If you are in the market for insurance the different types of products available, and the different levels of cover can be, quite frankly, mind-blowing. It can be tempting to hire the services of a financial advisor, but do you really need one, and what sort of service do they provide?
Whether a financial advisor would be beneficial to you depends on a number of factors including the type of product you are looking for, your financial goals over the long and short term, and the complexity of your personal circumstances and finances. A financial advisor will start by asking you a number of pretty in-depth questions to find out how much of a risk you are prepared to take with your money, what you hope to achieve financially, and what your situation is at present.
There are different types of financial advisors; some offer advice solely on specialist products such as pensions, and some give general advice on investments and general financial planning. With regard to investments, some financial advisors work solely on behalf of a certain company/or companies, whilst others are entirely independent so can give you advice on a wide range of products from different providers. If you choose to work with an advisor who works independently then you will probably get access to a wider range of products than you might do by conducting your research alone.
When you are given advice it falls into two main categories; ‘advised’ and ‘non-advised’ sales. The majority of specialist brokers, banks and building societies will discuss the options available to you and leave the final choice entirely in your hands. In effect, you are simply being supplied with information, and you have little recompense if things go wrong. Contrary to this, if a product is specifically recommended to you and it turns out not to meet your financial needs then you may be able to make a claim against the advisor for miss-selling.
In the UK, prior to December 2012 many financial advisors did not charge a fee, instead they received a commission from the investment provider which was deducted from the customer’s initial, or ongoing, payments. Since then, the law has changed and financial advisors must stipulate how much they charge, and how you pay their fees. However, you will probably find that most advisors offer a free, first consultation.
Of course it is cheaper to buy financial products direct from the provider, but you run the risk of buying a product that does not meet your financial needs, or offers a poor return. A financial advisor is likely to present you with better options, and some products are in fact only available if you buy via an advisor.
So, in what circumstances is it advisable to consult a financial advisor? Well, if you are simply looking to open a savings account or cash ISA you most probably do not need the services of an advisor as these types of product are low risk, and rates can easily be compared via online comparison sites. However, if you are considering investing your money into unit trusts and shares then the help of a financial advisor can be extremely beneficial as these types of product can be more difficult to understand.
Similarly, if you are in the market for a mortgage, or insurance, it may be cost effective to work with an advisor to discuss your options, and possibly to get you a better deal. You should also consider whether you have the necessary knowledge and skills with regard to investing, whether you are happy to take full responsibility for poor investments, and if you have time to carry out the necessary research. Pensions, in particular, are an area in which you may need professional guidance as they are long term investments so it is important to fully understand the risks and benefits of individual products. If you are entitled to a workplace pension via your employer they may give you access to financial advice and guidance to help you understand the benefits of joining their scheme.
If you do decide to consult a financial advisor then the internet is a good place to start. There are a number of websites that list independent, professional advisors; simply type in your location and the type of product you are looking for and you will be given details of financial advisors near you. An experienced financial advisor can offer a number of benefits as financial matters are often difficult to understand, and there are usually a number of different options to choose from when dealing with a specific financial requirement. In addition, many financial products have hidden costs, and choosing the wrong products can have serious, long-term implications. A good financial advisor can help you avoid making costly mistakes, explain any hidden charges, and suggest financial products to you that you may not have considered by researching the subject alone. Sound financial advice from a reputable, financial advisor can mean the difference between a comfortable standard of living, and financial ruin!