What does a financial adviser do?
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We are now very close to the end of the 2022/23 financial tax year, and for many people, it’s the last chance to invest their remaining ISA allowance. But for many, investing is something many struggle to understand or have a hard time starting. Speaking to a financial adviser could be the very first step to a healthy investment portfolio.
But you may be thinking “what exactly does a financial adviser do?” They assist people to make decisions about what they should do with their money.
But you should be aware in advance that a financial adviser differs from a financial planner. In the UK, financial planners are not tightly controlled or regulated. A financial adviser can call themselves a financial planner regardless of whether they provide a financial planning service.
Financial adviser basics
A financial adviser is a professional that helps you make decisions about what you should do with your money and give you advice on how to achieve your goals.
Depending on your goals, you will have to find various financial advisers to compare and select one or more which fit your goals and needs. For example, if you are planning to retire in 20 years and you are looking to purchase a second house, you will most likely need to find two separate financial advisers, one who deals with middle net worth and big expensive purchases, and one who deals with retirement planning.
Read our blog on how to find financial advisers in the UK.
Financial adviser services
There are various types of services a financial adviser depends on their area of expertise. There is no one-size-fits-all model, so it helps to understand the common service professionals use. The best advisers have a vested interest in your whole financial life and will help you build an ongoing financial health plan. The plan includes assessing your current financial situation and identifying areas of improvement.
Most advisers will be able to help with;
- Creating an emergency plan
- Assist with saving and budgeting
- Retirement plan
- Tax plan
- Paying debt off
- Investment management
- Identifying asset allocation or investment portfolio diversification
- Planning and meeting short and long-term goals
- Explaining structures and investment products which fit your goals
- Estate planning
A robo-adviser provides financial planning services through automated algorithms with no human interaction. They gather information through an online questionnaire survey and automatically other a service based on the data information. Often, robot-advisers use passive investing strategies.
A robo-adviser is a good alternative if you prefer to be hands-off with your investments and don’t require a direct relationship with any human financial adviser. Since your portfolio will be managed and handled by software, robo-advisers charge a lower fee which equates to a higher long-term return for investors.
When should you get an adviser?
Anyone can work with a financial adviser as long as they are over 18. To work with an adviser, you don’t have to have a middle to high net worth – you just have to find someone suited to your goals.
The decision to enlist an adviser is a personal decision. A good time to start look is when you are struggling to meet your financial goals, need to plan on where to save, budget, or want help with investment management.
Financial advisers bring an expert and external view to your finances and take a deep look at your financial situation and suggest improvements based on your financial health survey. A good adviser can be worth the cost if you are able to meet your goals, and also, help you feel more secure in your financial situation.
When you have found a few advisers, you should aim to create a few questions to ask to pinpoint whether or not the adviser is suitable for your financial situation and short or long-term goals – here are 14 questions to ask.
How much do you pay?
Financial advisers are almost never free. The only free part of an adviser is the first consultation meeting.
You may not be required to pay any upfront fees, they will take payment in a number of ways. Some will be commission-based and will make a percentage of the products they steer you into. These are highly criticised as they don’t have your best interest in mind, just making enough to trigger their commission. Others take a percentage fee based on how much they are responsible for, but others take a percentage of profit.
Not all financial advisers have the same level of training or will offer you the same depth of service. So when contacting an adviser, be sure to do your own research and due diligence first to make sure the financial adviser can meet your needs.