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Financial Advisor / IFA

Also known as: Independent Financial Advisor, Wealth Manager

Definition

A financial advisor is an FCA-regulated professional who provides expert advice on investments, pensions, inheritance tax planning, and financial strategies to help you manage and protect your wealth.

In estate planning, financial advisors help you minimise inheritance tax, structure investments efficiently, and coordinate your financial planning with your will and estate plan.


What Does Financial Advisor / IFA Mean?

All financial advisors in the UK must be authorised by the Financial Conduct Authority (FCA) under the Financial Services and Markets Act 2000 and hold at least a Level 4 Diploma qualification. The FCA distinguishes between "independent" and "restricted" advisors. Independent Financial Advisors (IFAs) can recommend products from the entire market and must give unbiased, unrestricted advice. Restricted advisors offer a more focused range of products from specific providers. Both types are FCA-regulated, but IFAs have "whole of market" access—particularly valuable for complex estate planning where you need the full range of investment and insurance options.

For estate planning, financial advisors assess your estate size, calculate potential inheritance tax liability, and recommend tax-efficient strategies. They might suggest gifting strategies using annual exemptions (£3,000 per person), potentially exempt transfers that become IHT-free after seven years, trust recommendations, or tax-efficient investment structures. Sarah, 62, consulted an IFA about her £850,000 estate. The advisor calculated her inheritance tax exposure (£525,000 over the nil-rate band equals £210,000 potential IHT) and recommended starting annual £3,000 exempt gifts to grandchildren, maximising pension contributions, and considering a trust for her £150,000 investment portfolio. Financial advisors work alongside solicitors—the solicitor drafts your will and creates trusts, while the financial advisor designs the tax-efficient strategies those documents implement.

Financial advisors typically charge through one of three structures: a percentage of assets under management (0.25% to 1% annually), flat annual fees (£2,000 to £7,500), or hourly rates (£200 to £400). For estate planning, you might opt for a one-off consultation (£400 to £1,200) rather than ongoing management if you just need initial strategy recommendations. You don't need to be wealthy to benefit—if your estate exceeds the inheritance tax threshold (£325,000, or £500,000 including your home for direct descendants), professional advice can save your beneficiaries significantly more than the advisor's fee. Wealth managers typically serve high-net-worth clients (£500,000+ investable assets), while many IFAs work with middle-income families on specific needs like inheritance tax planning. Always verify any financial advisor is FCA-registered at register.fca.org.uk before engaging their services.


Common Questions

"Do I need a financial advisor to make a will, or can I just use a solicitor?" You don't need a financial advisor to write a will—a solicitor can draft it independently. However, if your estate may face inheritance tax (generally estates over £325,000, or £500,000 if leaving your home to direct descendants), a financial advisor can recommend tax-saving strategies before your solicitor drafts the will. Many people benefit from consulting both professionals.

"What's the difference between an independent financial advisor (IFA) and a regular financial advisor?" An Independent Financial Advisor can recommend products and strategies from the entire market and must give unbiased advice. A "restricted" financial advisor may only offer products from specific companies or a limited range. Both must be FCA-regulated, but IFAs have access to the full range of options, which is particularly valuable for complex estate planning.

"How much does it cost to get financial advice for estate planning?" Financial advisors typically charge in three ways: a percentage of assets under management (0.25% to 1% annually), flat annual fees (£2,000 to £7,500), or hourly rates (£200 to £400). For estate planning, you might opt for a one-off consultation (£400 to £1,200) rather than ongoing management if you just need initial strategy recommendations.


Common Misconceptions

Myth: You need to be wealthy to work with a financial advisor—they only help rich people.

Reality: While some wealth managers specialise in high-net-worth clients, many financial advisors work with people at various financial levels. If your estate might exceed the inheritance tax threshold (£325,000, or £500,000 including your home for direct descendants), professional advice can save your beneficiaries significantly more than the advisor's fee. Some advisors offer one-off consultations for a few hundred pounds, making professional guidance accessible without a long-term commitment.

Myth: If I hire a financial advisor, they'll control my money and pressure me to buy products I don't need.

Reality: Financial advisors provide recommendations and advice—you always have the final say in any decisions. FCA-regulated advisors must act in your best interest and clearly disclose how they're paid. Independent Financial Advisors are specifically required to give unbiased advice across the whole market, not push specific products. You're also free to change advisors or stop using their services at any time.


Understanding Financial Advisor / IFA connects to these related concepts:

  • Solicitor: Handles legal aspects of estate planning while financial advisors design tax-efficient strategies—many people need both professionals.
  • Estate Planning: Financial advisors are a key component of comprehensive estate planning alongside solicitors and accountants.
  • Inheritance Tax (IHT): Financial advisors specifically help calculate IHT exposure and recommend reduction strategies through gifting and investment structuring.
  • Pension Nomination: Financial advisors coordinate pension beneficiary nominations separately from wills as part of overall estate planning.
  • Probate: Financial advisors can ensure sufficient liquid assets to pay inheritance tax without forced asset sales during probate.

  • Article on Accountants & Financial Advisors: Explains how financial advisors approach estate planning and serve clients with complex financial portfolios.
  • When to Consult a Financial Advisor: Helps you determine whether your situation warrants professional financial advice for estate planning.
  • Inheritance Tax Planning Strategies: Details the specific strategies financial advisors typically recommend to reduce inheritance tax liability.
  • Coordinating Professional Advisors: Shows how financial advisors work with solicitors and accountants for complex estate planning.

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Legal Disclaimer: This glossary entry provides general information about UK financial services and does not constitute legal or financial advice. For advice specific to your situation, consult a qualified solicitor or FCA-regulated financial advisor. Always verify any financial advisor is registered with the FCA at register.fca.org.uk.