Financial Advice

Hannah Beecham

How to Chose the Best Running Mate  

Choosing a sound independent financial adviser (IFA) can be as testing as any courtship ritual, and there’s just as much to lose if it all goes wrong. So here’s how to ensure you put your money in safe hands. 

Expatriates are a particularly vulnerable breed of investor and conmen employ a variety of contrivances to ensnare them. One old sally comes in the form of a cold call. The caller commences with a little flattery – you’ve been chosen because of your perceived investment savvy – and continues by offering you that most rare and exciting of investment opportunities, a chance to double, or even treble, your money in just thirty days – about as likely as a fish riding a bicycle. Another draws your attention to a prominent advertisement in the local expatriate newpaper, trumpeting a mouth-watering annual return on what can only be described as a safe-as-houses investment. Participate in this juicy little deal and you’ll earn a regular monthly income of 8% per annum from a gilt-edged bond. Really? In these days of lowest  ever interest rates?

So how do you set about teaming up with an honest John; a skilled independent financial adviser (IFA) who will marry your aspirations realistically to your assets?

The beauty pageant

Meet as many prospective financial advisers as your schedule allows. Investors are sometimes encouraged to treat this process like a beauty pageant – you will undoubtedly be shown the finest wares an adviser has to offer. Incidentally, you should not be charged for these initial consultations; you're providing a marketing opportunity. Prepare an agenda; make a list of any questions you feel are important, whether concerning the IFA’s professional background or particular investment areas you wish to explore. Do not be dazzled by promises of fulsome financial returns or lose sight of the bare facts of the arrangement you need to establish. If you're not confident about going alone, take a friend.

At the first meeting, an adviser should be happy to outline a general strategy, and explain it to you in clear terms. Ask as many questions as you need. Will you be comfortable with the proposed financial outlay? Will it be flexible enough to cope with a change in your circumstances? Will the level of risk be appropriate to your objectives?  As different advisers recommend different approaches, question them as to the relative merits of each.

The key question for any investor at these initial meetings is, “How do I ensure this adviser is right for me?” To begin with, don't accept ‘spin’. The only real proof of an investment manager's ability is track record. What you are looking for is a manager who has consistently delivered good returns, that is to say, realistic returns in all market conditions. So it’s important you ask for client testimonials and other references confirming the adviser’s track record. 

Fee versus commission 

No-one can expect good professional advice to be offered free of charge. Broadly-speaking, there are two ways a private individual pays for investment advice – either as an upfront fee paid directly to the adviser, or by way of commission paid to the adviser by the providers of the financial product signed up for.

An IFA is more likely to be paid on a fee-basis, but a tied adviser will usually be reimbursed via a commission from the company whose product is being sold. This division is not always so cut and dried and it is important you settle the question of payment method with your adviser at the outset.