What is a financial advisor?

Fact checked icon
Fact checked.
May 19, 2024

In a nutshell

A financial advisor is your partner when it comes to your finances. They’ll manage your savings and investments to grow them over the long term in a safe and sensible way – and they can also help with tax advice and inheritance. You’ll likely make a lot more money having experts manage your investments.

Keen to sort out of your finances or looking to grow your money further? A financial advisor could be a good option. (Often also called an independent financial advisor, or IFA).

A financial advisor works with you to identify your financial goals for the future, and then puts together the best strategy to achieve them. Using all the right tips and tricks to save money along the way (all legal of course).

Their service is completely personalised to you, so often they’ll meet you face-to-face, or chat over the phone. They want to understand you, your life, and your family so they can determine the best options for the future (such as retirement and your inheritance). Or, if you’re a bit younger, maybe how to grow your money faster.

The core services they offer is to manage your savings and investments, so they’ll work out the right investment accounts to use (and in the UK there’s a few good ones to save loads of cash from the tax people), and then work out which investments are best for you – and again there are thousands of options out there!

What is a financial advisor?

We’ll cover your investment account options and your actual investment options below.

Typically a financial advisor will stick with you for a long time, as investing is for the long-term, they are effectively your partner when it comes to your finances. Sometimes they even become family friends, so it’s a good idea to find one you like!

Find a financial advisor

Use Unbiased to find the right advisor for you.

Find an advisor¹Find an advisor¹

When to use a financial advisor

Having said financial advisors are great, they’re not for everyone. They’re not free, and can be fairly expensive. They’re more suited to people with a good amount of savings or a relatively large pension.

We normally suggest only using one if you have savings or a pension of more than £30,000. If you’re just starting out investing, we recommend checking out Wealthyhood¹, they’re an investment app who will guide you through building the right investment strategy for you. And, you can get started with just £10 (they also just charge £1 per month too!).

Alternatively, you could just let the experts manage everything for you, with an expert-managed investment app, check out highly rated Moneyfarm¹ (here’s our Moneyfarm review), and our best investment apps.

Expert-managed investment apps

If you’re just looking for help with your pension, check out PensionBee¹ (here’s our PensionBee review) – you can transfer over all your old pensions and they’ll manage your pension all the way to retirement. (They have low fees too!)

Financial advice benefits

Using a financial advisor can be super beneficial to growing your wealth (money) over time, it’s often better than investing yourself, and much better than not investing at all!

The main benefits to financial advice is getting the knowledge and experience from an expert. Someone whose job it is to literally grow other people’s money – and they’re very good at it.

It also means you can save lots of time and effort managing your own money by letting the experts handle it for you and spend your time enjoying life more. 

Here’s all the benefits in a bit more detail:

Long-term investment focus

A financial advisor will only focus on the long-term when it comes to investing. There’s no advice on what the next hot stock is, like Tesla or Apple. An advisor will use tried and tested techniques to grow your money over the long term – often with a emphasis on a large pension pot when you retire (a pension is a tax efficient way to save money).

Use the right investment accounts

Using the right investment account can save so much cash over time – which means your money can grow a lot faster too. There’s quite a few options in the UK which are:

Stocks and Shares ISA: save up to £20,000 per year and everything you make is tax-free, forever. You can only pay into one account per year however. 

Lifetime ISA: save up to £4,000 per year for your first home and get a 25% bonus from the government.

Personal pension: save up to £60,000 or your whole salary per year, which is lower, and get a 25% bonus on everything you pay in. Plus, 40% tax back if you’re a higher rate tax payer (earn more than £50,270).

Personal pension

Junior ISA: save up to £9,000 tax-free, all in your kids name.

There’s also a few more options such as investment trusts – we won’t cover these now but a financial advisor will work out the best accounts to use to grow your money in the most efficient way possible, and save money for your future, and your kids future if you have them.

Avoid investment scams

Investment scams are fairly rare but they do happen, and even smart people can get fooled! An investment advisor will manage your investments so you don’t need to worry about if an investment is legitimate or not.

Increase confidence

Investing is pretty complicated, very hard to do yourself, and can be pretty nerve wracking and stressful with your money on the line. Plus, we’re not taught about any of it in the UK – which is why Nuts About Money was started – to help educate people about money!

However, investing is often seen as the best way to grow your money over time, and we should all be investing if we can. Using a financial advisor can give you the confidence to invest, without actually having to do anything yourself, and you’ll know it’s being invested in the right way to achieve your long term goals.

Build the right investment portfolio

A financial advisor will put together the right investment portfolio for you (that just means where your money is invested). And this is where they’re super useful. 

Once you’ve worked together to determine your long-term goals (such as a nice big pension pot), they’ll go off and put together a whole range of investments that aim to meet your goals.

Your portfolio will often be determined by the level of risk you’re happy to take (don’t let the word risk put you off!). With higher risk, your money will have more ups and downs in the short term, but can grow much more in the long-term. With lower risk, your money should simply grow slowly and steadily.

Investing risk level

A financial advisor will find the right balance between risk and reward to achieve your goals.

Types of investments

Within your investment accounts, your financial advisor will typically buy a range of investment funds, which are a group of investments all packaged together into a single investment, which makes it much easier to buy (and cheaper!).

Funds are popular across the world, and almost every investor will have funds as the core of their investment portfolio. Typically within a fund, there can be different types of investments that include:

Stocks & Shares: these are where you can buy a small amount (a share) of a company. This can increase in value, and can pay out profits to its owners (shareholders).

Stocks and Shares

Bonds: these are loans to governments and large corporations in return for interest.

Property: this is often commercial property that pays rent.

Commodities: these are real things like gold and silver.

So, your financial advice will look at your goals and determine the right investment funds to buy to build up your investment portfolio (the total amount of your investments). 

They’ll then regularly check your portfolio to make sure everything is on-track, and ‘rebalance’ your portfolio if needed. Which means buying and selling different investments to keep everything perfectly in-line with the strategy.

It’s fairly complicated to do, and quite time consuming – that’s why it’s good to have the experts do it for you.

Types of financial advisor

Although we tend to group them all together, there’s actually a few types of financial advisors:

Independent financial advisors

These types of advisors often work for themselves or for small firms, and they are independent of any investment company – which means they should look at every investment option out there to find ones that best suit your goals. 

By being independent they have a duty to provide you with a 'comprehensive and fair analysis of the market’ (that’s the legal phrasing).

Restricted financial advisors

These types of advisors work for large investment firms, and so are not independent. They don’t have to look at every option out there to find the best for you, they will often recommend the investments that their firm manages. 

This isn’t necessarily a bad thing in general, as their firm will have a huge range of investment options to suit your goals, and the investments are normally very well managed. They can recommend options outside of their own firm, but they don’t have a legal obligation to do so.

An example of this is St James’s Place. They’re the biggest financial advice firm in the UK, and have a large range of investments and lots of financial advisors. And very popular.

Mortgage financial advisors

And then there’s mortgage advisors too. Although most financial advisors can also help with your mortgage (such as finding the best mortgage rates), mortgage advisors can only help with mortgages – they are not allowed to give advice on anything else, such as investments.

Mortgage financial advisor

They’re typically a bit more efficient and cheaper than using an independent financial advisor to find the right mortgage for you. 

And, in fact, you can even get mortgage advice for free if you use an online mortgage broker such as Habito¹ (highly recommended). We also have our own service to find a local mortgage advisor too.

Tax advice

Financial advisors (not mortgage advisors) can also give you advice on tax, and more specifically, how to reduce the amount you pay, legally of course. (In terms of your investments.)

For instance, they can advise on the best way to structure pension payments to make the most out of your tax-free allowance over time and which investment accounts to use. Plus, how to reduce inheritance tax when you pass away (sorry to bring up a sad topic).

And if you run your own business, get a bonus from your employer, get shares or share options, and pretty much anything related to money, a financial advisor can guide you through how to reduce tax. You could end up saving a lot of cash, and we mean A LOT!

How much is a financial advisor?

Let’s talk about costs. A financial advisor isn’t free unfortunately, and it’s normally a long commitment over many years, so you’ll normally end up paying them quite a bit!

However, it’s normally worth it, they’ll grow your money much more than you could yourself (unless you're an expert), and simply having an advisor will mean you’ll probably be investing more than you otherwise would and so should be earning more money in the long-term too.

So when it comes to actual fees, you’ll normally pay a percentage of your total investments every year. And this is in the region of 2% per year as an average.

In fact the Financial Conduct Authority found that the average fee over a year 10 period was 2.14%. And this was made up of an initial charge of 2.4% (for the work that goes into building the right strategy) and then an ongoing fee every year of 0.8% (to manage your investments). 

Financial Conduct Authority

And this also includes the fees within the investments themselves, which average around 1.1% per year. (You’ll pay investment fees wherever you invest your money.)

Alternatively, some financial advisors charge a fixed fee for one-off advice, and this can range from around £500 to £1,000s depending on the advice you’re after.

How to find a financial advisor

The good news is finding a financial advisor is super easy. You can simply use Unbiased – a website for financial advisors. They’ll find the best financial advisors in your area and connect you directly with them.

It’s a free service, and you’ll often be able to chat with your advisor for free before you commit to any of their services. It’s worth checking out and highly recommended, just head over to the Unbiased website¹ to get started. If you want to learn more about them, check out our Unbiased review.

Good luck investing!

No items found.

Find a financial advisor

Use Unbiased to find the right advisor for you.

Find an advisor¹Find an advisor¹

Find a financial advisor

Use Unbiased to find the right advisor for you.

Find an advisor¹Find an advisor¹
No items found.

Find a financial advisor

Use Unbiased to find the right advisor for you.

Find an advisor¹Find an advisor¹
No items found.
Fact checked icon
This article has been fact checked.

This article was written, reviewed and fact checked by the expert team at Nuts About Money. You’re in safe hands. Learn more.

Find a financial advisor

Use Unbiased to find the right advisor for you.

Find an advisor¹Find an advisor¹

Get news, tips and deals straight to your inbox

Sign up

Related articles