A Financial Advisor Can Offer Good Investment Advice To Boost Your Retirement Savings

The Role of a Financial Advisor

A financial advisor uses their experience and expertise to assess the financial needs of their clients. They use their knowledge of tax laws, investment strategies and insurance to give investment advice to their clients. They help their clients to identify their short and long term goals and guide them with prudent investment strategies to achieve them.

An investment advisor uses their knowledge of tax laws to help clients with their retirement planning and estate planning. For retirement planning, they will encourage higher rate tax payers to contribute more into their pension funds to reduce their income tax liabilities. Likewise, for estate planning, they'll give tax advice and strategies to minimise their clients' inheritance tax liabilities.

An investment advisor has to do a fact find on each client's financial situation and discuss their clients' short and long term goals. When giving investment advice, whether it's stock investing or investing in unit trusts, they have to take into consideration their client's appetite for risk-taking.

• Selling life insurance


• provision of tax advice


• Provide advice on risk management


• advising on debt management


• Giving lectures and seminars to clients on the running of pension funds.

There are currently three types of investment advisor:

• A tied advisor - who is employed and paid by an organisation, such as an insurance company or a bank, to sell only their products;


• A multi-tied advisor or a freelancer - (usually commission based) who is allowed to sell several companies' products. There has been much debate about the effectiveness of advice given by these advisors in situations where there is a perceived bias toward certain products that offer high commission.


• An independent financial advisor - (usually fee based or fee only) who can advise on any company's products and is legally obliged to provide clients with the most suitable advice.

  Fee-only advisors are compensated solely by the client and are not permitted to receive commission for the recommendation of a product. A fee only basis of compensation for their advice reduces the potential for conflict of interest between the advisor and the client.

How do you choose an advisor?

• Choose an investment advisor with a minimum qualification such as a Certificate in Financial Planning (CertPFS) or Certificate for Financial Advisers (CeFA). A higher qualification includes a Chartered or Certified Financial Planner. A Certified Financial Planner must have at least three years' experience and have already signed up to a code of ethics.


• If an advisor is legitimate, they should be registered with the Financial Services Authority (FSA). Visit the FSA website to check whether an advisor is registered.


• Choose an advisor who is prepared to be paid by you, on an hourly basis, for his financial advice - not remunerated by commission from a bank or insurance company. This is to ensure that you get proper financial advice from them without the influence of high commission in deciding which is the product best suited to your situation.


• Ask the advisor whether they are prepared to give you a guarantee in writing to always act in your best interest. If they are prepared to give you a written guarantee, then this is a good indication that they are prepared to work in your best interest.

Online Financial Advisor Directories

UK

• Search IFA
• Financial Advisors Directory
• IFA Guide

USA

• Macroaxis
• NAPFA

An advisor performs a useful role in your retirement planning and estate planning. Stock investing carries a higher risk but gives you a better return on your investment. Putting your retirement savings in an interest bearing savings account carries a lower risk and also a lower return for your capital. Your financial advisor will give you their investment advice based on the level of risk you are prepared to take on your capital investment.

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