Getting advice on your savings and investments
When getting advice on your savings and investments it's important to know what type you're getting and to check that your adviser is authorised by the Financial Services Authority (FSA). You also need to understand whether you're getting advice or just 'information'.
Difference between information and advice
If you're looking for savings or investment advice it's important to bear in mind a few key points:
- anyone advising on or selling investments (eg life insurance, pensions, shares, and unit trusts) or mortgages must be authorised to do so by the Financial Services Authority (FSA)
- some firms are authorised to offer an 'advice' service, while others can only provide 'information' - firms must give you documents explaining which type of service they are offering (read more in the section 'Getting advice on investments')
- buying with advice puts you in a stronger position if you later discover that your investment was unsuitable
- the FSA doesn't regulate the sale of savings products, but a financial adviser may help you choose if they're already advising you on investments
Getting advice on investments
Investments may grow but this isn't guaranteed - they could fall in value or you could lose your money altogether. Because of these risks it's important to consider getting financial advice before buying an investment. An adviser will look at your individual circumstances and needs before making a recommendation, and will explain any investment risks.
Financial advisers may be authorised to offer advice in one or more areas, such as pensions, life/non-life insurance, general investments and/or mortgages.
Before making a recommendation, financial advisers must:
- ask you in detail about your financial situation and needs
- explain why the product they recommend is suitable
- give you clear information about the costs
Comparing the service and products on offer
Under FSA rules financial advisers must give you documents carrying the Keyfacts sign. These are in a standard format and are designed to make it easier for you to compare what you're being offered by explaining:
- the type of service they offer (information or advice)
- whose products they choose from (the whole market, from a limited range or from just one provider)
- how you're being charged for the service (fees and/or commission).
(Firms can only say they offer independent advice if they recommend from the whole market and also offer you the option to pay a fee rather than commission.)
A financial adviser must also give you a 'key features' document before you buy any investment product (sometimes called a 'key facts illustration' for mortgages). This will describe the nature, aims and risks of the scheme in a standard format to help you understand and compare it to other products. It will also confirm how your adviser will be paid.
Because savings products are 'low risk' (you usually get back at least what you put in, and usually interest on top), financial advisers don't need to be specifically 'authorised' by the FSA to give advice about them. However, if an adviser is already advising you on investments they may help you choose savings products based on the information available.
Similarly, banks, building societies, and National Savings and Investments (NS&I) will give you 'information' to help you choose from their own savings range and they may offer you advice but the final decision will always be yours.
Of course you don't need to involve anyone in your savings decision if you don't want to: you can compare what's available yourself, using tables available in specialist magazines, the Sunday newspapers or online (including the FSA's comparative tables) and then make your own decision.
How to find a financial adviser
You'll find financial advisers listed in telephone directories and business pages, and on the internet (the FSA link below offers a good starting point ). You can also ask friends for personal recommendations.
Most banks and building societies also have financial advisers. Bear in mind that they're often tied to selling their company's products, or a limited range of alternatives.
Can a stockbroker give you advice?
Stockbrokers are authorised and regulated by the FSA. Some are authorised to offer an 'execution only service' only (they buy and sell shares for you in return for a fee but don't offer advice). Others are also authorised to offer advice on what to buy or sell. They will usually charge an extra fee for giving advice.