1. Financial advice can be good for you

Do-it-yourself financial planning is becoming easier and Be your own Financial Adviser, a new book from Which?, aims to show you how to do it properly. But dealing directly with financial providers and making your own decisions means that you have only yourself to blame if something goes wrong. A good adviser should steer you clear of making mistakes, but if they do not you should be covered by a compensation scheme.

2. Advisers must be qualified

Financial advisers come in many shapes and sizes, from one-person firms to global organisations. Minimum qualifications are the three levels of the Financial Planning Certificate, or FPC 1, 2 and 3, which give an all-round knowledge of personal finance. Better-qualified advisers hold the Advanced Financial Planning Certificate, or AFPC.

3. There are different types

Since 1988 financial advisers have had to be either fully independent and able to deal with any financial provider, or tied agents selling only the products of one company. But from January 1 the Government introduced “depolarisation” — a third type of adviser, a multi-tied agent — who can sell the products of a limited range of companies.

4. The limits of tied agents

Most banks and building societies are tied agents. Lloyds TSB, for example, is tied to Scottish Widows, its subsidiary company, while the Halifax is tied to its in-house insurance and investment businesses through Halifax Financial Services. The advisers who work for tied agents often have only basic qualifications and their recommendations are limited to the products of their tied companies.

5. How multi-tied agents work

Multi-tied agents have marketing arrangements with several financial companies instead of just one. But they are not necessarily companies that offer the best deals to customers.

6. How independent financial advisers operate

An independent financial adviser (IFA) shops around to find the companies with the best products to meet your needs, or those that have the best investment performance in a given area.

Under their code of professional conduct, they are duty bound to show research to justify their choice. But it does not ensure that you will get good advice, or the best product. Up-front commission can still lead to dubious advice.

7. How to choose an IFA

Finding a suitable IFA can take time; personal recommendations are the best way. Alternatively several organisations provide names of IFAs in your area, such as IFA Promotion (0800 0853250 at www.unbiased.co.uk).

8. How advice is paid for

As part of depolarisation, all advisers must provide details of charges in a standard format called A guide to the cost of our services, also known as the menu. IFAs must also offer customers the choice of paying by commission or by fees.

9. Commission v fees

Paying a fee means you know your adviser is not recommending products because of commission. A fee-based adviser can also afford to spend time helping to get your finances into shape without selling you any products. Much will depend on whether you are buying investment advice or protection advice. Often for protection contracts, the initial outlay is small, but an adviser’s fees would make a significant hole in your budget. Groups for finding a fee-based adviser include the Institute of Financial Planning (0117 9452470, www.financialplanning.org.uk). But beware: IFAs may use such groups for advertising and the list may not be vetted.

10. IFAs expect you to ask questions

Visit at least two or three advisers before choosing. Many that charge fees will see you at first for free. Ask to speak to existing customers, if possible.

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