IFA Corporate Guide


Why Independent Financial Advisers (IFAs) and Employee Benefit Consultants are Well Placed to Give Impartial Advice

The best financial advice can be summed up as: impartial, affordable, suitable and transparent.

The advice a business receives depends on who is giving it and how impartial they are. Do not confuse sales of financial products with financial advice, although both are important and must be paid for. It may be that your business just needs advice on the existing financial products it has in place and does not need to pay for additional financial products.

Employers must know the status of their financial adviser as this will help them assess the value of the advice and its impartiality before committing to taking action based on it.

Currently there are three types of financial advisers:

  • Tied agents can only offer product recommendations from one financial services provider;
  • Multi–tied agents can only advise on the products of a restricted range of providers;

And

  • Independent financial advisers (IFAs) and employee benefit consultants who search the whole of the market for their clients.

The Financial Services Authority has proposed changes to the current system under its Retail Distribution Review (RDR). We will therefore update this guide to reflect industry changes as and when they are introduced.

Financial advisers of all types are required to give a clear and up–front explanation of the services they offer and how they charge for their services.

Employers will, of course, have to pay for the advice they receive. The choice is to allow your financial adviser to take commission from the products they arrange for you and your company or for a fee to be paid to cover the time taken, similar to how you pay your accountant or lawyer. The solution may be a combination of a reduced fee offset by a commission payment from the product providers. The impartiality of IFAs means they are obliged to offer this choice of being able to pay by a fee, tied agents are not. The important point is that you will know what is being charged and what exactly is being paid for.

Independent financial advisers will inform you in writing at your first meeting how you can pay them and the likely amounts involved. It is becoming increasingly popular for IFAs and Employee Benefit Consultants not to take commission from product sales but to charge on a fee basis. The implications of each route – fees, commission or a combination will be explained to you before you decide what is best for your company.

Remember that only IFAs and employee benefit consultants can access the widest range of financial products available giving them an unequalled capability to provide holistic advice on all areas of financial planning for a business.

It may be that you want an expert to look at your existing financial arrangements and employee benefits package. After highlighting any areas it may make sense to review, he or she can pinpoint what precise actions would be appropriate. Normally a comprehensive report will be prepared by the IFA or employee benefit consultant which will contain a professional opinion about your current position and the future implications of any financial arrangements in place or about to be recommended.

The constant flow of new legislation from government and the strict compliance obligations to be met mean that no business can risk losing touch with its responsibilities. As well bringing firms up–to–date with regulatory changes, an IFA or Employee Benefit Consultant will help employers and staff to secure the best outcome from any financial decisions they make.

Now you have a clearer understanding of how the advice market works, try answering the series of questions in the decision tree at the end of this guide and discover what type of advice you would prefer for your business.

Copyright © 2008 IFA Promotion Ltd.

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