How much do you know about financial advice?

Wrong! There are lots of different individuals and organisations that offer ‘guidance’ or ‘advice’ to help people with their finances, but there are some key differences between the two.

‘Guidance’ is a very broad term. With this type of service, you’ll typically be given the general information you need to go away and make your own decisions, and you won’t be recommended particular products. Meanwhile, ‘advice’ is when an authorised person or company offers a personal recommendation or specific course of action for you to follow, based on an evaluation of your circumstances and plans for the future.

For more information, visit Citizens Advice.

Wrong! Many people assume that financial advisers are for people who are better off. But taking professional financial advice can have a positive impact on everyone’s finances and investments, and make a real difference to your quality of life in retirement.

There are lots of different ways you can pay for financial advice, including by the hour or month, for a set piece of work, or through an ongoing fee – some advisers may offer an initial meeting free of charge so you can get an idea of what they can do for you. There are also a lot of things that affect what and how an adviser charges you, from where they are located to what qualifications they have. Visit the Money Advice Service website to find out more about financial adviser fees.

Correct! There are many types of financial adviser, and they can have different titles depending on what type of finance they specialise in. These can include mortgage, pension and investment advisers, as well as financial planners and brokers. But, no matter what their specialism is, they all have to be regulated by the Financial Conduct Authority (FCA).

Wrong! Independent financial advisers are required to recommend the most appropriate products for you, depending on your individual circumstances. This includes financial products that are available across the whole of the market.

However, if a financial adviser is ‘tied’ or ‘restricted’ then they are only able to offer you recommendations on a limited range of products, from one company or a small number of companies.

Advisers and companies are required to tell you in writing whether they offer independent, tied or restricted advice, but you should ask for more information if you need it.

Correct! Financial advisers can be paid a commission for offering advice on particular financial products, including mortgages, travel or home insurance and protection insurance.

However, a change in the law in 2013 means there are some products that advisers cannot charge commission for, including pensions, retirement products (like annuities) and investments. Instead, they can charge you a fee for their advice.

Visit the Money Advice Service to find out more.

Wrong! While professional financial advisers should be approved or authorised by the FCA, you can’t always assume that they are. It’s worth checking that your financial adviser is authorised to give advice before you use them.

You can do this by visiting the FCA’s Financial Services Register, a public record of companies, individuals and other bodies that are, or have been, regulated by the Prudential Regulation Authority (PRA) and/or the FCA.

If you do use an adviser that’s not approved by the FCA, you won’t be able to use the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if anything goes wrong, and your money won’t be protected, so it’s worth doing your research.

Correct! According to research conducted by the International Longevity Centre-UK (ILC-UK), supported by Royal London, people who take professional financial advice achieve better outcomes than those who don’t.

The Value of financial advice report, which used data from the ONS Wealth and Assets Survey on the wealth of individuals and their household assets in Great Britain, showed that people who used an adviser had, on average, 17% more (£12,363) in liquid financial assets and 16% more (£30,882) in pension wealth than those who didn’t use an adviser. This amounts to over £40,000 more in overall wealth!

Read our article to find out more about the research.