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An Independent Financial Advisor (IFA) is a professional that clients look to for financial advice and recommendations on the appropriate financial products from the market. While the term has its roots in the UK and is largely interpreted from a UK perspective, it has gained adoption in other markets around the world. IFAs work independently for their clients and do not represent financial institutions when giving advice.

Clients in the financial services market have several ways of accessing information regarding the products and services of various providers. They can directly visit a bank, insurance company or other financial institution to ask for advice or proceed with a transaction. In such a scenario, an individual can only enjoy the services or products of that single source, which may or may not be the most competitive ones in the market.

Going directly to the source means that an individual only gets to interact with the financial products a particular provider has. In contrast, an IFA has to consider the whole market and provide clients with what they believe is the best investment or product based on the client’s needs. As financial matters sometimes tend to be complicated, an IFA can examine an individual’s financial situation and offer advice that helps the individual make decisions in line with their larger objectives.

Most IFAs can provide an initial meeting to allow an individual to understand their services and see if working together makes sense. A fruitful relationship is likely to be a long-term one, so it’s essential for the client to find a professional they feel comfortable around and are confident can help them achieve their financial goals. Kevin Neal, who has more than 25 years of experience in financial services, has previously worked as an IFA providing wealth management services.

Typical questions on many people’s minds include who should have a financial advisor, or at what point in life it’s necessary to find one. Generally speaking, there isn’t a defined age, salary level or career point when this happens. When an individual’s financial life becomes more complicated than simply taking out money or cashing a cheque, it might be time to find a professional. Some IFAs have minimum investment requirements, so an individual has to make sure they find an advisor who can work with their financial situation.

There are various situations where using a financial advisor is prudent, especially situations involving a major life transition. Inheriting a sizable windfall qualifies as one of these instances. Setting up a system for passing on an inheritance can also require the services of a financial professional.

Charging Structures

Many IFAs set their own charging structure based on the type of advice they provide and their understanding of a fair price. Since there are many areas that an individual may be seeking help with, a different charging structure might apply for each. Typically, fees charged can be a percentage of the investment, a fixed fee, a commission or an hourly rate, depending on how the IFA prefers to work.

Regardless of the fee structure, it should be clearly stated beforehand and agreed upon in writing before any tangible steps are taken. In certain situations, IFAs may not provide a specific cost because some aspects of the work might be regarded as complex. Where there isn’t a specific cost provided, a client should have an opportunity to negotiate the terms.

It’s vital for an individual receiving financial advice to understand the charges that come with such a service. A common misperception of free advice has caught many unawares, especially as advisors who appear to give free advice may be receiving payment through commissions from product providers, with this cost ultimately passed on to clients. As with many business areas, a higher cost may mean better services. A client, however, must perform due diligence before settling on an advisor.