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An Independent Financial Advisor

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These days, most people with be familiar enough with the term to know that an independent financial advisor is obliged to give impartial advice to clients on financial services and products across the board of the entire financial services market. Most people will also have come to expect that that advice is generally offered free of charge. Perhaps fewer people will be aware, however, that although clients can indeed choose to receive "free" they can equally well choose to pay a fee for it.

Why pay a fee for a service that is otherwise offered free of charge? The answer, of course, lies in the fact that the Independent Financial Advisor also has to make a living. Good, professional and expert advice does not come entirely "free". If it is provided free of charge to the individual client, therefore, the advisor covers the cost of that advice by taking a commission from the provider of those financial products he sells. There is nothing intrinsically wrong or underhand in such an arrangement, but many will argue that it is important for the consulting client not only to be aware of the fact, but also to have the option of paying the Independent Financial Advisor directly for his services. In this way, the client can be assured that there is absolutely no way that the advice can be influenced by the prospect of an advisor's commission on what is being bought.

Since July 2005, therefore, the regulatory body – the Financial Services Authority – has made it a condition that all licensed Independent Financial Advisors must give their clients the choice of paying a fee for their advice. Therefore, the advisor has three ways of earning his professional fees:

Commission from the provider of financial products – conventionally, this has been the most usual method of paying for the Independent Financial Advisor's services. Nowadays, however, the amount of commission received must be disclosed by the advisor, who will also explain whether that commission is deducted from the amount being invested by the client or whether it is included in the cost of the investment. Either way, of course, the client is effectively paying for this commission. This puts a rather different slant on the concept of "free" advice;

Fees paid directly to the Independent Financial Advisor – although this arrangement is still probably less usual, it is an alternative that must be offered by the advisor. The actual fees charged will, of course, depend on the amount and type of investment being made and how complex is the advice needed. It can prove cheaper than paying a commission and the client can be entirely reassured about the objectivity of the advice, without worrying that the advisor is somehow influenced by a commission he could earn from a particular provider.

Commission and fee – thanks to the transparency of the relationship between advisor, client and providers, it is also possible to have a combination of both commission and fees. This breakdown of the actual cost of the advice being provided by the Independent Financial Advisor makes it much easier for the client to compare the real profitability of any chosen investment decision.
An Independent Financial Advisor
Independent

The independence of the adviser is critical. When an independent financial adviser is consulted, it is important to know that he or she has no vested interest and will not be influenced in any way by selling a single company's products. Independence means that the client can expect the adviser to act completely impartially, entirely in the client's best interests, and not because there is an established dependent relationship between the adviser and one particular supplier. The importance of this independence cannot be stressed enough. The adviser needs to be licensed by and is regulated by the Financial Services Authority, and independence is something that is central to such recognition. The client's faith and trust in the adviser stems largely from the latter's independence.

Financial

An independent financial adviser needs to have expert professional knowledge of a huge range of financial products and services. Since it has one of the most highly developed financial services industries in the world, the sheer range of products available on the British market means that knowledge and professionalism must be of the highest order.

Because of the sheer range of subjects with which an independent financial adviser needs to be familiar, there is a correspondingly wide range of qualifications available to individual advisers. For example, the adviser might have professional qualifications awarded by the Chartered Financial Analysts (CFA) Institute, the Chartered Insurance Institute (CII), the Institute of Financial Planning (IFP), the Personal Finance Society (PFS), the Pensions Management Institute (PMI, the Securities and Investment Institute (SII), or others. Above all, however, the adviser knows that his is a constantly changing market, with new products and services emerging all the time. He or she will make it his or her business to stay completely abreast of these trends.

Adviser

As an adviser, the third and vital component of the independent financial adviser's role harks back to the first of his or her qualities, independence. The financial advice given must be ?best advice? when recommending any product or service. That is to say, the advice must be the advice that is genuinely in the client's best interest. It is as though the adviser had stepped into the client's shoes and was giving advice entirely from the client's perspective. In this way, the client can be assured that the advice is truly independent, objective and impartial advice that will satisfy the interests that the client himself or herself has identified.

Summary

It is surprising just how much meaning can be packed into the three words that describe the role of the independent financial adviser. But as the above brief, thumb-nail sketchy has shown, each of the three words encapsulates a fundamental and vital part of this professional's job. Each word describes the obligations that the adviser has towards each of his clients, so that the clients, for their part, can rest absolutely assured that they receive genuinely independent, well-informed and expert financial advice that will serve their own best interests.
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Sean Horton has sinced written about articles on various topics from Finances, Mesothelioma Lawyer and Finances. Sean Horton is a Director of Enhanced Wealth, a whole of market mortgage broker and independent financial advisor specialising i. Sean Horton's top article generates over 90500 views. Bookmark Sean Horton to your Favourites.

Steve A Wright has sinced written about articles on various topics from Finances, Portugal Holiday and Finances. Steve Wright is Managing Director of Wrightway Financial Consultants, Independent Financial Advisers specialising in Pensions, Investments, Mortgages and Insurance. One of their major areas is being a. Steve A Wright's top article generates over 33100 views. Bookmark Steve A Wright to your Favourites.
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