Bure Valley Group is an investment introducer platform which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.
For many investors, there comes a point where their wealth and finances become difficult to manage. Inefficiencies can creep in, leading to eroded returns due to needless fees and taxes. This is where working with a financial adviser can be helpful. Yet, who can you trust with your hard-earned money and portfolio?
Below, we suggest some positive qualities and qualifications to look out for when considering different financial advisers (as well as some red flags to avoid). We hope these thoughts are useful to you.
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Do your research
Many financial advisers have experience working with pensioners. However, not all have worked with successful, early-stage investors (e.g. angel investors). The two groups are often distinct in their financial goals, situations and attitudes to risk.
It is also important to check whether the financial adviser is “restricted” or “independent”. The former will typically be bound to recommend only certain financial products, funds or solutions from certain partners, groups or networks.
Independent advisers, however, will have greater freedom to explore and recommend options from the wider marketplace. This can often give early-stage investors better access to more cost-effective solutions.
Qualifications
In the UK, not everyone is allowed to call themselves a financial adviser. To qualify, a professional needs at least a level 4 qualification in financial advice recognised by the Financial Conduct Authority (FCA).
However, financial advisers in other countries may not have strict regulatory requirements imposed on them, like in the UK. So, be careful when checking advisers at home – but be especially careful when considering options overseas.
Early-stage investors may wish to narrow their search further, focusing on Chartered Financial Planners (CFPs). These are widely regarded as the “gold standard” in the sector, recognised by the Chartered Insurance Institute (CII). It adds an extra layer of security for you (the client), knowing that you are dealing with a firm dedicated to high standards and ongoing development.
Ask about fees
Different financial adviser charge different rates. Also, their fee structures can vary. Some charge a flat rate for specific services (e.g. a pension review). Others operate more on a commission-based structure, taking a cut from the sale of financial products they recommend.
In the UK, the commission model is less common than it used to be. Under new rules introduced by the FCA, financial advisers cannot charge a commission on investment products purchased after 2012. However, overseas financial advisers may not be as restricted.
One criticism of the commission-based model is that it can incentivise financial advisers to recommend products which give them the most profit, rather than those which are in the best interests of the client. For early-stage investors with large portfolios needing frequent asset allocation decisions, a fee-based adviser may be the more cost-effective option in the long run.
Another option, of course, is the “robo-adviser” model. Here, providers rely on computer algorithms to construct and manage a portfolio. Whilst this can offer a low-cost option for many retail clients with simplier investments, this approach may not offer the tailored and personalised approach desired by many early-stage investors.
Speak to your shortlist
By now, you may have a vetted list of potential advisers who you might consider working with. This could be a good time to start approaching them and starting a conversation. Most financial advisers offer a free, no-commitment initial meeting, to get to know each other. It may be worth taking advantage of these offers, to explore your options more fully.
Meeting different advisers can help you compare different approaches, investment philosophies and personalities. It offers the chance for you to get a “gut feeling” for different professionals, helping you further narrow down your list based on your criteria (e.g. chemistry, competence and character).
An in-person discussion also allows both you and the adviser(s) to ask questions. For instance, you may wish to ask how your investments will specifically be managed. Do they provide an in-house service, or do they outsource this function? From the adviser’s side, they will likely want to ask more about your financial goals and circumstances to better understand your current position so they can tailor their guidance.
Make a choice
At the end of this process, it is time to decide. Do you truly need a financial adviser? If so, which one best meets your requirements? Remember, the adviser-client relationship can last a long time. So, be careful not to rush into a decision.
Looking back, think about any red flags which may have come up. Did anyone try to pressure you into making a quick choice? Were there any inappropriate questions you were asked? Were your questions about costs and fee structures answered clearly and directly? Did the adviser make you feel like they had a “client-centric” approach?
You can change your mind later once you have committed to an adviser. However, following a careful process (like this one) will help reduce that risk.
Invitation
Interested in learning more about the exciting startup projects we offer investors here at Bure Valley Group?
Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:
+44 160 334 0827
