How to compare IFAs

How to compare IFA’s?

Choosing the right IFA can be a daunting prospect. A good place to start is to look at client testimonials, either on an IFA’s website or a customer ratings website like Vouched For or Trustpilot. Have a look to see if the testimonials are recent and what clients genuinely have to say about an adviser and their service. Ultimately, however, it depends on whether you can “get on” with an adviser, do they seem knowledgeable and do they “speak your language”. To find out you’ll probably want to arrange an initial meeting, which most advisers will offer free of charge.

Independent or Restricted.

IFA’s can be either Independent or Restricted (sometimes referred to as Tied or Multi Tied). An Independent Financial Adviser has access to the whole of the market, which means that they can mix and match products and funds to suit your individual needs. Restricted advisers are tied to advising on their own company products and funds, or sometimes a limited number of other products and funds. Often restricted advisers are paid a salary by their company, which is taken into account in the level of charges for advice or product charges. You should be aware that some well known brands are actually Restricted, so don’t be afraid to ask the question.

Level of Charges

There are a number of charges that can apply to both advice and the products you purchase, so it’s important to look carefully at the total amount and number of charges, not just one.

Adviser Charges

Adviser charges can be agreed as a percentage of your overall investments, or as a flat fee. The charges may include ongoing advice, or this may be charged separately depending on your individual circumstances. You should always ask what levels of ongoing service you will receive in return for the charges.

Think about whether the charges are “value for money”, charges should be appropriate to the levels of complexity of advice and the work involved.

Product Charges

Product providers will charge fees as well, as a percentage of your investment, and you should take the total level of these fees into consideration when choosing a particular product. Product fees can include:

• Platform Charges
• Individual Product Charges
• Ongoing Fund Charges
• Transaction Charges

If you take out Off Platform Investments (i.e. Stand Alone Products), you may also be charged various fees including:

• Individual Product Charges
• Ongoing Fund Charges
• Transaction Charges
• Bid/Offer spread charges
• Exit Fees

Look out for Exit Fees in particular, which are charged if you move your investments within a particular timeframe. These could be as high as 10% if you move your investments in the first year. These are often charged by Restricted advisers who are only recommending their own products or funds.

Ongoing Service Levels

Your adviser should make it clear what levels of ongoing service they will provide and what the cost of the ongoing service will be. It may be that you want to agree quarterly, 6 monthly or annual face to face reviews, or telephone based reviews.

Make sure the levels of ongoing service suit your individual requirements and that the level of charges reflect “value for money”. You don’t want to pay high service charges just to receive an annual statement in the post!

You should also ask your adviser how actively they will manage your investments. Whilst a Fund Manager will manage your overall fund performance, you will need an active adviser if you want your investments to be reviewed and re-balanced to reflect your individual requirements on an ongoing basis; otherwise you risk being left in the same fund year after year.