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What to look for in a financial advisor?

For startups, the importance of quality professional advice cannot be overstated. While business owners are quick to seek advice from lawyers and accountants there is considerable resistance to seeking financial advice.  A survey conducted by OpenMoney earlier this year, which polled 2,080 adults, provides a worrying insight into how business owners view financial advisers and the advice that they provide. We spoke to Pradeep Oliver, Partner, Cripps Pemberton Greenish who gave us more insight on the topic.

23% of respondents felt that they did not trust the financial advice sector enough to seek financial advice, and words and phrases such as ‘hidden agenda’ and ‘enforced rip-off’ were front and centre in their minds when asked for their view on the financial advice sector generally.

Financial advice is actually highly regulated. An IFA must comply with a myriad of rules, the underlying purpose of which is to compel an IFA to act in the  best interests of their client, and to provide  advice that is both suitable and appropriate for their client’s needs, objectives and  circumstances.

However, sometimes a financial adviser will provide advice that is not suitable or appropriate, and when this happens, the damage can be catastrophic.

The question then is, what to look for in a financial adviser?

First and foremost, it is crucial that the adviser is reputable and  regulated. A word of mouth recommendation from a trusted colleague or contact can be invaluable, however you must do your own research.

If you wish to instruct a firm, check the firm on the Financial Conduct Authority’s (FCA) register of regulated firms, to ensure that the firm is authorised and regulated to provide financial advice.

The importance of regulated status cannot be overstated. There are a number of unregulated firms offering access to seemingly attractive investment opportunities.  If the firm is not regulated, they are under no regulatory duty to provide you with good and suitable advice – in fact, if they do provide you with financial advice, the individual or firm is committing a criminal offence.

Further, it is unlikely that an unregulated firm will hold indemnity insurance and your avenues for recourse are significantly limited. For example there is no access to the Financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS).  

Secondly, if the firm is authorised and regulated by the FCA, you should then check the FOS portal and do a search of FOS decisions to see if that firm has had any concerning decisions upheld against it.

If there are more than a handful of decisions that all concern the same type of complaint (such as bad advice), it could indicate a systemic problem, and it may be best to avoid their services.

It is also prudent to be aware of other typical indicators that a financial adviser may not be acting in your best interests, even if they are regulated and have no Ombudsman decisions against them.

For example, if they are pushy in their advice, do not ask you pertinent questions about your personal and financial circumstances, or arrange for a third party to visit you at your home to sign forms without giving you the opportunity to properly read and consider them. In particular unregulated investments and “tax mitigation” schemes should be treated with caution.

In summary, you must do your research to ensure that you properly establish the credibility of your proposed financial adviser, and even then, you must be wary of the possible signs that the adviser may not be acting in your best interests.

Finally, keep all of your paperwork, and record the details of all meetings. This is critical evidence if something does go wrong.

If you believe that you have suffered loss as a consequence of poor financial advice call Cripps Pemberton Greenish on 01892 515 121 for a free, no obligation chat with one of our highly experienced financial negligence solicitors.