Nov 29, 2011

Arranging a mortgage: Is a financial advisor or mortgage advisor better?

The question of whether to ask an independent financial advisor or mortgage advisor for help when arranging a mortgage does not have a clear-cut answer. Either might be suitable, depending on their circumstances and yours.

If you are looking to take out a mortgage, you could seek advice from either a mortgage advisor or an independent financial advisor. Either might be appropriate in different circumstances. The most important thing is to check what their affiliations are, and whether this might affect the advice they give you.

Independent financial advisors and mortgage advisors
One first and obvious difference between independent financial advisors and mortgage advisors is that IFAs are more general in their approach and will offer advice on a wide range of financial topics – tax, pensions, insurance, investments, mortgages, inheritance and other areas. Mortgage advisors will only be able to provide information about mortgages.

This difference may inform who you approach first. If you need just a mortgage, then you may only want to speak to a mortgage advisor. If the help you need is more far-reaching and encompasses other areas of you finances, then an independent financial advisor will be able to serve you better. It is best to decide this in advance, because you may get better deals if you are looking for several products at once than just one of your own.

Is Tied or Independent?
Additionally, as the name suggests, independent financial advisors have to be independent. This means they will offer you advice from across the market. They are not ‘tied’ to one or other financial institution, such as a bank or mortgage provider. That means the range of advice they can give you is much broader, and more likely to suit your needs.

A mortgage provider may or may not be tied. If they work independently, or for an estate agent or mortgage broker, they might offer advice from the whole of the market. But if they work for a bank, for example, they would sell only that bank’s mortgages. Unlike the independent financial advisors, they are usually paid solely by commission: when they sell a mortgage, they are paid by the company involved. This might seem good for you, because you’re not paying a fee up-front. Of course, there’s no such thing as a free lunch, and you may end up paying for it over the long term, with slightly worse rates over the course of the mortgage. Alternatively, it may not be the best product for you, because the advisor is only looking at one provider.

Independent financial advisors have to offer the option to pay by a flat fee. This may hurt more in the short term, because it could be several hundred pounds. However, you know that you are getting impartial advice, and that you should recoup that investment in the long run.

When a mortgage advisor might be better than an independent financial advisor
If you have a good idea of the mortgage you want, or the bank you want to go with, then it may make sense to bypass the independent financial advisor and go straight to the institution in question. This makes some sense if you do not have any other needs that an IFA could help with. Make sure you do your research and make the relevant comparisons, to check that you really are getting the best deal.

In the end, though, a tied advisor is only going to give you information about products from a small section of the market. Since they are also paid by commission, it is also hard to regard their advice as impartial since there is an element of self-interest in the decision. If you are in any doubt, a good independent financial advisor should be able to provide the advice you need without these concerns coming into it.

No comments:

Post a Comment