21 Feb 2015, 11:14am


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  • IFA

    Independent Financial Adviser

    In theory this is someone who knows more about finance than you do, and helps you chose the financial products best suited to meeting your financial goals and risk tolerance, maximising the use of your resources.

    You can find a financial adviser at https://www.unbiased.co.uk/ which is the trade organisation.

    The theory of an IFA was they were independent and worked for you, rather than being a product salesman. However, in the past many finacial products like funds had percentage kickbacks to advisers. People being what they are, the principal-agent problem meant these kickbacks sometimes influenced the advice, oddly enough in the direction of funds that paid great kickbacks. Quelle surprise

    Then along came the RDR which aimed to get rid of the kickbacks and make the fees paid to advisers more transparent. Unfortunately, the amounts involved tended to scare the horses, as a result Brits may struggle to get independent financial advice for investment sums (not fees!) that are less than six figures without paying a high percentage cost. This is made worse by people suing financial advisers for ‘mis-selling’ products, often when people overestimate their risk tolerance and the risk pans out wrong. IFA have to take out professional indemnity insurance and do all sorts of due diligence paperwork and that costs money.

    Monevator delivers a robust critique of financial advice in the old days

    and an indication of where it is going

    which is basically more DIY particularly if you aren’t well-heeled. Which is presumably why you are here 🙂

    The act of taking a pension is quite complex, especially where you are seeking an annuity. There’s a strong case to be made for seeking financial advice before you make any irreversible choices with a pension like turning it into an income, even if you don’t have a six-figure pension capital.


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