When can a financial advisor be helpful?

Last updated: 4 May 2022   By Dr Lucy Brown, Editor

Plan for the future and make the most of your finances with expert advice from a financial advisor.

Finance affects everyone, whether you are a high-income household or a low-income household it is important to know how best to manage your money and prepare for your financial future.

From pension planning to investments, to insurance policies and taxes, financial advisors play an important role in helping you get the best out of your money.

The rules, numbers, and regulations around finance change on a regular basis and it is your financial advisor's job to know what is happening and to provide accurate advice with your best interests at heart.

financial advisor with couple
Credit: Andrey_Popov/Shutterstock.com

What can a financial advisor help with?

During our lives we have some key financial decisions to make, and a financial advisor can help you with a wide range of these. A financial advisor's role is to help you understand the options available to you and recommend products that suit your needs.

  • Life changes - getting married, starting a family, divorce, these all require some financial thought. A financial advisor can talk you through life assurance options and critical illness cover or how best to invest or save money for your child or children's future.
  • Investing or saving money - you might find you inherit some money or perhaps you're simply in the situation where you can afford to save some money each month. A financial advisor will talk you through the most tax efficient ways of saving your money and advise on the possible risks and rewards of each of your options.
  • Buying a house - mortgages can be complex, as can setting up insurance plans to go with the mortgage and writing into trusts who the house would belong to in the event of your death. A financial advisor will help ensure that you have all eventualities covered in the most cost-effective way.
  • Pensions - it is wise to begin thinking about pensions as soon as you are of working age. A financial advisor can look at your expenses and your income and you can work together to form a pension plan that will allow you to save for a comfortable retirement when the time comes. This article on pension types on Choose offers more information on pension types.

Financial guidance, offered by some companies and charities, just tells you the options available to you and leaves you to make the decision on what is best. A financial advisor on the other hand will be able to tell you specifically what to choose for the best results and best return, making their recommendations invaluable.

How do I choose an advisor?

Choosing the right financial advisor is an important part of planning your financial future. Recommendations from friends and family can be useful but it is also worth considering what your financial needs are and then choosing an advisor who specialises in that area.

The gov.uk website recommends searching the financial services register to check that the financial advisor you have chosen is registered and qualified for their position.

All financial advisors must be qualified to the minimum of level 4 and must also have signed up for an ethics framework that includes agreeing to 35+ hours of training per year. The FCS registration ensures that should you be unhappy with any advice given to you, you are able to report it to the Financial Services Ombudsman and may be able to claim compensation.

The following websites are a useful way to find a financial advisor to suit your needs:

Different types of financial advisors

Financial advisors fall into two types, independent financial advisors (IFA) and restricted advisors.

  • IFAs offer unbiased advice, their advice will take into account all options and are not tied to any particular product or company.
  • Restricted advisors are tied to a particular area of finance, such as pensions, or are tied to a select number of companies and so their advice may be limited in what they can offer.

Is using a financial advisor expensive?

Financial advisors can price their services in a variety of ways. Some offer a free consultation followed by an hourly price or others might ask for a percentage share of an investment. For some products financial advisors may receive a commission for selling that product. Financial advisors cannot commission for:

  • Investments
  • Pensions
  • Life annuity products

Instead, they may charge a set fee for their advice. The Pensions Advice Allowance scheme allows you to withdraw £500 per year, for up to 3 years, to pay for pension based financial advice.

Some workplaces also offer schemes for discounted or free financial advice. Your workplace is not allowed to give you the advice, but it can include financial advice services as part of its benefits package. This can help reduce the costs of getting financial advice.

Whilst it may seem slightly odd to pay money to save money, financial advisors are trained in depth to understand all of the financial options and provide you with suggestions that you wouldn't have otherwise known about. Therefore, the overall gain of using a financial advisor is that, even with the fees, you end up financially better off and more secure.

What to consider before meeting a financial advisor

Before meeting your advisor for the first time it is a good idea to know what it is you would like advice on and what your financial situation is.

  • Do you need advice on pension planning? Or do you have some extra cash that you would like to see a return on? Whatever your need is have it clear in your mind why you are seeking help.
  • Are you a risk taker or are you risk adverse? Some investments carry a higher level of risk than others. Having an idea on how you feel about this will be useful as it'll help your advisor to recommend products that suit your risk mindset.
  • Do you know your income and expenditure? Before meeting with your financial advisor, it would be useful to know where you currently stand financially and what your budget is for financial products.

Your advisor can then see if your budget is realistic and also take into consideration how accessible you need any assets to be. For example - investing in property is an illiquid asset as it is not possible to access that money quickly if needed, whereas some ISA accounts allow you to withdraw the money any time as needed and therefore may be a better investment option for you.

What are the benefits of getting financial advice?

Financial advice can be crucial in helping you make the most of your financial situation and your assets as well as helping you ensure that you are prepared for the future.

  • Choice - advisors, especially independent ones, have access to a wide range of financial products that you might struggle to find without their help.
  • Personalised recommendations - your advisor will be able to help you find products that meet your needs and circumstances.
  • Increasing your funds - financial advisors will help you get the most out of your money and will work hard to ensure that investments pay off as much as possible, and that you get the most of tax-relief and savings schemes.
  • Help in difficult situations - it can be hard to consider how finances might work if you were to die or how inheritance tax might affect your family. Your advisor will be able to help you set up a plan to protect your loved ones.

Overall, using a financial advisor is a valuable idea that not only offers you financial savings but also security for the future and the relief that comes with knowing that you're doing all that you can with your financial situation.

Summary: why use a financial advisor

Financial advice can help you make the most of your savings, your tax relief allowances and help you prepare financially for your future and retirement. As well as this, financial advisors can help with wills, testate, mortgages and other insurance policies to ensure that you are getting a product that suits your needs.

Some investments and financial products carry an element of risk with them, but your advisor will explain this to you in detail, taking into account your needs. You are protected by the financial service ombudsman in the event of any malpractice.

Different advisors can specialise in different products or different areas, but all financial advisors are regulated by the financial conduct authority, and all have to have completed a minimum standard of training, so you know that the advice you are getting is well informed and suitable for your needs.


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