Advisory Trading for beginners

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Things you may need to know before you start trading on the Financial Markets with a Broker or an Independent Financial Advisor (IFA).

What is Advisory Trading?

Advisory trading can be described in many ways and it’s important to be aware that there are different types of advisors.

To summarise in short, advisory trading is where a client or company gives authority, otherwise known as power of attorney, to a regulated firm to make and manage trades or investments on their behalf. Advisory services allow clients to consult with investment professionals before making any decisions. The regulated broker or IFA is in a position to offer personalised advice and; recommend financial products that are suitable for its clients.

Some of the different types of advisory managers are financial advisors, portfolio managers and investment managers.

Advisory Trading

Why should I use a Broker or an Independent Financial Advisor?

Brokers and IFA’s should offer impartial advice and guidance on a clients investments and/or portfolios. This advice should be tailored to aspects such as a clients attitude to risk, investment objectives and financial circumstances all while taking into account a clients short term and long term financial goals. This advice usually comes with a fee.

Brokers and IFAs should be regulated in the UK by the Financial Conduct Authority on the FCA Register. You can search this register on-line to make sure your advisory is registered to provide advice in the UK.

Financial instruments

There are a range of financial instruments that can be traded on an advisory basis, just some of these are:

Stocks / Shares
Forward Contracts
Futures
CFD’s
Financial Spread Bet
Foreign Exchange
Exchange – Traded Funds (ETF’s)

What do I need to do before beginning trading with a Broker or an IFA?

Before you begin trading with a Broker or and IFA, make sure they are registered with the Financial Conduct Authority. You can do this by searching the FCA Register. If the firm are regulated by the FCA, this will offer you protections such as the Financial Ombudsman and The Financial Services Compensation Scheme.

Search the company is registered on Companies House. This is a UK Government Website which lists all UK limited companies.

Don’t be afraid to do your own research and ask about their qualifications and if they are registered. Check their certificates against the FCA register. Find out long they have been trading and what type of trading they usually do.

It is beneficial to be aware of what your investment goals are – are you thinking about long-term or short-term? What level of risk to your investment are you willing to gamble with? What is my objective of this investment?

Who are the Financial Conduct Authority, The Financial Ombudsman and The Financial Services Compensation Scheme?

The FCA is a regulatory body that regulates the conduct of 50,000 firms in the UK to ensure that the financial markets are honest, competitive and fair.

The Financial Ombudsman is a free service to consumers who deal with complaints between active FCA regulated financial businesses and their customers. If a financial business and a customer cannot resolve a complaint themselves, the Financial Ombudsman will give an unbiased answer about what has happened. If the Financial Ombudsman decide someone has been treated unfairly, they can use their legal powers to put things right.

The FSCS are a body that was introduced to protect customers of financial services firms that have failed and were regulated by the FCA. If a firm is not able to pay compensation directly / or they are no longer trading, then the FSCS may be able to pay compensation if your claim is within their rules.