Consult a financial planner

Traditionally, financial advice has centred on flogging products to clients. But with financial planning the focus is more on giving advice that considers your personal as well as your financial needs.

“A financial planner looks at the whole picture,” says Nick Cann, chief executive of the Institute of Financial Planning (IFP). “They’ll talk with you to identify what you want to achieve, look at your income and your expenditure, prioritise your needs and create a strategy for your short-, medium- and long-term goals.”

Who is it for?

Absolutely anyone, regardless of their wealth, can benefit from financial planning.

Andrew Strange, policy director at the Association of Independent Financial Advisers (AIFA), says: “One of the most important times people seek financial planning advice is in the 5 years prior to, and the 5 years post, retirement, to help make the most of their pension pot.”

However, many people need financial planning advice at a much earlier stage and experts stress that financial planning is about building a relationship that lasts.

Some advisers may only take clients who earn a certain amount of money, but Strange says that 75% of IFAs claim still to offer financial planning to those approaching retirement with assets of less than £25,000.

How do you find a reliable IFA?

When it comes to choosing a financial planner you obviously need to find someone affordable and offering good value.

Strange advises people to find existing clients and ask for recommendations. He also suggests using the IFP and AIFA websites or searching online for an adviser.  All advisers will meet with you for a free introductory session where they can spell out their service and charges.

So how much will it cost me?

Advice is never free and traditionally IFAs receive commission on every product they sell on to you. For an investment such as an ISA or pension this could be as much as 8% of your entire lump sum or regular savings plan. If the product sale does not come with quality financial advice then you’re being ripped off.

Many advisers opt for less commission in favour of getting an annual or “trail” commission (around 0.3–0.5%), which can make it a bit more likely that the adviser will stay in touch and keep you advised. Maybe!

All advisers are obliged to offer a fee option to clients in order to call themselves an IFA, but most are only interested in the commission. The danger of commission is that advisers will “churn” you from policy to policy to generate commission for themselves. The advantage of fees is that you know the adviser is working for you, but it can be expensive.

In 2013 IFAs will have to charge a fee agreed between the 2 of you. Typical fees could be: initial report, £40–£2,000; monthly retainer, £50–£250; hourly fee, £100–£250. A good benchmark is 1% a year. If you’re wealthy, it should be less; if you’re not, it could well be more.

What about my bank?

Most banks now offer the option of paying for financial advice and planning. But banks generate income by selling products, and strict targets mean staff don’t have much time to talk about all your financial needs.

“I wouldn’t expect the highest standard of financial planning from banks,” says Steve Martin, managing director of Smart Financial Planning. He says they have a tiny range of products and because you’re often not given full details of all that are available, it can be worse than searching online yourself.

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