Independent Financial Advisers or IFAs are advisers working independent from an insurance company or a bank. They are professional advisers on financial matters making sure that they help clients in selecting a financial product that would suit their needs.
An independent financial adviser is one type of adviser that offers and recommends products from the whole of the market. The other two are tied advisers, those working for and representing one financial institution, and multi-tied advisers, those who are paid on a commission basis while offering products from a selection of the market.
These advisers are under the rules and regulations of the Financial Services Authority. They are obliged to know their clients' circumstances and gain understanding on their requirements to be able to give them what is known as "suitable advice". They do this through a series of processes known as "fact-finding". Through surveys and interaction, they will be able to create a profile of clients and make a list of their needs and requirements. When they recommend products, they should also let their clients know the benefits, charges and other information about the product. They are also obliged to undergo "Continuous Professional Development" by keeping up with developments in the market and in their profession.
Matters such as investment, insurance, mortgages, loans, retirement planning, tax and legal matters may be consulted with IFAs.
There are four ways for independent financial advisers to get compensations.
The first way is through commission. When they sell a financial product, the IFAs receive a commission from the provider. Some providers also pay annual commission but not all products offer the same.
IFAs may also get their remuneration from fees. Some advisers shifted to offer doing their work for a fee because they deem it fairer to the clients. This is because most times, paying for a fee is cheaper than paying for the IFAs' commission on the product that they are selling.
Some opt to do a combination of these two. They may charge commission for transactions and fees for advice.
Some economies developed the term "fee-only" to refer to transactions where advising firms receive no commission.
IFAs have levels of qualifications as well. The entry level is the "Financial Planning Certificate" or "Certificate in Financial Planning". The Qualifications and Curriculum Authority designate exams for individuals to reach this level. The level after that is the "Advanced Financial Planning Certificate" or the "Diploma in Financial Planning" and "Advanced Diploma in Financial Planning" after. The highest is "Certified Financial Planner".
In getting an independent financial adviser, it might be worth to ask about the areas of expertise of the adviser.