Independent Financial Advisers and their tied adviser counterparts may look alike, but under the skin they are as different as chalk and cheese.
An IFA who claims to be independent must be just that – having no ties with any financial providers that could influence any decision to recommend products or services.
Independence means having the choice of any financial product that suits the need of the client without any restriction.
A tied adviser is also just what the description implies.
They are employed or contracted to a specific financial organisation and can only give advice on that organisation’s products.
In the middle are some IFAs who profess independence, but who work for a network which limits the products and services they can sell to those put forward by a single or group of financial institutions.
Does the difference matter?
Training standards will often differ between the two as well. All financial advisers should hold professional qualifications and work within a regulatory framework, but an IFA is likely to have a broader professional knowledge of the wider market than a tied adviser.
What does this mean to a client?
Unsurprisingly, a client approaching a financial adviser expects the best advice to suit their personal financial circumstances.
A tied adviser should declare their affiliation and limitations to giving advice at the outset. However, they are unlikely to say better products are on the market.
An independent adviser should offer unfettered advice as they can choose from more products and services offered by any provider.
Comparing IFAs and tied advisers
So, going to a tied adviser, like one who works for a bank means only receiving advice on products offered by that bank, while consulting an independent financial adviser is like visiting a comparison site that can draw from the whole market.
Another difference is often how the adviser is paid.
More financial regulators are outlawing commission payments from financial providers, so a tied adviser is likely to draw a salary, while an independent is likely to charge a fee for their services.
This is not the case for every adviser, but it’s a general rule of thumb.
Who should you consult?
In theory, as long as you are aware of the restricted advice a tied adviser can offer, then you are free to choose which route to travel – however why buy from someone with limits on their advice when the whole world is your oyster with an IFA?
