What is an IFA, and why should you care?

In the current climate, getting professional financial advice could be more important than ever. From minimising your inheritance tax burden, to investing, saving for the future whilst making the most of tax-free allowances, securing your pension income, finding the right mortgage deal, putting in place the right insurance to protect your family’s finances…the list goes on. 

These are all services offered by financial advisers. 

A question we often get asked is, ‘Surely, financial services is a heavily regulated industry, so all financial advisers must offer roughly the same service?’

Well, yes, and no. Yes, we are all bound by the same industry regulations, and there are certain practices and regulations which we must adhere to.

But, no, because, just as in any industry, the way that financial advice is provided can differ hugely.

At Talis IFA we are, as our name suggests, independent financial advisers. 

In this article we’re going to shed some light on what the ‘independent’ part means, and why it matters. If you’re already familiar with the financial services industry, you can probably move on now, but if you’re new to the idea of seeking financial advice, or perhaps finding a new adviser after someone you trust has retired, this article is for you.

Independent Financial Adviser (IFA) – a definition

In simple terms, ‘independent’ means that the individual or firm isn’t tied to any particular financial institution. This is important for you, as it means they aren’t ‘restricted’ in terms of the financial products and services that they can recommend. They are free to research and recommend solutions based on how well they match your needs and preferences – not based on ‘best fit’ from a limited portfolio.

How can you tell an FA from an IFA?

The first sign is that an IFA is usually proud of that fact and will tell you up front about it! If it’s not immediately obvious, though, check out who owns the firm and whether it is affiliated to other firms. ‘Big brand’ adviser firms are typically ‘restricted’ meaning they have their own portfolio of products and cannot advise on the whole market.  If you’re not sure, the simplest thing is to ask.

Independent vs restricted financial advisers – the pros and cons.

One of the biggest pros of working with an IFA, as we’ve already seen, is that they have unfettered access to the whole of the UK market – whatever mortgage, investment, savings or protection you’re looking for. 

But that access isn’t much help without in-depth knowledge of where to look and what to look for. And that’s where a firm of experienced and qualified IFAs like Talis really comes into its own. Taking the time to get to know you, to understand your financial position and, crucially, your plans for the future, is one of our core strengths. It allows us to offer you truly tailored advice based on a financial plan which we develop together with you, and to recommend the products based purely on your needs and preferences. A good IFA isn’t driven by commission and sales targets, but by a genuine commitment to helping you achieve the best possible financial future – from financing your first home, to achieving the lifestyle you want in retirement, to passing on your wealth to the next generation.

Restricted FAs can rarely claim the same values as they are often part of a highly corporate environment or wider group, with a less personal approach and, possibly, governed more by the need to achieve targets than by your needs.

That’s not to say that working with a restricted FA is second best. Many people like the reassurance of putting their money with a big-name brand. The big names may also have easier access to ancillary services through other subsidiaries owned by the same parent company. But remember that size isn’t everything, and a large firm doesn’t necessarily mean a better outcome. If a more personalised approach is what you prefer, an IFA may well be the better choice for you.

How are IFAs paid?

This is another area where IFAs and restricted FAs can differ. 

An IFA is typically compensated solely through fees paid by their clients (i.e., you). They will make their fee schedules clear to you at the outset, and then invoice you directly or explain how these fees can be settled from your investments, according to whatever has been agreed between you.

A restricted FA may operate on the same basis but it is common for them to be incentivised by the company providing the financial products that they sell. Payment by commission is rare these days but a bonus for hitting KPIs (key performance indicators) can have the same result.

If in doubt, it’s always best to ask at the earliest opportunity so that you fully understand the nature of the agreement you’re entering into.

The Talis IFA approach

Talis IFA is a firm of independent financial advisers focussed on helping our clients to make smarter financial decisions when planning for financial freedom. What makes us stand out is that we take a life first, money second approach: yes, the numbers are important, but what matters more is that you have the financial freedom you need to live the life you want.

Personal preference and chemistry make a big difference to how you feel about the financial advice you’re getting. That’s one of the reasons why we take time to get to know you – not just your attitude towards money and investment risk, but what really matters to you.

We’ve been providing straightforward, independent financial advice for over 30 years, and now look after over £250m of our clients’ money.

We understand that money matters make many people anxious, and we aim to provide reassurance and easy-to-understand advice, without drama, and never with a hard sell. We sit on the same side of the desk as you, looking together into the finance world as we inform and guide the decisions that will make your money work for you. 

If you’d like to explore how we can help, please get in touch.

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