This page is a brief introduction to the types of a financial adviser who should be able to advise you on which Life Insurance policy is best for you. All the information in this page is based on the Regulations that will be in place at the beginning of 2013.
What type of advice is available?
The range of advice available is varied, and the services offered by a financial adviser will usually fall into one of the following categories.
A fully independent Financial Adviser will undertake a comprehensive review of your financial situation and then will look at the whole of the market to find the most suitable product for their customer.
Independent advice using a panel
An independent adviser will also conduct a full review of your financial situation but will usually use a panel of different products from different companies to use in most of their recommendations. However; an adviser in this category must be aware that they may need to look outside the panel to find a product that meets the customer’s needs, so they must have the ability to research the whole of the market before making a recommendation.
This title covers financial advisers who only recommend their company’s own products or from a limited range of products. They will usually conduct a financial review, but this may not be as comprehensive as that of an independent adviser.
The most common advisers who fall in this category will be advisers working in banks or those who recommend products from a specific company or small number of companies.
This form of advice will usually be restricted to providing a customer with advice on a specific area and may not provide comprehensive financial advice.
This form of advice will usually be through a series of scripted questions that lead to a specific type of product that falls within the “stakeholder” rules. The most common forms of Stakeholder product are an Individual Savings Account or pension with low charges.
Non advised sales or Execution only
A non advised (or execution only) sale is one where the customer specifies exactly what product they want, the amount of premium and, where appropriate, the level of cover required. For a Life Insurance policy an example is where you apply direct (often online) to a Life Insurance company for a specific policy.
How is a financial adviser paid?
With the exception of Basic advice and non advised sales the financial adviser will charge a fee. The amount of the fee will depend on the level of advice given and the time that a Financial Adviser spends on giving you the advice.
Depending on the product recommended and the individual adviser, this fee can be paid by the company or companies that you take out a policy with as an “adviser fee” and is added to the Life Insurance company’s charges for setting up the policy.
The non advised sale made through a financial adviser may attract a small fee for processing the application and this can be treated in the same way as if advice has been given.
For basic advice commission may be paid to the adviser for the sale of a policy.
This article is for guidance only and must not be construed as advice. The contents of this article are aimed at the UK market, although many countries will have similar policies available. If you need advice you should refer to a Financial Adviser.