How much do you know about financial advice?

How much do you know about financial advice?

Despite it being very valuable for a lot of people, there are many misconceptions about financial advice. Take our quiz to find out how much you really know

When it comes to making the right decisions about your finances, seeking professional financial advice – if you’re able to do so – can be extremely worthwhile. Whether you need more information about how and where to invest your money, buying a financial product or planning for your future, an impartial financial adviser can recommend the best course of action for you.

However, despite the value that financial advice offers, there are still a lot of misconceptions around how it works and who needs it. Take our quiz to test your knowledge.

Financial guidance and financial advice are the same thing.
True

Wrong! There are lots of different individuals and organisations that offer ‘guidance’ or ‘advice’ to help people with their finances, but there are some key differences between the two.

‘Guidance’ is a very broad term. With this type of service, you’ll typically be given the general information you need to go away and make your own decisions, and you won’t be recommended particular products. Meanwhile, ‘advice’ is when an authorised person or company offers a personal recommendation or specific course of action for you to follow, based on an evaluation of your circumstances and plans for the future.

For more information, visit Citizens Advice.

correct
False

Correct! There are lots of different individuals and organisations that offer ‘guidance’ or ‘advice’ to help people with their finances, and the two are quite different.

‘Guidance’ is a very broad term. With this type of service, you’ll typically be given the general information you need to go away and make your own decisions, and you won’t be recommended particular products. Meanwhile, ‘advice’ is when an authorised person or company offers a personal recommendation or specific course of action for you to follow, based on an evaluation of your circumstances and plans for the future.

For more information, visit Citizens Advice.

wrong

How did you do?

0/6
Financial advice is for the wealthy.
True

Wrong! Many people assume that financial advisers are for people who are better off. But taking professional financial advice can have a positive impact on everyone’s finances and investments, and make a real difference to your quality of life in retirement.

There are lots of different ways you can pay for financial advice, including by the hour or month, for a set piece of work, or through an ongoing fee – some advisers may offer an initial meeting free of charge so you can get an idea of what they can do for you. There are also a lot of things that affect what and how an adviser charges you, from where they are located to what qualifications they have. Visit the Money Advice Service website to find out more about financial adviser fees.

correct
False

Correct! Financial advice can have a positive impact on everyone’s finances and investments, and make a real difference to your quality of life in retirement – it’s not just for people who are better off.

There are lots of different ways you can pay for financial advice, including by the hour or month, for a set piece of work, or through an ongoing fee – some advisers may offer an initial meeting free of charge so you can get an idea of what they can do for you. There are also a lot of things that affect what and how an adviser charges you, from where they are located to what qualifications they have. Visit the Money Advice Service website to find out more about financial adviser fees.

wrong

How did you do?

0/6
There are lots of different types of financial adviser.
True

Correct! There are many types of financial adviser, and they can have different titles depending on what type of finance they specialise in. These can include mortgage, pension and investment advisers, as well as financial planners and brokers. But, no matter what their specialism is, they all have to be regulated by the Financial Conduct Authority (FCA).

correct
False

Wrong! Actually, there are many types of financial adviser and, depending on what they specialise in, advisers can come under lots of different titles – from mortgage, pension and investment advisers, to financial planners and brokers. But, no matter what their specialism is, they all have to be regulated by the Financial Conduct Authority (FCA).

wrong

How did you do?

0/6
Financial advisers can only recommend certain products.
True

Wrong! Independent financial advisers are required to recommend the most appropriate products for you, depending on your individual circumstances. This includes financial products that are available across the whole of the market.

However, if a financial adviser is ‘tied’ or ‘restricted’ then they are only able to offer you recommendations on a limited range of products, from one company or a small number of companies.

Advisers and companies are required to tell you in writing whether they offer independent, tied or restricted advice, but you should ask for more information if you need it.

correct
False

Correct! Independent financial advisers are required to recommend the most appropriate products for your circumstances, and this includes financial products that are available across the whole of the market.

Only if a financial adviser is ‘tied’ or ‘restricted’ will they offer you recommendations on a limited range of products, from one company or a small number of companies.

Advisers and companies are required to tell you in writing whether they offer independent, tied or restricted advice, but you should ask for more information if you need it.

wrong

How did you do?

0/6
Financial advisers are paid a commission for recommending certain products.
True

Correct! Financial advisers can be paid a commission for offering advice on particular financial products, including mortgages, travel or home insurance and protection insurance.

However, a change in the law in 2013 means there are some products that advisers cannot charge commission for, including pensions, retirement products (like annuities) and investments. Instead, they can charge you a fee for their advice.

Visit the Money Advice Service to find out more.

correct
False

Wrong! Actually, financial advisers can receive commission when they offer advice about particular financial products, such as mortgages, travel or home insurance and protection insurance.

However, a change in the law in 2013 means there are some products that advisers cannot charge commission for, including pensions, retirement products (like annuities) and investments. Instead, they can charge you a fee for their advice.

Visit the Money Advice Service to find out more.

wrong

How did you do?

0/6
All financial advisers are authorised to give advice.
True

Wrong! While professional financial advisers should be approved or authorised by the FCA, you can’t always assume that they are. It’s worth checking that your financial adviser is authorised to give advice before you use them.

You can do this by visiting the FCA’s Financial Services Register, a public record of companies, individuals and other bodies that are, or have been, regulated by the Prudential Regulation Authority (PRA) and/or the FCA.

If you do use an adviser that’s not approved by the FCA, you won’t be able to use the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if anything goes wrong, and your money won’t be protected, so it’s worth doing your research.

correct
False

Correct! It’s possible you may come across a financial adviser that isn’t regulated or approved by the FCA, so it’s worth checking that they are authorised to provide advice before you use them.

You can do this by visiting the FCA’s Financial Services Register, a public record of companies, individuals and other bodies that are, or have been, regulated by the Prudential Regulation Authority (PRA) and/or the FCA.

If you do use an adviser that’s not approved by the FCA, you won’t be able to use the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if anything goes wrong, and your money won’t be protected, so it’s worth doing your research.

wrong

How did you do?

0/6
You could be financially better off if you seek professional advice.
True

Correct! According to research conducted by the International Longevity Centre-UK (ILC-UK), supported by Royal London, people who take professional financial advice achieve better outcomes than those who don’t.

The Value of financial advice report, which used data from the ONS Wealth and Assets Survey on the wealth of individuals and their household assets in Great Britain, showed that people who used an adviser had, on average, 17% more (£12,363) in liquid financial assets and 16% more (£30,882) in pension wealth than those who didn’t use an adviser. This amounts to over £40,000 more in overall wealth!

Read our article to find out more about the research.

correct
False

Wrong! Actually, people who take professional financial advice are shown to achieve better outcomes than those who don’t, according to research conducted by the International Longevity Centre-UK (ILC-UK), supported by Royal London.

The Value of financial advice report, which used data from the ONS Wealth and Assets Survey on the wealth of individuals and their household assets in Great Britain, showed that people who used an adviser had, on average, 17% more (£12,363) in liquid financial assets and 16% more (£30,882) in pension wealth than those who didn’t use an adviser. This amounts to over £40,000 more in overall wealth!

Read our article to find out more about the research.

wrong

How did you do?

0/6

Whether you’re clued up when it comes to financial advice, or you could benefit from learning a little more, it’s worth considering whether a professional financial adviser could help you with your finances – especially if you have some important decisions to make. If you need to find a financial adviser, then the Unbiased or Money Advice Service websites can help, and you can find more information on the value of impartial financial advice here.


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