If you buy investments through an authorised financial advisor you need to be aware of the basics, i.e. what that means for you as the investor and them, the advisor.
In order to be allowed to give advice on financial investments in the UK, it is necessary to be authorised by the financial services regulator. This authorisation is for your protection and requires the authorised person or company to maintain certain minimum standards of competence, financial backing and record keeping commensurate with their permitted activities. Buying through an authorised person also qualifies you for the Financial Services Compensation Scheme if the authorised person goes bankrupt or the advisor breaches the rules set down by the regulator.
When giving advice there are many rules authorised advisors are required to follow for your protection. They are required to act in your best interest (i.e. they must sell you products that suit your purpose). This means they must understand your particular circumstances, which they will invariably do by asking you to complete a detailed questionnaire. They are also required to deliver the product to you on the best terms available, the so-called "rule of best execution".
There are two categories of authorised financial advisors: Independent Advisors and Tied Advisors. Independent Advisors are authorised to advise on a range of different products from a range of different providers. They are able to scan a wide range of the market to provide the most suitable product. Although the Government has recently proposed a change to this rule, Tied Advisors are only authorised to sell products from the organisation they represent. They are not able to scan the entire market place to find the best product available. They still have to ensure that anything they sell to you is suitable and if the organisation does not sell a suitable product, they are obliged to tell you.
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Investment Risk
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