What are the qualifications and experience of the person you will be dealing with?

It is common for the business owner or the individual you deal with to have very few qualifications but for there to be someone well qualified in the background. Without the appropriate level of knowledge how will the person you meet know the right questions to ask? Will they even be aware they've missed important issues or implications?

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It is not any one qualification that is important as they test different things - it's the combination that matters.

The Chartered Insurance Institute exams primarily focus technical knowledge in specific areas, the Certified Financial Planner certification assesses ability to construct overall financial plans incorporating lifelong cash-flow modelling and BS ISO 22222:2005 checks that processes and procedures are in place to effectively deliver a high standard of advice and service. They are quite different and it is the combination that is important.

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Beware of letters after names.

You should be careful about letters after adviser’s names as, for example, even the most basic entry level assessment results in being able to use the letters CertPFS. Find out what they mean and bear in mind that many advisers choose not to display their letters.

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Are they authorised to provide regulated advice and are the products they are offering regulated?

Sadly scams are rife and cases where unsuspecting investors have been persuaded to part with their money or transfer their pensions are all too common. Check their details on the FCA register, get a second opinion, trust your gut feel and remember that if it sounds too good to be true it probably is. Also be wary about unregulated investments. They tend to be high risk and/or complex and there are strict rules regarding their promotion.

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What is the background of the financial adviser and the business leaders?

Banks, Private Banks, Insurance Companies and many national IFAs are product orientated, sales and target driven. Finding out the background of the advisers and business leaders may give you an indication as to their motivation and ethos.

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Are they independent and impartial?

It is our view that there are only two kinds of adviser – those that act impartially and as the client’s agent and those that don’t. We also believe that in order to be impartial you must be an independent financial adviser (IFA), negotiating with all providers on clients’ behalves. Ask if they are independent. You should get a straight yes or no answer.

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Do their fees depend on the sale of a product or investment?

If the adviser won’t get paid without making a product sale, whether in the form of commission or a fee, they’ll try to sell you a product. Operating on a fee basis is essential to impartiality but you must be aware that it doesn’t guarantee it.

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Have they explained exactly what you are going to get and how much you will be charged?

Have you agreed exactly what services are to be provided and been provided with a breakdown of their remuneration and the underlying product or investment costs? We believe the services to be provided both initially and on an ongoing basis should be explained and agreed in advance and confirmed in written engagement terms. This is the way other professionals work. It is just as important to be aware of the costs associated with the recommended products and solutions. Despite rules over commission and charge disclosure, it is still not always clear what you will be charged and what the adviser and product provider will receive.

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What is the motivation of the individual and company?

Are the objectives of the adviser and the business aligned with those of their clients? All businesses want to be profitable and increase in value and all advisers want to be well paid for what they do but do you get the sense they are suggesting a particular option because it’s more profitable? Are they gearing up for a sale?

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Do they have robust processes? What are they?

Processes are important in all businesses. They should reduce risk and improve consistency of service and can also improve efficiency. Improvements in efficiency can be used to reduce the cost of services that clients pay or to increase profitability. A highly personalised service is expensive to deliver. However you should be particularly wary of services that are extensively standardised but for which the fees are at a level you would expect to pay for a highly personalised service.

Ask them what will be involved in advising you. What is their advisory cycle? What will happen next? Do they have difficulty explaining the different steps and what will be involved in each of them? Many companies do not have proper processes and procedures and others take the ‘sausage factory’ or ‘one size fits all’ approach. You should be wary of both.

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What types of clients do they deal with?

If your circumstances are complicated and/or the value of your assets and investments large, you are likely to benefit from a bespoke service and it is likely to offer you good value. Conversely if your affairs are simple and you are not particularly wealthy, a low cost standardised service is likely to be better value. Part of your questioning to determine who is right for you should include the types of clients they deal with and what they do for them. It is worth questioning them quite extensively to determine if the examples seem genuine.

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How many clients is each financial adviser responsible for?

The appropriate ratio will depend on how bespoke the service is, whether you will be dealing with the adviser on a day to day basis, the size of the support team etc. We believe that to provide a bespoke financial planning service, the maximum number of clients per adviser should be no more than 50. This number will increase significantly where service is less bespoke but the number should provide a useful indication of just how much of their time is likely to be available to you.

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How often will review meetings be held?

A proper financial planning relationship requires regular contact and review. How often will you meet? What is the agenda likely to be?

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Will they provide you with written reports? When will they be provided? What will they contain?

We believe whenever practical, advice should be provided in comprehensive, logical reports in advance of implementation. This means you have time to digest and properly consider recommendations before finalising important decisions. Ask if you’ll receive a written report, when you’ll receive it and what it will contain.

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How do they define financial planning?

Most financial advisers will call themselves financial planners and claim they are involved in financial planning. The problem is there are many definitions of financial planning. The Institute of Financial Planning define it as “Financial Planning is the process of developing strategies to help you manage your financial affairs so you can build wealth, enjoy life and achieve financial security”. An answer along these lines indicates they are more likely to focus on meeting clients’ overall long term objectives rather than product sales and transactional relationships.

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Do they discuss particular products or investments before really understanding you and your objectives?

Whether banks, private banks, IFAs or even Chartered IFA Firms, many advisers are primarily interested in selling you a product or investment for maximum profit. In most cases in order to provide the most appropriate financial planning and investment advice a huge amount of personal and financial data is required along with extensive discussions about your objectives and views and the various available solutions. If you are offered a particular product or solution early on in proceedings alarm bells should ring.

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What is their complaints and disciplinary history?

You can check the FCA disciplinary histories of firms and individuals on the FCA register which you may access via the FCA website. This should also give you an idea of individuals’ career history and experience. You should still question them about this as for example, when Baker Tilly Financial Services Ltd was bought by Towry Law, the records of those who worked for Baker Tilly Financial Services Ltd were changed such that their records showed only Towry Law.

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Do you get straight answers?

Are they open in their answers? Are they happy to admit when they don’t know the answer? Do they try and change the subject?

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What is their attitude towards tax products and unregulated products and investments?

Unfortunately there are many financial advisers who like to sell the products or services that pay the most commission or share of fees and many such products are tax products, unregulated investments and certain pension arrangements. The potential benefits offered sound too good to ignore. Those marketing these products can often be impressive brands and/or highly qualified individuals. Whilst some are effective and do have a place, it is important that all options are considered and all risks explained.

We are aware of high risk products being sold by both regulated and unregulated individuals where the minimum fees can be tens of thousands of pounds. Over the years we have witnessed far more failures than successes and suggest extreme caution. You should be convinced that the adviser is providing an objective view having considered all alternatives and be comfortable with all risks before proceeding. This is an area where impartial fee based financial advice from suitably qualified advisers who you can trust to tell you when not to do something is of paramount importance.

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Are they directly regulated by the FCA?

We believe being directly regulated by the Financial Conduct Authority is better than being influence by a third party such as a network or parent company though we acknowledge that this can be beneficial to certain types of firm.

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What is their approach to investment risk assessment?

Do they just ask you what your attitude to investment risk is on a scale of one to ten? Do they only ask you to complete a questionnaire and make investment recommendations based on the results? Other than for the simplest scenarios we believe this process to be fundamentally flawed.

A proper assessment of investment risk should not just be based on the risk you are willing to take but also the risk you need to take. It is one of the most important elements of the advisory process and sufficient time and discussion should be dedicated to it. The directors of Trusted Planning Ltd have dedicated years of thought and research to investment planning and risk, both at Trusted Planning Ltd and throughout their careers, culminating in the most robust proposition we have encountered.

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