a settling down period, then look to see if there is a shortfall, how much it is. If there is, will it remain at that level and for how long?
If you need income, how much do you need? Will your need for income change in the next 10 years. Why and by how much? (For instance, a State Pension becoming payable, your mortgage finishing, a partner finishing work and receiving a pension, insurances maturing).
Everyday expenditures will change, some increasing and some decreasing. Income, however, will nearly always be less. It is important, therefore, to exercise some control. The budget forms which follow help compare the main areas of income and expenditure before and after leaving to identify areas where adjustments can be made.