It is rarely surprising when we hear that independent financial advisers (IFAs) are placed at the top of the list of financial services firms when it comes to ‘trust’.
According to a new report commissioned by The Read Group, IFAs are the financial services provider most trusted by consumers.
The survey of 2,330 consumers found that lenders, credit card companies and price comparison websites were the least trusted types of firms in financial services.
Trust is important, but investors need more than trust when selecting and dealing with financial advisers.
It might not be desirable or possible to remove trust from the equation entirely, but reducing the dependence on trust can be achieved by carrying out a certain amount of due diligence.
Checking that an IFA firm is authorised and regulated by the Financial Services Authority (FSA) is an important first step.
A quick check on the FSA Register will show whether an IFA firm is currently authorised. It is also worth checking this system to make sure that the firm has the necessary FSA permissions to provide advice on a specific area.
Looking at the qualifications and experience of your preferred financial adviser is also important.
You should make sure that they hold at least a Diploma level qualification (or have a plan to get there very shortly) and have specific experience working with clients who share similar attributes.
Ideally, your chosen adviser should hold the Chartered Financial Planner or Certified Financial Planner (CFP) qualification as these both represent a very high standard of technical understanding.
Getting all recommendations and advice in writing from the adviser, before implementing that advice, is essential.
This provides you with the opportunity to consider what is being recommended before you put it in place. It means that you can formulate lots of questions for the adviser and get detailed answers to these questions before putting pen to paper on an application form.
Another important consideration which helps to remove trust from the equation is looking for an adviser with membership of a professional body. This means that they have to uphold a code of standards and ethics, which gives you an additional level of protection over and above that afforded by the Financial Services Authority.
By the end of next year, every individual financial adviser will need to hold a Statement of Professional Standing from their accredited professional body and get this updated annually. You should ask for a copy of this once they become available, as it will demonstrate that the adviser remains up to date with their continuing professional development and qualification requirements.
Whilst trust is an important factor in building relationships, you can reduce your reliance on trust by looking for these basic factors in your dealings with an independent financial adviser.
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