There are essentially two main sources of financial advice in the UK; Independent Financial Advisers and Tied Agents. The key difference between the two is that Independent Financial Advisers are required to act as the agent of the client and to select products from the whole of the market, whereas Tied Agents represent a single financial institution, or at best a limited number of companies. Independent Financial Advisers are also required to offer the option of being paid by a fee instead of taking commission when they arrange transactions on your behalf.
So, what does this matter? After all, both types of adviser put themselves forward as providing comprehensive financial planning, wealth management, tax and estate planning. Some Tied Agents even promote their fund management service as offering a ‘Best of Breed’ – take a look at this Google Search result page for a few examples.
Well, the chances are that you already own products from a variety of companies. Once the financial planning advice has been provided you are probably going to need to acquire some products in order to provide the security that you require and deliver your long term financial goals. With a Tied Agent you immediately encounter a couple of problems. They are not allowed to advise you on the products which you hold with other companies. Just as importantly, when it comes to putting the financial plan into action what choice do you get from a Tied Agent? If you have been following this so far, it will come as no surprise to learn that what you get are products from the companies that they represent.
Suppose you have gone ahead and bought a number of products from a Tied Agent and after a while you decide that their investment performance has not been up to scratch. You go to the Tied Agent and ask him what your options are. He can only offer other fund choices from the provider that he represents.
Independent Financial Advisers, in contrast, can advise on all products that you already hold. If you need to buy new products, they are required to search the whole of the market and recommend the most suitable one for your needs. They are strictly answerable to you and act as your agent and not that of a product provider.
Clearly it is a matter of personal choice. The following table may help you to decide which type of advice is best for you:
If you do decide that Independent Financial Advice is best for you make sure that you check that is in fact what you are getting. Due to the obvious advantages Independence confers on consumers Tied Agents working for ‘Wealth Management’ companies will go to considerable lengths to fudge the issue. Ask them out right whether they are an Independent Financial Adviser. If in doubt check the Unbiased Register to see if their details are included.