How Independent Financial Advisors Can Help With Recent Changes in Personal Finance

windfall of moneyThis post comes to you from the team.

With significant changes taking place in the way people deal with their personal finances, more and more are seeking what is called an IFA, or an independent financial advisor.

Recently there have been big changes in areas like tax law, bankruptcy, and consumer debt management that could mean big changes in the way people manage their personal finances. Many believe that this will lead more and more people to turn to professionals for advice. Making the right financial decisions are not always easy and that’s where IFAs come in, since using an IFA may make the whole process more cost effective.


Planning is a Whole New Ball Game

With the recent financial crisis, financial products and state benefits have changed considerably, and will affect retirement planning. And with fixed income yields so low and many experts predicting mediocre equity returns in the future, people will need to re-calculate how they plan to live after leaving the work force. Of all the factors that drive people to look for independent financial advice, retirement and investment planning are two of the biggest factors. Experts agree this trend is likely to continue in the future.


Not all Advisors are the Same

Independent financial advisors come in all shapes and sizes and not all IFAs offer the same range of services. The best advisors are not affiliated with any one company, so they will provide the most independent advice, and access to the widest choice of financial solutions from any number of companies and products. You can pay for their advice by fee or by commission.

The main purpose of a financial advisor is to help clients in the planning and arranging of their financial affairs. So an IFA may customize an investment portfolio for you and manage your portfolio, as well as provide timely information about accounts and financial world market updates. And if you need even more detailed advice, some may be able to help you manage credit card debt and choose the right low apr credit cards.

Some things to ask your financial advisor include whether or not the advisor is independent or tied. A tied financial advisor could only advise on products from their own company, unlike an independent advisor that typically accesses products from throughout the entire available market. Also ask how long the IFA has been a financial advisor and ask for their qualifications. For example, the basic minimum qualification requirement for an IFA is the Certificate in Financial Planning or the Certificate of Financial Advice. All IFAs must also be authorized and regulated by the Financial Services Authority (FSA).


Starting the Planning Process

When developing a financial plan, you should start by defining where you are today, what resources you have available and what your personal and financial goals are. And IFA can help you figure these goals out by gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan to assist in achieving your objectives.

It’s not any different than what you should do on your own, except that a second opinion can help you to solidify your ideas and develop concrete steps to take.  Plus an advisor may have better ideas about the best strategies and the best products, which you may not have read about in Money magazine.

Don’t forget to ask how the IFA charges for services and what level of ongoing service they offer. An hourly rate may not be the most cost-effective solution if you like to take a buy-and-hold, or hands-off approach to your portfolio, since they will have an incentive to tinker as much as possible.  A commission-based approach might be more suited, since you’ll have minimal transactions to pay for.

With the new year beginning, it’s a perfect time to make the decision to take control of your financial planning and overall investment choices. And with the financial world changing rapidly, you may be able to save yourself a lot of time and headaches by seeking advice from an independent financial advisor.

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  1. says

    Finding a good financial advisor is tough these days. I actually just wrote an article on how to invest on your own. If you study slightly and understand basic concepts, you can do just fine, and you can avoid unnecessary fees!

    • says

      Self-directed investing is great, but I have encountered real roadblocks in two things: transitioning into retirement and dealing with windfalls (i.e. inheritance or lottery winnings). I think for a small flat fee, the advice received could be invaluable.

  2. says

    A further distinction should be made between “fee-based” and “fee-only” advisers. Fee-based advisers often charge asset based fees but may also collect commissions. Fee-only advisers do not collect commissions or referral fees paid by other product or service providers.

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