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Monday 21st March 2022
What's it all about?
This article's designed to help you:
Choosing the right tax advisor can be critical when you’re making big decisions about your money. It’s not always easy to know who to trust, and which kinds of questions you should be asking. At their best, tax advisers can use their expertise to boost your finances and help you save effectively for your family’s future. At their worst, though, they can range from poorly qualified to outright scammers. A few smart questions at the start can save you a lot of problems later on.
So, what do tax advisers actually do? Well, for starters they can help you put away enough cash for a comfortable retirement – something that a lot of us have trouble budgeting for throughout our working lives. Depending on your personal situation, they can also show you how to invest properly, balancing the risks against the potential rewards while protecting your cash, or help when you’re house-hunting or taking out a mortgage. They can even help you maximise the benefits when you get a sudden cash windfall, like an inheritance or redundancy payment.
One thing that’s worth keeping in mind is that, when we’re talking about money, there’s a big difference between “advice” and “guidance”. When a charity or other organisation says it offers financial guidance, they mean they can talk you through the various options you can pick from. They won’t (or at least shouldn’t) get into the specifics of recommending any particular product, or steer you in any one direction. Financial advice, on the other hand, gets right into the gritty details. An adviser will explain which option they believe will suit you and your money the best.
Why does this difference matter? Simple – it’s a question of protection. Organisations offering guidance aren’t regulated by the Financial Conduct Authority (FCA). That means if things go wrong you probably won’t be able to go to the Financial Ombudsman for help. You probably won’t be able to claw back any lost money through the Financial Services Compensation Scheme, either.
What this all adds up to is that you have to pick your tax adviser with your eyes open. Make sure whoever you’re working with is covered by the FCA and you should at least have some protection if the wheels come off.
The next thing to know is that not all financial advisers will offer the exact same range of services or expertise. If you talk to an independent financial adviser (IFA) about investment options, for instance, they should have a wide range of products for you to think over. They’ll help you find one that closely matches what you’re looking to accomplish with your money, without trying to push you toward any specific company. Basically, they’re supposed to be unrestricted and unbiased in their advice.
A “restricted adviser”, on the other hand, will definitely try to pull you in a particular direction. In fact, they basically have to. A restricted adviser is limited to recommending only specific providers or products – so it’s really important to know who you’re dealing with.
Restricted advisers aren’t trying to cheat you, but they aren’t able to offer unbiased advice. They do, however, have to be up-front about that. That means they can’t call themselves independent and they need to explain exactly what their restrictions are. If you’re not 100% sure, always ask them for more details. Some examples of restricted advisers’ limitations include:
While a restricted adviser must let you know that they’re not giving to give you a complete picture of your investment options, there are a few things they don’t have to tell know about. For instance, if the company they work for doesn’t sell a particular type of product, they don’t have to tell you that product exists. They also don’t have to tell you if the product they’re advising you about might be cheaper elsewhere. They’re not breaking any rules by limiting their advice like this, so you have no right to compensation if you later find you could have got a better deal with another product or firm.
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Being 100% sure your tax advisers know what they’re talking about is absolutely essential – but what does that actually mean? How can you be sure your adviser has the expertise to grow your investment and protect your money? One of the main things to check is that they have at least level 4 in the Qualifications and Credit Framework. That should at least show that they know what they’re talking about. After that, you’ll need to check they have an up-to-date Statement of Professional Standing (SPS). This means that they’re committed to acting ethically and honestly. It also means they’re going through a minimum of 35 hours of training each year. An SPS needs to be renewed yearly, so check the date and remember to ask questions if you’re not certain of anything.
Financial advice is a really personal thing, and what might work for one person might not be so good for another. That’s why your individual circumstances play such a big role in the advice you’re given. A really great adviser will ask a fair few questions before recommending a product or course of action, to be absolutely sure their advice is sound. Remember, if you get bad advice (as opposed to guidance), you could have a right to complain. That’s why advisers try to make sure anything they recommend is affordable and a good fit for your long or short-term goals. They’ll also work with you to decide how much risk you’re prepared to take (all investment involves risks of one kind or another). Your adviser should always factor your tax situation into their recommendations, of course, since that can make a huge difference to your options and prospects.
If an adviser misses any of these details and you end up with an inappropriate product, you don’t have to put up with it. Again, if you end up losing money because an adviser steered you wrong, you might be able to complain.
Keep checking back here for more money tips and updates. We’re experts at saving you cash and we’re always here to help. That’s the reason why you’re better off with RIFT.
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There are quite a few different kinds of tax advisors to choose from, so it’s really important to work out exactly what sort of...
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