Six Types of Financial Adviser
Published / Last Updated on 19/10/2023
When we first shot this video topic over 10 years ago, there were fundamentally 3 types of financial adviser:
- Tied Adviser – where they were appointed representatives of one product provider and could only arrange products from that one company.
- Restricted Adviser – where they had regulatory permissions to offer advice and arrange products on one or two sectors e.g., mortgages, life insurance and income protection insurance.
- Independent Adviser – whole of market, unrestricted advice and arranging products across all sectors and all ‘whole of market’ i.e., all product providers.
1 January 2013 – Retail Distribution Review
This was a review by the financial regulator as to how improvements could be made to the finance adviser sector.
- Firstly, it became a requirement for financial advisers to have minimum qualifications of level 4 diploma (1st year of degree level) and working towards higher qualification at level 6 (1st Class Honours Degree level) Chartered or Certified Planner status. Many banks and insurers closed their advisory arms as many of their advisers were nowhere near degree standard.
- Commissions for most policy types was banned and replaced by Adviser Charging Rules on pensions and investments where advice is being given. In short, commissions could still be taken on life insurance and mortgages but not on pensions and investments where a fee must be quoted. However, you can still choose to have our adviser fees paid from policy charges. Many banks and insurers again closed their advisory arms as they did not wish to move to a fee only model and preferred commissions.
- Commissions can still be paid across all areas where no advice is provided i.e., you choose an option yourself. Many banks, insurers and mortgage firms moved to this model: High commissions but no liability for advice as none is given.
Financial Advice Market has Changed – There are now 6 types of financial adviser:
- Tied (Appointed Representative) Adviser – where they are appointed representatives of one product provider and could only arrange products from that one company e.g., those ‘quick’ life insurance advertisers on television. Full commissions usually taken if no advice.
- Restricted Adviser – where they have regulatory permissions to offer advice and arrange products on one or two sectors e.g., mortgages, life insurance and income protection insurance. Adviser fees charged on commissions or a % upfront and % ongoing on the value of your wealth and deducted from your pensions/investments (just like commissions are).
- Tied Network (Appointed Representative) Adviser Platform - where the adviser is an appointed representative of an adviser network with one product platform with a range of products on the platform and a range of investments funds from different investment companies on the platform and they can only arrange products from that one platform. Adviser fees charged on a % upfront and % ongoing on the value of your wealth and deducted from your pensions/investments.
- Independent Network (Appointed Representative) Adviser Platform - where the adviser is an appointed representative of an adviser network with one product platform with a range of products on the platform and a range of investments funds from different investment companies on the platform, but they can ‘go off panel’ and arrange products from outside their platform. Adviser fees charged on a % upfront and % ongoing on the value of your wealth and deducted from your pensions/investments.
- Independent Adviser % Fee – whole of market, unrestricted advice and arranging products across all sectors and all ‘whole of market’ i.e., all product providers with adviser fees charged on a % upfront and % ongoing on the value of your wealth and deducted from your pensions/investments.
- Independent Adviser Fixed Fee – whole of market, unrestricted advice and arranging products across all sectors and all ‘whole of market’ i.e., all product providers with adviser fees charged on a set cost or fixed fee or time costed basis rather than a % of wealth (fixed/set fees can also be paid from your pension or investment funds in the same way as % adviser fees).
Impartial Advice
We suggest for fully independent, impartial, and unbiased advice, you should select a 'type 6' Independent Financial Adviser with Fixed Fees. By having fixed fees and no ongoing % fees, you will likely save many £hundreds, if not £thousands in lower charges deducted from your funds.
All our advisers are 'type 6' Independent Financial Advisers and Chartered Financial Planners.
