How to get financial advice - Tiscali

Knowing whom to turn to for financial advice is half the battle when trying to sort out your money affairs. Over the years the financial services industry has grown into a many-headed Hydra with banks, building societies, insurance companies, fund managers, stockbrokers and independent financial advisers (IFAs) all vying with each other to serve the public and take their hard-earned cash.

Fortunately, there is one crucial piece of information that you can use to guide yourself through the financial services maze. Although the list of "product providers" is long, the army of people they employ can in fact be divided into two neat groups.

Anybody offering financial advice to the public must either be "tied" to their employer - in which case they can advise only on that company's products, or they must be "independent", in which case they have to consider all available products.

The point of this sharp distinction - known as "polarisation" - is to ensure that investors understand the motives and status of the person they are dealing with.

Although both tied agents and IFAs are required by law to give customers "best advice", the former have far less room for manoeuvre. Tied agents are effectively salesmen operating on behalf of one company. They are employed by insurance companies and banks to sell their investment, pension and insurance policies to the public, either by visiting people in their homes or by arranging for them to come into their branch office to discuss their financial affairs.

Like any salesmen, tied agents are mostly paid in commission. This means the more they sell the more they earn. Companies that employ salesforces frequently set targets and incentives to push particular products.

People who want a real chance of getting the best solution should contact an IFA. IFAs are required to compare all policies and to select the best. Most big IFA firms do this by using modern software to construct "best buy" panels that regularly change their selection of companies.

IFAs need to make a living too. Financial advice costs and most IFAs receive commission payments from insurance and pension companies in much the same way as tied agents do. Many investors do not mind this as it means they do not have to dip into their pockets to get the advice.