Independent Financial Advisers (“IFAs”) and Financial Advisers assist their clients with a range of financial issues.
IFAs and Financial Advisers sell and advise their clients on the best products to purchase in order to meet their financial needs. This will include holding an initial meeting with the client to ascertain their needs – called ‘factfinding’ - researching the best products to meet those needs, presenting a range of solutions to the client and completing all the paperwork to set up the arrangements.
The range of services they provide are primarily the following:
- Pensions – e.g. stakeholder, personal, Self Invested Personal Pension Plan (SIPP) and Small Self Administered Schemes (SSAS)
- Investments – e.g. Unit Trusts, Investment Trusts and Investment Bonds
- Mortgages – Buy to Let, Let to Buy, Residential and Commercial
- Life and critical illness insurance
- Other insurance - e.g general, motor, unemployment, sickness and health
- Tax planning and trust work;
IFAs will advise their client on which of these products they need.
Salaries can vary hugely between both individual and employer. Some firms offer fees to their clients while others accept commissions from the sale of products. It is possible to be self-employed or work for a company.
The range of salaries are normally between £25,000 and £100,000 p.a. but it is not unheard of for an IFA to earn in excess of a million in a year. The salary will largely depend upon the success of the IFA in finding new clients.
Criticisms have been levied that IFAs are not truly independent because they accept commissions.
- You will be responsible for advising a client on a wide range of financial issues.
- Completing factfinds and asking the 'right' questions to understand your client.
- Making sure that documentation is properly witnessed and signed e.g. trustee signatures for trust work.
- Making sure that a worst-case-scenario is covered for e.g. death, critical illness
- Making sure that assets use the appropriate trusts for keyperson insurances etc. The law of negligence is increasingly applicable in this field and you will be responsible for ensuring that your client's needs were fully assessed and met to the best of your ability.
- Looking after your client's affairs in an orderly and compliant manner. IFAs may be inspected by the FSA without notice so having systematic documentation is imperative.
- Keeping on top of changes in legislation and investment markets. You will be responsible for relaying this information to your clients in a timely fashion.
Some advisers will specialise in a particular area and, for certain elements of the profession, special qualifications will be needed.
An IFA needs to pass a series of exams in order to qualify. The full list of relevant qualifications is published by the Financial Services Skills Council (FSCS). The most common of these are the Chartered Insurance Institute (CII) Financial Planning Certificates although there are other bodies offering similar qualifications. These included the Chartered Financial Analyst (CFA) Institute, Securities & Investment Institute (SII), ifs School of Finance (IFS) and Institute of Financial Planning (IFP). Some of these qualifications are more bespoke than others and will only allow practice in a specific area. It is estimated that it will take around two years to fully qualify, however, this can be achieved more quickly with hard study and there are no minimum service requirements necessary to become qualified.
Knowledge - A good IFA should have an acute knowledge and keen interest in the financial markets and should keep abreast of things that may affect their clients' needs. These might include moves in stock prices, changes in tax policy or other governmental regulation, trust law and pension law.
Person - IFAs need to be sales driven and personable with good presentation skills. They should be smartly dressed and good at explaining complex ideas. A client may not fully understand their needs and so a good IFA should be able to ask insightful and focused questions that will help them to understand their clients.
Organisation - There will normally be a need to collect information from a variety of different sources including investment product providers, lawyers, accountants and the employer. An IFA needs to be organised to ensure they obtain all this information and keep it in the correct legal form. A good working knowledge of Microsoft Office products is a must.
IFAs normally have an office but are likely to spend a lot of time at their clients' homes. Unlike the other professions home visits have become the norm. There is a lot of compliance required to become an IFA and anyone wishing to practise should expect a split of around 50:50 between meetings and desk work. IFAs often divide the work into administration which may be done by back-office staff and sales and advisory done by another individual.
There will undoubtedly be situations where the IFA is not capable of meeting the client's full needs. If this is the case an IFA may need to contract the help of another professional, for example an accountant, lawyer or stockbroker in order to meet the client's needs. Developing contacts in these industries is thus important.
It is possible to join banks and insurance companies straight after school or university through work or graduate programmes. While no experience is necessary and most training is on the job, advising clients on their finances requires a lot of responsibility and is often an area that people move into later in life.
- Banks - Most banks will have financial advisers employed in branch (Barclay’s, Royal Bank of Scotland, Lloyds TSB etc).
- Insurance Companies – Scottish Widows, AEGON, Scottish Equitable, AXA, St James’s Place Partnership etc.
- Lawyers and Accountants – It is becoming increasingly common for law and accountancy firms to employ financial advisers in house.
There are also a lot of small IFAs in most areas. These may often run with 2-10 staff. However, the compliance requirements, costs of insurance and professional indemnities necessary mean that many small IFAs are affiliated to larger companies who take care of the compliance function.
Working as an IFA will develop many of the skills necessary to move into a range of other jobs. The development of sales and networking skills can be very useful. While most IFAs will not have a highly technical knowledge of the investment industry, the career can provide a solid ground for moving into Investment Consultancy, Fund Management, Stockbroking and Investment Banking, although further study may be necessary to achieve this. Many IFAs also have successful careers in these areas before moving into an IFA role.
Donald Cameron, 25 has been a Financial Adviser for 3 years and is currently working at St. James’s Place. He studied Economics and History at University.
Typical day job
My job is normally quite varied and I work on a variety of inheritance tax, pension and investment issues. I used to deal with mortgages a lot more but the amount of paperwork involved and low pay becomes infuriating.
I don’t work for an independent company but am a multi-tied adviser. However, we do have a wide range of products. I work for a small firm within the overall practice and we’re all responsible for finding our own clients. I’m normally in the office by 8:30 and I will always spend at least 30 minutes catching up with the Financial Times. This isn’t always necessary in this profession but I personally believe it is very important. As with most offices I will then catch up on e-mail and post. We’re supposedly a paperless office but if you saw my desk you’d realize that’s not the case.
Each day I will normally have at least 5 or 6 documents arrive from clients – signed application forms and the like and around ten pieces of information come in from clients' investment/ pension providers. Following an initial interview with the client we normally use Letters of Authority, signed by the client, and write to all their existing investment providers. This can be a long winded process and I’ve known some providers take as long as 2 months to write back and then send the wrong information. Once we have all this information I will normally build a spreadsheet to work out all the valuations and, if necessary, projections for a client's income. Following on from my notes (which need to be clear and comprehensive) from the first meeting I will then look at what the best products are for the client and what their objectives are. What this means is selecting the correct product. For example, if someone is making an investment I would look at how much risk they want to take and recommend an ISA first and the type of investments i.e. gilts, bonds, equities or other, depending on the risk the client wants to take.
A lot of my day can thus be spent writing reports to clients with my advice. I will normally have an initial meeting with a client and then, after obtaining all the information, write a report to them and attend a follow up meeting. As a lot of my clients are working, my meetings are normally in the evenings and this means I often won’t finish till about 8 or 9p.m.
The other major element of my job is networking. I will always try to attend at least two events a week with the potential to meet new clients. Normally these are either in an evening or at breakfast meetings.
What do you like about the job?
I’m very much a people person so the chance to meet new people and talk with them is the biggest thing for me.
What do you dislike about the job?
Paperwork! I spend considerable amounts of time filling in application forms which drives me insane. This can also be quite a difficult element of the job as for health insurance you have to ask clients very personal questions and delve into their past to ensure that there is nothing that would void any insurance contract.
What advice would you give to someone thinking of doing this job?
It’s very important to be patient and people-orientated. There is a large element of selling something to people and, in a difficult financial market, educating an individual is as important as advising them. It’s also imperative that you have the client's best interests in mind. I have already come across several cases of poor financial advice and the consequences and opportunity costs for the client can be huge.
What job(s) do you think you might do after this role (i.e. career progression)?
I have always been interested in the markets and trust aspects of the role, so if I was to move on it would probably be in a research capacity for an investment house or to work more on the legal side. However, the latter would entail a lot of re-training.
What other inside-information can you give to help people considering this career?
Being a Financial Adviser does provide you with a lot of flexibility and you can often build a career around your family. Make sure that you are interested in finance as the investment environment in particular is becoming increasingly complex and the old school of financial adviser is having to revive itself or become extinct. Spend some time with an adviser if you’re really interested in this career to get a feel for the office environment and the kind of clients you will be working with.