Personal finance can seem a daunting subject and many turn to a financial adviser to help. Do you though know the difference between a tied agent, a multi-tied agent and an independent financial adviser? We take a look.
As you might gather from the name, a tied agent is normally employed directly by a bank or insurance company. They may also be self-employed but be ‘tied’ to one company.
Being a tied agent means the adviser can only advise or sell you products offered by the company that employs them. This can be limiting in that even if there is an alternative, better product the agent cannot tell you about it.
Be aware that the agent will probably have their salary topped up with commission or performance related bonuses. The commission will be paid from any premiums you pay in for a product purchased.
Multi-tied agent
Whilst a tied agent is likely to work for a bank or building society, they are able to sell or advise you on products from more than one company. They will though be limited to a small list of providers with whom the employer has a financial arrangement with.
As with a tied agent, the mutli-tied agent will usually have their salary topped up with a commission or performance related bonus.
Whilst a wider choice of products will be covered, clearly the range is still limited to those decided upon by the commerical arrangements the employer has.
Independent Financial Adviser
As the name suggests this type of financial adviser is independent and as such they can advise or sell you products from any financial provider.
Importantly, you don’t have to pay an independent financial adviser on a commission basis which means their payment doesn’t have to be linked to the products they sell, rather they have to offer you the option to pay by a fee.
Being independent, these advisers are unbiased and really can ensure they select products that truly meet your particular needs and not be influenced by their own specific targets or employer relationships.
They act on your behalf and will provide you with personalised written reasons as to why they have recommended particular products or services for you.
Be aware that some people may seem to be a professional adviser but unless they have been authorised by the FSA you would be wise to consider whether you want to use them. For example, by using an adviser who is authorised you have access to a complaints and compensation scheme should things go wrong.
A firm may offer different levels of advice for different financial products. For example, it may offer mortgages from the whole of market but insurance products from a limited number of providers.
As part of the FSA’s Retail Distribution Review (RDR), it is likely that the different types of adviser advice will change in 2012 to independent advice, restricted advice, simplified advice and basic advice. By doing this it will be clearer whether the advice is independent or is restricted to a limited part of the market.
I’m quite confused, as I’m not sure how I would pay the fee to an adviser tied to the company from which I wish to buy a product: e.g. a pension provider. Would there necessarily be a fee on top of the usual management charges, and if so, how would this appear? They used to say that irrespective of going direct or using a financial adviser, one would still pay.