Dumb advice

Matt Pitcher's picture

The most important question you should ask an adviser is the least commonly discussed. I often find myself in front of a new client asking if there is anything else they would like to know about me before I proceed to ask their inside leg measurement. When they fail yet again to ask me what my qualifications are, I proceed to tell them. No one in their right mind employs an architect without checking that he is qualified to practice and registered with RIBA. If we didn’t ask we could end up with a very shoddy looking house that leaked.

Often I wonder if clients take their finances as seriously as they should. Your finances as a whole are more important than your house. Why so? Well because they should be set up such that if your house was taken away from you, you would be able to rent somewhere. If your health suffered you would receive a lump sum and an income so that you could quit your job. When you feel ready to retire you can do so without a huge drop in income. Finances may seem boring and complex but actually they are about protecting your husband/wife against the unforeseen, providing for your children and buying yourself time to achieve the lifestyle you aspire to.

If we took our finances this seriously we would make an effort to understand them but also we wouldn’t entrust them to any old person that we met through a friend. Solicitors, chartered accountants and architects study for many years. Sadly in the UK, to practice as an Independent Financial Adviser, you only have to pass 5 exams which most advisers study part-time whilst working for an advice company in a more junior role.

These basic level exams are nothing short of joke and many clients could pass them given some short study leave. This rather begs the question; why let someone loose on your finances who may know little more than you do? All of these five initial exams are multiple choice which you may remember from your school days but grew out of when you sat O’Levels/GCEs/GCSEs.

There is also very little incentive for an adviser to keep studying to achieve higher and higher levels of qualification. In practice that means that your adviser could be out of his depth completely when dealing with your particular needs.

The three levels of qualification for advisers are; Certificate, Diploma and Chartered. Only Chartered status covers enough areas broadly and deeply enough to provide an adviser with the knowledge to deal with most clients and not have to pass clients onto a specialist colleague, if one is available. A Diploma level adviser may well have stronger knowledge in some areas than others and therefore need to focus on certain parts of your finances, hopefully handing over any other areas to a specialist.

What about experience, does that count for anything if you haven’t studied for qualifications. Well it may well count for something, it hopefully means that your adviser can avoid endowments, split cap investment trusts and poor with-profit funds. But it could mean that he miss-sold them last time and may miss-sell the next example to come around.