Don't let advisers rip you off, warns city watchdog

BE CLEAR: Agree with your financial adviser in advance how you are going to be charged and how much The Financial Services Authority (FSA) plans to ban independent financial advisers (IFAs)

from taking commission for selling savings and investment plans. But as the changes do not come in until 2012, consumers are being urged to take steps to ensure they are getting the most

suitable advice in the meantime. Many experts blame the payment of commission for contributing to a series of mis- selling scandals over the past 20 years, including endowment mortgages and

personal pensions. With about half of the UK’s 35,000 IFAs favouring commission, consumers should be on guard, according to campaigner Which?. Dominic Lindley said: “Our last round of

mystery shopping found 82 per cent of all advisers failed to have a meaningful discussion about how the advice would be paid for. “There is always going to be the suspicion a

commission-based adviser is recommending a product based on the amount of commission they would receive rather than its suitability.” Decide what type of financial advice is needed, and find

an IFA who specialises in that area. An online directory service called Unbiased can help with finding an IFA or mortgage broker according to your area and their specialisation

(www.unbiased.co.uk). Under the current system, all IFAs must give their customers the option of paying an upfront fee, or paying by commission. Make sure you talk to your adviser at the

outset about how you want to pay, and how much the advice will cost. Pensions For pensions and long-term investments, it is more likely to be worth spending money on getting the right advice

since there are larger sums of money at stake. Any IFA should be able to give guidance on pensions, yet it is better to choose one with specialist knowledge which will be clear from their

qualifications. Don’t be afraid to ask what pensions exams they have under their belt. For example, those considering doing a pension transfer should only seek advice from an IFA with the

G60 or Advanced Diploma (pension) qualification. A pensions provider might offer guidance. But most simply provide information, rather than personalised advice, so be sure to ask at the

outset if they are able to give formal advice, so there is no confusion. Plus, they will only be able to talk about their pension plans, and not those from the whole of the market.

Government helplines geared towards retirement are just for advice on state pensions and will not be able to deal with personal pensions over and above explanations of jargon and tax

matters. For investment advice, an IFA will be able to match your needs with a portfolio. Which? recommends using an adviser with three years or more experience. Again, providers will have

information, such as past fund performance to hand, but this is unlikely to be formal advice, so ask for information if you want to do some homework on a fund. But any investments require a

full understanding of your financial position, which is why an IFA can be more appropriate. Make clear the amount of risk you are willing to take. Mortgages Borrowers can turn to an IFA,

mortgage broker or a bank for advice. They could even find their own on a comparison website. Yet many believe receiving professional help is crucial, as mortgages can be very complicated.

Brokers differ greatly on how they get paid. Some will charge a fee according to the size of mortgage you require. Others are fee-free and make their money from the lender. Be sure their

policy is clear. Where a fee is too large, try to negotiate it down, or switch to another broker. An IFA can give mortgage advice, although many choose not to, concentrating on investments

only. However, they often have brokers they can recommend so it’s worth asking for a referral from someone trustworthy.