5 points to consider when looking for a financial planner

Bad financial advice can be devastating, here are 5 points to consider when looking for a financial planner. 

Lots of us have heard of the shocking stories of someone losing their life savings at the hands of someone unscrupulous calling themselves a wealth manager.  Sadly the standard of offshore client protection still has a long way to go to match that of the UK, which has one of the strictest regulatory regimes in the world. January 2018 saw the start of the tightened ‘MiFID’ rules in Europe this will ensure that retail consumer protection slowly starts to improve. However offshore, there are still numerous companies that offer risky non-compliant products and are ripping clients off by charging high commission structures.

A good wealth manager should not only help grow your money, they can help plan your financial future, protect your assets and minimize your tax exposure. An ethical IFA should place the client before any personal gains, a good adviser can really play an imperative role in how successful someone is later on in life.  Yet a dishonest IFA can be the cause of devastating capital loses.

Here are some important points to consider


1) Be careful of high-risk and unregulated investments

Before beginning an investment you should have completed a comprehensive questionnaire about your financial situation, lifestyle and lifetime goals, in addition, you should have filled out a risk profile’, this will calculate how long you wish to invest for and how much risk your willing to take for the return.  Your IFA should now have a thorough understanding of your situation and requirements, plus, they will know which types of investments are suitable for you. Some offshore firms may offer unregulated products marketed as student accommodation and car parks these are risky investments and have traditionally given poor returns and sadly on some occasions, large losses.  Also, it is not unheard of for immoral companies to offer bridging finance as an investment option, which is for sophisticated financiers only. These types of investors can make their own informed choices and are extremely knowledgeable and experienced in the investment market. Funds recommended should always be clearly explained and within your risk tolerance. A well-structured portfolio should be tailored to the client and diversified across different funds in bonds, cash, stocks, and property, depending on the tax wrapper chosen it can have many tax incentives too.


2) Financial advisor qualifications

Is your IFA qualified to a level 3 diploma in financial planning, this is the minimum requirement to work offshore? The FCA mandatory obligation in the UK is that all advisers are level 4 RDR qualified. Chartered advisers are even higher qualified and can offer a further level of expertise. How experienced is your wealth manager?

3) A firm’s regulatory status

A well-regulated organization should give a greater level of retail consumer protection for example companies regulated by the FCA in the UK and the FSC in Gibraltar, can offer excellent client security.

4) Transparency of fees.  

Ask how your adviser is remunerated, this should be pre-agreed and shown in the client agreement. Lots of investments can have built-in fees that consumers are not aware of, these charges can be high and erode the return.

All costs should always be agreed on in advance. There are a few ways an IFA can be paid an hourly charge, a percentage of the amount invested or a fixed charge.  Common practice is a commission charge up front then an annual fee of is 1 %-1.5 % per annum based on the assets under management. Your client agreement should detail this and how often you will meet your advisor, normally there will be reviews 1-2 times a year or before if your situation changes.


5) Is a firm independent, restricted or tied? 

Tied means a company is only offering a small number of financial products and restricted means just that; a limited choice of investments. An Independent firm will look at the most suitable products to fit the client across the whole of the market.

Be careful of advisers who have direct involvement in the funds there are recommending or those that aggressively try to push you into one investment over another.

Bottom Line

A skilled adviser can be the key to a client achieving financial freedom, but incompetent advice can result in a loss of money.

And the information on this page is intended as an introduction only and is not designed to offer solutions or advice. Beacon Global Wealth Management can accept no responsibility whatsoever for losses incurred by acting on the information on this page.

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