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Independent financial advisers (IFAs) are
professional A professional is a member of a profession or any person who works in a specified professional activity. The term also describes the standards of education and training that prepare members of the profession with the particular knowledge and sk ...
s who offer independent advice on
financial Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...
matters to their clients and recommend suitable financial products from the ''whole of the market''. The term was developed to reflect a
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and ...
(UK) regulatory position and has a specific UK meaning, although it has been adopted in other parts of the world, such as
Hong Kong Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China (abbr. Hong Kong SAR or HKSAR), is a List of cities in China, city and Special administrative regions of China, special ...
. The term "independent financial adviser" was coined to describe the advisers working independently for their clients rather than representing an
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
company, bank or bancassurer. At the time (1988) the UK government was introducing the polarisation regime which forced advisers to either be tied to a single insurer or product provider or to be an independent practitioner. The term is commonly used in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and ...
where IFAs are regulated by the
Financial Conduct Authority The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom, but operates independently of the UK Government, and is financed by charging fees to members of the financial services industry. The FCA regulates financ ...
(FCA) and must meet strict qualification and competence requirements. Typically an independent financial adviser will conduct a detailed survey of a client’s financial position, preferences and objectives; this is sometimes known as a ''factfind''. The adviser will then recommend appropriate action to meet the client's objectives; and if necessary recommend a suitable financial product to match the client’s needs. Individuals and businesses consult IFAs on many matters including
investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...
, retirement planning,
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
, protection and
mortgages A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any ...
(or other
loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...
s). IFAs also advise on some tax and
legal Law is a set of rules that are created and are law enforcement, enforceable by social or governmental institutions to regulate behavior,Robertson, ''Crimes against humanity'', 90. with its precise definition a matter of longstanding debate. ...
matters.


New rules for financial advisers in the UK from 2013

From the end of 2012, there will be two types of
financial advisor A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory ...
: independent or restricted. IFAs will no longer be allowed to receive commissions from financial services companies on new sales of investments. Instead, they will have to set their own fees, based on the services they offer, and agree with the client on fees before providing any services. Any advice that does not meet this standard must be labelled as restricted. IFAs should also be able to demonstrate to the FCA that they review all the suitable products in a market and that they give fair, unbiased and unrestricted advice. These changes are intended to make their charges more transparent and advice more genuinely independent. However, some banks, building societies and insurance advisers could switch to offering an ‘information only’ (non-advised) service instead, where fees won’t be apparent. Advisers will also be allowed to keep earning it on products they have sold before the end of 2012, and still charge a regular fee if they are providing an ongoing service such as reviewing and advising on a client's investments. Neither do these new rules apply to the sale of cash savings products, general insurance, protection products (term life insurance, critical illness cover, income protection insurance etc.) or mortgages unless they are sold at the same time as a regulated investment product.


Qualifications for IFAs in the UK

To offer financial advice an individual must represent or be an appointed representative of a firm registered with the
Financial Conduct Authority The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom, but operates independently of the UK Government, and is financed by charging fees to members of the financial services industry. The FCA regulates financ ...
(FCA). The FCA require that firms ensure that individuals acting for them have ''appropriate qualifications''. The list of appropriate qualifications is determined by th
Financial Services Skills Council
at the behest of the FCA. Up to the end of 2012 all financial advisers only required a qualification at Level 3 or above of the
Qualifications and Credit Framework The Qualifications and Credit Framework (QCF) was the national credit transfer system for education qualification in England, Northern Ireland and Wales until October 2015.. The replacement was the Regulated Qualification Framework. The QCF re ...
. From the end of 2012, financial advisers will need to be qualified at Level 4 or above. (This is about the same as completing the first year of a university degree.) An increasing number of advisers are now also “Chartered”, which means being qualified to a level 6 standard (equivalent to a first class honours degree.) From the end of 2012, financial advisers will need to obtain an annual Statement of Professional Standing. This statement confirms that the adviser is suitably qualified, that the adviser subscribes to a code of ethics and that the adviser has kept his or her knowledge up-to-date through continuing professional development. Most financial qualifications are assessed under the Qualifications and Credit Framework (QCF). You will see that these have a QCF grade, from level 1 to level 8.


IFA Network

IFA Network is an association of IFAs. All financial advisers in the UK must either be authorised or exempt under the Financial Services and Markets Act 2000. Membership of an IFA Network qualifies an IFA as being exempt from regulation. The IFA Network is then responsible for the advice and regulatory compliance of its members. Source: Financial Conduct Authority What is an appointed representative? An appointed representative is a firm that conducts regulated business on behalf of a directly FCA-authorised firm, who is its ‘principal’. The principal firm takes regulatory responsibility for the appointed representative, and must ensure it meets FCA requirements.


Notes and references


See also

*
Financial advice A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory ...
* Financial adviser * Financial planner * Pensions in the United Kingdom *
Self-invested personal pension A self-invested personal pension (SIPP) is the name given to the type of UK government-approved personal pension scheme which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and ...
*
Collective investment scheme An investment fund is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage. These advantages inc ...


External links

* * * {{cite news , title = Financial resolutions , work =
The Guardian ''The Guardian'' is a British daily newspaper. It was founded in 1821 as ''The Manchester Guardian'', and changed its name in 1959. Along with its sister papers '' The Observer'' and '' The Guardian Weekly'', ''The Guardian'' is part of the ...
, date = 2007-01-15 , url = https://www.theguardian.com/money/2007/jan/15/financialadvisors A guide to choosing an IFA Financial advisors