What is a Financial Adviser - a guide to the different types

Updated: Thursday, 29 February 2024

When making major money decisions, particularly those that can have a long-term effect, it is important to take the time to ensure you’re making the right choices. Speaking with an expert like a financial adviser can alleviate any confusion or worries you may have, so you feel confident planning for your financial future.

Here, we’ll cover the different types of Financial Advisers, such as ultra-high-net-worth Financial Advisers, and the services they offer to help you navigate your finances at different times in your life. From there, you’ll be able to find the best Financial Adviser for your needs.

What is a Financial Adviser?

A Financial Adviser is a professional who offers their expertise across all areas of finance and money management, to help you make informed financial decisions. Just as you would trust a skilled mechanic to conduct an MOT on your car, you can seek the help of a Financial Adviser to keep your financial engine running smoothly.

Financial advisers are well-versed in a range of financial topics. They can offer you guidance across several areas, from investments and savings to retirement planning.

To benefit from your Financial Adviser’s expertise, establishing a trusting relationship is important. This allows them to gain a deeper understanding of your financial situation and preferences. You can then work together to define your short-term and long-term goals, and strategise a plan to achieve them. They should also inform you of any fees you need to pay upfront, and agree with you on how you’ll pay them beforehand.

There are several different types of Financial Advisers available to suit your individual needs. The term ‘Financial Adviser’ is an umbrella term used to describe someone who offers financial advice to clients. Sometimes they use a different title, such as wealth manager or financial representative. But regardless of their title, all Financial Advisers in the UK are regulated by the Financial Conduct Authority (FCA), which means they must follow certain rules and regulations when working with you.

Independent Financial Adviser (IFA)

When looking for a Financial Adviser, you can choose between independent or restricted. An Independent Financial Adviser (IFA) gives you unbiased advice about all types of financial products from the whole of the market, without restriction. Alternatively, a restricted adviser offers a more narrow, focused range of products and providers. For example, they may recommend one pension provider. Restricted advisers can also specialise in just one area, like investments for example, and then only offer a small panel of products from a handful of companies.

Ultra high-net-worth Financial Adviser

As the name suggests, ultra high-net-worth Financial Advisers specialise in financial advice for those with a high net worth. They concentrate on managing large investment portfolios and working with wealthy clients. One of the biggest challenges for those with a high net worth is how best to manage their wealth effectively, for the short and long term. Ultra high-net-worth Financial Advisers can help you to organise your finances, diversify your investment portfolio, find the best interest rates, and guide you on how best to structure your wealth. 

While you may be financially comfortable right now, this may not be the case forever. An ultra high-net-worth Financial Adviser can help you minimise financial risk, and help you to grow and protect your assets, to give you financial peace of mind.

Financial Planner

A Financial Planner is similar to a Financial Adviser. They both offer helpful financial advice to their clients, but there are some key differences between the two. Financial Planners are more likely to focus on long-term planning and strategies such as retirement, tax, and estate planning. They tend to take a more holistic approach to finance, considering their clients’ personal goals and future financial milestones.

Financial Investment Adviser

Financial investment advisers, also known as stockbrokers, can advise you on the smartest ways to invest your money. They manage and monitor the performance of your investments to help you meet your financial goals. They should also monitor market trends on your behalf, to help you minimise risks that may affect your portfolio and offer you peace of mind.

AI Financial Adviser

Artificial intelligence (AI) is now being used to offer financial advice. Through the powers of algorithms and machine learning, AI Financial Advisers can offer investment recommendations and financial advice by analysing market trends. AI could be used to analyse your accounts, and identify both opportunities and risks to your finances.

But while AI has the capacity to be a Financial Adviser, it does also come with its risks. AI may not be able to account for unexpected changes in the market the same way that a human can. You may also be hesitant to use an AI tool for financial advice due to its lack of transparency, particularly around how it makes its decisions and what data it holds.

Financial Adviser fees

If you’re asking ‘how much is a Financial Adviser?’, you may be surprised to hear that many Financial Advisers provide a free introductory consultation. This gives you a chance to get to know them and decide if they’re the right fit for you. You probably won’t receive financial advice in this meeting. Instead, they’ll talk you through their service and any fees you’ll need to pay going forward.

How much your Financial Adviser will charge you depends on several factors, such as the service they’re offering you, their experience, and their location (if you’re in London for example, it may be more expensive).

They may charge you an hourly rate (this will vary but the average rate in the UK is around £150 an hour), a set fee for a specific piece of work such as a pension transfer, a monthly fee, or an ongoing fee. The Financial Conduct Authority (FCA) claims that on average, Financial Advisers charge 2.4% of the amount invested for initial advice, followed by 0.8% per year for ongoing advice.

Commission-based Financial Adviser

Commission-based Financial Advisers can earn money through commission if they offer advice on certain financial products, such as mortgages and life insurance. But as of 2013, Financial Advisers aren’t allowed to earn commission when advising on your pension, investments, or retirement income products.

The difference between a Financial Adviser and a wealth manager

Knowing where to start with financial planning can sometimes feel challenging. If you find yourself unsure of where to begin, seeking guidance from a finance professional, such as a Financial Adviser or wealth manager, can help you to navigate the complexities.

Both can provide financial advice, but wealth managers usually work with high-net-worth individuals with more specialised financial circumstances. Their clientele is primarily those who are looking to manage large amounts of wealth. They may be looking for tax planning advice, philanthropic planning, or family legacy planning, rather than day-to-day money management.

Some wealth managers might ask for a minimum amount to invest, and how much it is depends on the firm. It's a good idea to ask about this early on in your conversations with them. Knowing this can help you figure out if their services fit your financial plans.

Considering financial advice?

If you need support in navigating your finances, working with an expert can give you valuable professional advice to help you make informed decisions.