Wednesday, 5 September 2007

Financial Advisers and Planners in the UK

Just as I was about to write this post on finding financial advice in the UK, a family member pointed me to the famous MoneySavingExpert website. It turns out that it has a great primer on that very subject. Part 1 is advice on when to use an adviser, how to find a good one and how to pay, while part 2 covers picking and paying for an Independent Financial Adviser (IFA).

While generally excellent and quite comprehensive, part 1 needs to do better than this comment about seeking Investment advice:
''While research helps, there's always an element of gambling when it comes to investment picking. If you go it alone, you get a head start because, do it right, and there are no charges (read Discount Brokers article). So the IFA has to pick substantially better than you to make up this difference.''

If one looks at investing as gambling, then one is likely to have the same success rate as gambling. The ''do it right'' is exactly the problem. Individual investors too often do it wrong (see Richard Deaves' book What Kind of Investor Are You? for citations of studies that prove this). The website does correct this bad piece of advice somewhat with the last comment, ''... planning, structuring and timing investments for events (e.g. funding university fees) can be very complex and here IFAs can come into their own.''

It's not just for events, however. It's all the time when investing. Much better would be a statement like this: ''Unless you understand, or are prepared to spend the time to learn, aspects of investment such as financial analysis, portfolio theory, diversification, risk and return characteristics of various investment alternatives, then getting the advice of an IFA is a good idea.''

In part 2 under the ''what qualifications do you have?'' question to ask a prospective IFA, it does not but could mention that the Certified Financial Planner designation offered by the Institute of Financial Planning offers almost the same extra qualifications as the Chartered Financial Planner mentioned - completion of the renamed AFPC (the new name is the Diploma in Financial Planning, but many planners still use the old term). To find a CFP in the UK here is the IFP's search tool.

There are also a number of other advanced qualifications, all approved by the Financial Services Skills Council, the body authorized by the national UK regulator the Financial Services Authority, to set and maintain qualification standards for anyone wishing to offer financial advice. The good thing about the regulatory set-up is that anyone offering advice may not pretend they have competence when they don't - if they haven't the necessary approved qualifications, they should refuse your business.

The FSSC-approved courses are offered by various bodies:
Some of them are:

  • CeMAP and Advanced CeMAP (which adds competence in commercial mortgages and lifetime mortgages) (IFS)
  • CeLM - Lifetime Mortgages (IFS)
  • CF6 - Certificate in Mortgage Advice (CII)
  • CF7 - Certificate in Lifetime Mortgage Activities (CII)
  • MAPC - Mortgage Advice Practice Certificate (CIOBS)
  • LMAPC - Lifetime Mortgage Advice Practice Certificate (CIOBS)
Taxation and Trusts
  • G10 (old code but commonly used still) Taxation and Trusts; now, J01 Taxation and J02 Trusts or AF1 Personal Tax and Trust Planning seem to overlap and match G10 (CII)
  • G60 (old code) Pensions; now J05 Pension funding options and J06 Pension Income Options or AF3 Pension Planning provide this (CII)
  • CF9 Pension Simplification (CII)
  • CF* Long Term Care Insurance (CII)
  • G20 (old code) Personal Investment Planning and G70 Investment Portfolio Management; now replaced by J06 Investment Principles, Markets and Environment and AF4 Investment Planning (CII)
  • CertIM - Certificate in Investment Management (SII)
  • IMC - Investment Management Certificate (UKSIP)
Though it is not as breezy and informal as the MoneySaving Expert material, the Financial Services Authority itself has an excellent guide to finding financial advice. You can't get the rules, restrictions and rights wrong when the word comes from the horses' mouth. The last few pages of the guide includes a whole raft of financial organizations and websites, both government and private, on a very wide range of financial topics for consumers. A one sentence blurb says what each has to offer. The FSA's own consumer advice website called Moneymadeclear includes excellent material on savings, investments, mortgages, insurance, credit cards, loans, pensions and retirement, including calculators for mortgages, pensions, budgets and a product comparison tool for annuities (prices are not right up to date apparently), mortgages, savings accounts, ISAs and investment bonds.

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