Do I need a financial adviser? A practical guide

Financial advice has an image problem. It is associated in many people's minds with either being sold something, or being too wealthy to need to think about it yourself. Neither is quite right. A genuinely independent financial adviser can make a material difference at several specific points in your financial life, and be entirely unnecessary at others.

You almost certainly need one if

• You are approaching retirement and need to decide what to do with a defined benefit pension
• You have received an inheritance, sold a business, or come into a significant lump sum and need to know what to do with it
• You own a business and need to think about succession, tax-efficient extraction, or the interplay between your business and personal finances
• You hold multiple pension pots from different employers and are not sure how to consolidate or optimise them
• You are buying a home and want to make sure you have the right protection in place alongside the mortgage
• Your income puts you in the higher or additional rate tax band and you are not confident you are using your allowances efficiently

You can probably manage without one if

• Your only investment is a workplace pension and you are contributing at the default rate
• Your finances are straightforward: regular income, no investments beyond the workplace pension, no business interests
• You are comfortable researching and executing basic decisions like opening an ISA yourself

Independent vs restricted: the difference matters

Independent Financial Advisers (IFAs) can recommend products from across the whole market. Restricted advisers can only recommend from a limited range, often their employer's own products or a panel they have an agreement with. By law, a restricted adviser must disclose this to you. Always ask: are you independent or restricted? If restricted, ask what that means for the range of products they can recommend.

How financial advisers charge

Commission-based advice is no longer legal for investment products in the UK (it was banned by the Retail Distribution Review in 2013). Advisers charge in one of three ways: an initial advice fee (often 1-3% of assets being invested), an ongoing annual fee (typically 0.5-1% of assets under management), or a fixed project fee for one-off work. For a one-off pension review, expect to pay £500-2,000 depending on complexity. For ongoing portfolio management, fees are usually a percentage of the assets managed.

What to look for when choosing one

• Chartered Financial Planner status (the CII's gold standard qualification)
• FCA authorisation (check the register, not just what they tell you)
• Clear explanation of how they charge, in writing, before any engagement
• Willingness to give you a written statement of their recommended plan before you commit
• A specialism that matches your situation: retirement planning, business owners, investment management, protection