Should I Pay For Financial Advice?

Financial advice: Should I pay for it?

By Laura Rettie, Personal Finance Journalist. Last updated 31st January 2023.

Laura Rettie

Let’s face it: we're terrible when it comes to discussing money, so it’s no shock that less than 10% of us have used a financial advisor in the past two years.

For decades, generations of adults have left school with no financial education, leading to millions of people not prioritising their financial health, or even knowing where to start - because put simply - you don’t know, what you don’t know!

It’s high time we normalise talking about our financial wellbeing. Seeking financial advice and expert guidance from a specialist can help you get the most from your money, and it’s a very sensible thing to do before making significant investments or taking out a high value financial product, like a mortgage or pension.

What is financial advice?

Financial advice is a personal recommendation on how to manage your money and achieve your goals. Financial advisors can provide you with a plan on how to invest your money, how to save for retirement or how to make the most of your tax allowances.

A financial advisor must be suitably qualified and registered with the Financial Conduct Authority (FCA) to provide financial advice. You can use the FCA register to check if a financial advisor is authorised to give financial advice.

Using an FCA-registered financial advisor means you’re entitled to complain to the Financial Ombudsman and be entitled to compensation if things go wrong.

It’s common for people not to understand the difference between financial advice and guidance.

There are several services that offer free financial guidance, but independent financial advisers almost always charge a fee.

Free financial guidance offers factual information about various financial products available; it may list for example, financial products' features, benefits, pros and cons.

However, financial guidance will not be able to give you an answer to which financial product best suits your needs, but it can help you to make an informed decision.

Financial advisors on the other hand are trained and have experience in suggesting which specific products would be most suitable for your individual circumstances.

Services that offer financial guidance do not need to be registered with the FCA, and you can’t complain to the Financial Ombudsman Service or claim compensation if things go wrong.

The different types of financial advisors

There are two different types of financial advisors, and which one you choose could affect the advice you’re given.

Independent Financial Advisors (IFAs)

IFAs provide independent advice and will consider all products across the market before suggesting what’s best for your circumstances. Advisors give unbiased advice and can suggest products from the whole of market. If you’re looking for general advice about how to get the most out of your money, an IFA might be the best option for you.

Restricted financial advisors

Restricted financial advisors are restricted to certain products, providers, or both. A restricted financial advisor must explain to you clearly how they’re restricted before you agree to use them.

There are a few ways advisors can be restricted, such as:

  • They only consider specific providers and not the whole market
  • They can only recommend one or a few types of products, but not all products
  • They have chosen to specialise in a particular market, such as mortgages or pensions.

Using a restricted financial advisor who only looks at products from one provider could mean your options are significantly reduced. This doesn’t mean that all restricted providers are a bad choice though; restricted providers who have chosen to specialise in a specific market could still consider the whole of that market, such as a pension advisor or mortgage broker.

What should I expect from a financial advisor?

When you first meet with a financial advisor, they should inform you whether they’re independent or restricted, the level of advice you will receive and how much they charge for advice.

Financial advisors can help you with several services, such as financial planning, savings, investments, mortgages, insurance, equity release and pensions.

Usually, during your first meeting with a financial advisor, they will ask you loads of questions about your financial and personal situation.

This can feel invasive, especially if you’re not used to sharing your financial history or how much you get paid - but it’s important that your financial advisor gets a thorough understanding of your circumstances and attitude to risk to be able to give you the right advice, recommend the best products for you, and reach your financial goals.

Can I get financial advice for free?

Unfortunately, most independent financial advisors do charge for their services, especially because they’re no longer allowed to be incentivised to recommend a specific product, so they charge a fee for their time.

Most financial advisors will offer a free initial consultation, asking about your financial situation to understand your financial needs and next steps. You’re unlikely to get firm recommendations until you start paying for their services.

If you can’t afford to pay for financial advice, there are specialist charities that offer financial guidance with face-to-face or over-the-phone consultations. Remember, though; these charities cannot give specific product recommendations and can only give you an overview of products that may suit your needs; plus, they don’t need to be regulated by the FCA, so if something goes wrong, you’re unable to claim any compensation.

Is it worth paying for financial advice?

Whether or not it’s worth paying for financial advice depends on a few factors, such as how financially minded you are and your current financial circumstances.

If you’re an experienced investor and understand the risks of investing, you may not need to seek advice before making investment decisions. If you understand how mortgages work and think you can find the best deal by using a broker or comparison site, you might not need to speak to a mortgage advisor.

Essentially, if you feel that guidance alone will allow you to make an informed decision and get the most from your money, then paying for financial advice may not be worth it for you.

If you can’t afford to pay an independent financial advisor, or you’re not sure it’s worth it, it’s a good idea to start by using free guidance from services like MoneyHelper or Citizens Advice.

It’s a good idea to pay for financial advice if you inherit a large amount of money, or plan to make a large investment. If you can afford it, paying for independent financial advice can be worth it’s weight in gold.

The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.