Finding Advice – 7 Questions to Ask When Choosing a Financial Advisor

key questions to ask a financial advisorThis is a series of articles outlining all you need to know to find the right combination of financial advice and support that will help you build your dream for the future. Be sure to join us so you do not miss any post in this series.

We are all pretty capable when it comes to straightforward financial decisions. Setting up bank accounts, choosing decent savings plans and organising insurance, for example. And of course, MoneyNuggets is here to guide you when you need a bit more support to get going.

However, not all financial decisions are straightforward. Tax planning, retirement funding, consolidating existing pensions, building investment portfolios; each of these comes with its own set of risks, fees, and booklet-filling, sometimes with mind-boggling terms and conditions.

Which is why these decisions might cause you to seek help from an expert. Rather than spend hours learning and researching information, let someone else do that and spend your own precious hours doing something more enjoyable instead.

But how do you decide WHO to speak to and what questions to ask a financial advisor?

Your relationship with a financial adviser should be a long and fruitful one; you should feel comfortable with them, ask questions and feel confident they have your best interests at heart. You should never, therefore, just take the first referral you are given. Do a bit of research first.

And to help you get started, here are the 7 top questions to ask a financial advisor to make sure you get the best out of your new advisor. 

7 Key Questions to Ask A Financial Advisor

Q1: Do You Have Experience In Helping People Like Me?

Different advisers tend to target – or perhaps find they tend to attract – different types of client. Simply by being more familiar with certain topics, some will have greater experience of some things and less of others.

What you want to find out is, how closely does their normal day-to-day practice overlap with what’s required to meet your own needs?

For example, if you have a pension fund of £50,000, but the adviser usually deals with funds 10 times that value, you may find your situation better supported by someone familiar with smaller fund sizes. And indeed, vice versa, should the opposite be true.

Q2: Are You ‘Independent’?

If you decide to see a financial adviser, especially if it is your first contact this one of the key questions to ask a financial advisor.

Advisers in the UK are split into two categories: ‘Independent’ and ‘Restricted’

‘Independent’ means an adviser must be able to offer unbiased advice based on a comprehensive and fair analysis of the whole market of products and funds. ‘Restricted’ means they give advice only on certain types of product, or perhaps on products from only a limited number of providers.

For most people, particularly with larger funds, Independent would always be the recommendation, particularly if you have a large investment portfolio and/or complicated tax affairs.

However, independent advice can be expensive. There are thousands of products available in the UK – and over 2,500 funds – and it can take many hours to make a truly independent assessment.

By contrast, a Restricted adviser may decide he or she only wants to deal with certain types of client, and can keep his or her fees down by undertaking a selection process that will provide well for 90% of those people in advance.

If your tax situation is fairly straightforward, you simply need to review the value of your pension or the risk in your ISA holdings, therefore, a Restricted adviser might be perfectly good enough AND cost you less. (See ‘How much do you charge?’)

Just one caveat, though.

Watch out for Restricted advisers who are employed by product providers and who only give advice on that single provider’s products.

And ask yourself whether that scenario offers a decent probability of you the most suitable product in every situation.

Q3: What Qualifications Do You Have?

By law, all financial advisers must pass an NQF Level 4 Diploma in Financial Advice to prove they have at least a minimum level of knowledge and expertise.

They then also have the option to continue to study up to NQF Level 6 – at which point they will then qualify for Chartered or Certified status (depending on which body they studied with).

You should ideally be seeking an adviser with Level 6, i.e. Certified or Chartered status (often shortened to CFP or CFA). Or at least some indication of their intentions towards that higher level of qualification and how far towards achieving it they have got.

Q4: How Much Do You Charge?

Fees are a really hot topic in the finance sector at the moment and should be one of the first questions to ask a financial advisor – and we will come on to the ‘why’ in our next update (coming soon).

What you need to know now, however, is how much your adviser is likely to charge you – a fixed fee, an hourly rate or a percentage of your investments – and whether that money is likely to be deducted from your investment (via what’s called an Adviser Charge) or can be paid by you directly, via card, bank transfer or direct debit.

If you are able to pay the fees directly to the adviser, this is the best option as it keeps the fees clean and very transparent.

You will always know exactly what you are paying and your investment will be free to get on and grow without being encumbered by regular deductions.

However, in some instances, that may not be possible, either because you cannot afford the fee directly or because product deduction is easier. In which case, Adviser Charge may be the way forward.

One thing to note: if you are quoted a percentage fee – and particularly if the adviser indicates this will usually be via ‘Adviser Charge’ – make sure you convert that into £ sterling. 3% (for example) might not sound like a lot of money.

If you have £100,000 in a pension, however, that’s £3,000. Ask what you’ll get for that money. And what you can expect in hours spent looking after you. This is one of the vital questions to ask a financial advisor before hiring.

Q5: What Can I Expect From You?

In outlining their services to you, an financial adviser should give you full details of what to expect for their fee.

This should include what they will gather information on, how they will assess your situation, what you can expect from your resulting financial plan and details, if applicable, of how they will support you on an ongoing basis.

You do not have to have an ongoing relationship with an adviser. However, knowing that someone else is keeping an eye on things for you and providing details of how it is performing can be reassuring.

It also puts the responsibility on someone else to notice when things might be going wrong, and to make recommendations on how to put things right again if they do.

Q6: How Will We Communicate With Each Other?

In these days of quick communication, we now have a range of different ways to talk to each other. And some advisers are using this technology to help build efficiencies into their processes, which can potentially reduce costs.

So, while many continue to work face-to-face, there are also some advisers now using web conferencing, the telephone, email and messaging software to communicate – and some may even offer some basic elements of advice without you needing to speak to anyone at all…

If you are happy with the new digital age, you may also be happy to deal with someone online. It can also open up more choice as your location is no longer a limitation on your choice of adviser.

However, if you are the type of person who needs face-to-face personal contact, then digital advice will not be for you.

Q7: Can I Talk to Any of Your Existing Clients?

An employer wouldn’t take you on for a job without asking for a reference. So, make sure you ask for a reference from your adviser before you go ahead and ‘employ’ them. This is one of the important questions to ask a financial advisor that are often overlooked.

Many advisers are members of online review networks so may simply be able to refer you to one of those. Either way, don’t just take the details, make sure you check the validity of those details as well. Good luck!

Over to You:

Have you met with a financial adviser? What questions did you ask your financial advisor? Share with us here, we’d love to hear from you!

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Lesley James

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    1. Good question. And no, not everyone ‘needs’ financial advice. But two aspects to consider:

      – In pure money terms, there are situations when that advice will pay back more than it costs in the savings you make (in tax, perhaps, or debt/mortgage interest payments). And others where the simple fact someone is pushing you to get your money organised means you will make you more money than you might have done on your own (by getting you started earlier, by keeping you motivated – and by recommending a more suitable home for that money).

      – In more human terms, an adviser is there for more than just recommending the best product. They also act as your coach and mentor, informer, educator – and help you protect yourself against the unexpected.

      So there’s an argument they can offer value to almost anyone – even if right now that’s just an hour to help kick start your plan.

  1. Really helpful and clear advice! It’s hard to know how to find the right person but your list of questions would certainly help.

  2. Hiring the services of a financial advisor has never really been on my radar, I wonder, do I really need one, as an average earning parent?

  3. Finances scare me and make my head spin but it clearly shows how negative my relationship with money is. I agree that being transparent about fees creates clarity x

  4. I am in the process of looking for a financial advisor , as I am buying my home. These tips are great to look out for and ask.

    1. Hi Lindsey, I am glad you found the post useful and thank you for taking the time to leave your comments. I hope you find a great advisor who can help you get your new home. Good luck!

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