"Neither a borrower nor a lender be"

Asking any of my family members or friends for financial advice would be like asking a vegetarian for  whether to go for beef or lamb: I just wouldn't do it. But apparently, 71 per cent of the British population do not share my doubts, for they admitted in a new survey by Alliance & Leicester that this would their first port of call - if they chose to seek any advice whatsoever...

Whilst I appreciate that others may be blessed with a more financially savvy social circle than my own, is it wise for anyone to take advice given to them by people with whom they share a bed/regular meal times/ ancestry/ or all of the above?

Working on the assumption that the UK population is seeking out real financial advice, such as whether to invest in oil or gold, or which kind of pension fund to choose, rather than where to find the cheapest DVD player, then I think the following is worth bearing in mind.

If it goes wrong, then depending on the scale of the damage, the advice could have incredible repercussions. Like divorce, for instance.

If it goes right, on the other hand, then you may be in danger of turning the other person into a sounding board to talk through financial dilemmas which will inevitably redefine the relationship and leave you yearning for the days when all you ever discussed was how much you love each other, or in the case of friends, shoes.

On the basis that money issues are the root cause of many a marital or family breakdown, and that there are often much more enjoyable things to talk about with those that you love, then my advice would be to look elsewhere, from someone impartial, matter-of-fact, and most importantly, qualified.

Remember that the world is full of Polonius-type figures, all too eager to dispense what is actually mediocre information. It might sound good, and they might have the very best of intentions, but unless they have a string of financial qualifications to back it up, then be ready to dispense that pinch of salt. You should then visit IFA Promotions to find someone who can prove they are worth listening to.

An exception could be made if you are acquainted with or related to a genuine financial adviser who will happily offer you their pearls of wisdom for free. But the fact that they know you could be a blessing or a curse. They may have a more intimate knowledge of your financial circumstances and attitude to money,  but your relationship and the fact that they would be doing it for free, might compromise the quality of advice. Remuneration has an uncanny habit of focusing the mind - maybe suggest paying them a token amount.

Comments

[damien euston]

humm, Mortgage IFAs (MIFA) - the misnomer of the finance industry.

Bottom line, they are sales people, sales people that are driven by commission rates that are offered by lenders.
On top, IFAs have to be approved by most lenders to broker many types of mortgages - so how likely is it that one MIFA will be capable of offering the entire available portfolio of UK approved mortgages - especially the unique mortgage you are after, (after having done your homework).

Personal research has to come before contacting them. And why pay an 'consultation fee' of a couple of hundred quid, when you can read the money section of the Times on Sunday for £1.40 ?

Similar to Rajs' story, I was verbably offered a higher APR to the one advertised on the web site when I was changing my mortgage - only when I pointed this out, and a new details were printed out from the lenders business application, the advisorer realised that they weren't aware of changes.

So, FSA supporting you or not, it's still 'Buyer Beware' - you have to know what's going on.

DamienH

[Raj]

I recently took part in such a survey about where I'd go to for financial advice. I don't remember what the choices were and what I said, but one of the options was IFA and I was not inclined to tick that.

I'll explain why:

I was shopping around for a flat and each estate agent recommeded that I speak to their mortgage advisor. I spoke to three different "mortgage specialists" (all regulated by the FSA).

The first one advised me that I could borrow only four salary mutiples with Scottish Widows. I asked her to try other lenders and she told me that it would make no difference. I later directly approached Scottish Widows who agreed to lend me the amount I needed (4.75 multiples). HSBC, Alliance and Leicester and Halifax were also willing to lend me that amount.

The second advisor told me I would knock off a greater amount from the capital if I took an interest only mortgage and overpayed than if I took a repayment mortgage. I specifically asked him if that would be the case if the interest rates and payment amount was the same. He said yes and drew graphs to explain. He then used his calculator to give me a figure of the amount I would save in a three-year period. I don't know how he arrived at his conclusion but it was totally inaccurate. If you overpay on an interest only mortgage but pay the same total amount for the same interest rate you knock of the same amount of the capital in any given period irrespective of whether you have an interest only or a repayment mortgage.

The third person was recommended by a friend. He wasn't linked to any estate agent but I wasn't impressed with the best rates he found. I asked him about discounted mortgages with an overhang after the best rate finishes. He said his company didn't do those as they are never good value for money. I told him to explore Alliance and Leicester's easy step flexible mortgage (3.64% for first 2 years then rising to 5.75% for 1 year then then to their SVR) with a lock in period of 3 years. He was quite surprised that the lock in period was that short. Then he wanted around £400 as a fee to arrange the mortgage (after I had told him something he should have known).

In the end I went directly to Alliance and Leicester and got the mortgage that I found most competitive and suitable for my present needs.

Yes, IFAs are probably better qualified to give advice than relatives, parents and friends but I would recommend that you do your own research as they don't always give the best advice. I use financial websites and books to get my information.