In a report by industry publication Financial Adviser, Theresa Fritz, researcher at the Consumers Association (CA), has attacked the quality of financial advisers working for "tied agents" as 'below par'. She said: "Most tied advisers offer poor advice and I would not be surprised if it was two thirds which were poor. But I would need to see figures to support this and see how it was quantified - it is a big claim. That said, we have consistently found that tied advice is bad".
Our Tips
Firstly, you have to understand the difference between tied advisers and independent financial advisers. An Independent Financial Adviser (IFA) is one that is not tied or linked to any single insurance company, pensions company or investment company. Generally, this means that the adviser will act on behalf of you, the client, and has access to over 28,000 different policies available from hundreds of companies. Using this option gives you access to a wide range of companies and policies. IFAs tend to work on a commission or a fee basis or a mixture of the two to suit you. You appoint them and they act on your behalf.
Our Tip: Some IFAs are more independent than others. For example, certain types of adviser are part of special network organisations or larger IFA groups and may operate limited panels of products. They generally say that they have researched the market and selected a range of products from certain providers and that they review the panel on a regular basis. Also, be aware that when questioned, some advisers will say that they are "Independent" when they are not. They may be Independent Mortgage brokers with a wide choice of mortgage companies to use but this does not necessarily mean that they are also IFAs.
If you want to use an IFA always ask them which companies they have access to and ask them to confirm in writing that they are Independent Financial Advisers.
Tied Financial Advisers can either be companies that are separate from an insurance or investment company but have an agreement in place to only advise on and sell one particular company's products. These are known as "Appointed Representative Companies".
There are also advisers who work directly for one insurance or investment company and in the same way as appointed representatives they only advise on and sell one particular company's products. These are known as "Company Representatives" which again means that the advice that you receive is strictly limited to the products or services of generally one organisation only.
Appointed Representatives and Company Representatives do not act on your behalf, they act on behalf of the company they represent.
Our Tip : Be aware that many larger banking or building society organisations operate in this way. Many of them own or are tied to one insurance company or investment house. E.g. Taking the big four banks, Barclays are tied to Legal & General, HSBC have HSBC Life, Lloyds TSB own Scottish Widows and Nat West own Nat West Life.
Generally, if you see an adviser from these types of organisations you will receive policy and services advice on their respective linked companies only - you only receive advice on their available product range and not the whole market.
Is it the best pension? Is it the cheapest life insurance cover? Things are much the same for many other banks and building societies and this article is not trying to criticise this approach, merely make you aware of your choices.
If you want a greater choice than this, some of these organisations do have subsidiary links to Independent Financial Advisers and may refer you on if you question them enough.
is a multiple award winning Independent Financial Adviser . If you need help or advice, contact us or visit the Help Zone to find out about all the different ways we can offer advice to you.
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