What is an Independent Financial Advisor and Should I Hire one?

15 November 2023

Financial advisors can make a significant difference in helping people make informed decisions about their money and investments. When selecting a financial advisor, you may come across the term “Independent Financial Advisors”.

Independent financial advisors, just like any financial advisor, are professionals who offer financial planning and investment advice. What sets them apart is that they are not tied to specific financial institutions, banks, or product providers. The independence allows them to offer a broader range of financial products or solutions to match their client's goals.

It's important to note that this does not mean non-independent financial advisors cannot offer a personalised approach; they also have the capacity to tailor their advice to individual needs and objectives. However, there are several key factors that distinguish independent financial advisors from their non-independent mates.

What makes a Financial Advisor Independent?

When it comes to choosing between independent and non-independent financial advisors, there really aren't many significant distinctions. Whichever path you eventually opt for, both options can be incredibly valuable in guiding you toward a more secure financial future.

You see, the choice between independence and being part of a larger team doesn't necessarily determine their quality. In fact, there are instances when signing up with a bigger team of financial advisors and associates might be the right choice for you. Ultimately, it's about finding the right advisors that fit your unique financial goals and needs.

However, if you want to keep your options open, here are 3 ways you can confirm their independence:

1. They have no association with the recommended products 

Being fully independent means having no affiliation with a product or firm like a bank, brokerage or insurance company. They are completely separate from major banks and large financial institutes, operating autonomously, and do not have predetermined financial products in hand.

2. They do not receive any commission or incentives for endorsing these products 

An independent financial advisor should not be compensated for recommending superannuation products, insurance products, or any specific stocks in any way.

3. They do not charge asset-based fees

Independent financial advisors typically charge fees for service or flat rates on their services rather than using a percentage-based fee structure.

Financial planners that are not independent might receive commissions for recommending certain products, or might work for a specific financial organisation and be limited in recommending their products. There are also advisors in between, who function fairly independently but receive some commissions for certain products. It is helpful to ask the advisers you are speaking to about how they work in this area.

However, many financial planners today, whether independent or affiliated with a financial institution, have shifted away from percentage-based fee structures to fee-for-service models. This shift can be seen as a positive development in the financial advisory industry for some reasons. One reason is the transparency of the fee-for-service structure, allowing clients to see all the costs involved in their financial planning process. Moreover, this fee model can also be cost-effective, especially for clients with larger assets compared to percentage-based fees.

The Best Interests Duty

It's important to note that both independent and non-independent financial advisors are bound to act in the client’s best interests. This means that financial advisor has to prioritise your interest and provide appropriate advice regardless of their independence. However, this duty does not necessarily extend to other financial institutions, such as superannuation funds. It's always a good idea to do your research and understand the level of duty that your financial institution is bound by before making any decisions.

Should I Hire an Independent Financial Advisor?

Choosing between an independent financial advisor and one from a large company depends on your individual needs and preferences.

Independent financial advisors are typically small businesses or individuals who operate on their own. They may have limited support staff, and you may work directly with the advisor without a team to assist them. While independent advisors can provide you with a close working relationship, they may have fewer resources to handle urgent matters. While they are not influenced by financial benefits to sell you financial products you may not need, there is also less oversight on their advice from a larger network.

On the other hand, advisors from larger firms or financial institutions are backed by extensive support networks. They have access to a broader range of resources and can provide more immediate assistance when needed. These firms often have dedicated customer service teams and technology platforms that can enhance your overall experience. However, they may recommend products or services that they will get a commission for.

Ultimately, the decision of whether to choose an independent advisor or one from a large company comes down to your specific financial situation and personal preferences. Here are some questions you should ask yourself to decide whether to go with a particular financial advisor:

  • Do I trust this advisor? This is the most important question. You need to feel comfortable with your advisor.
  • Am I comfortable with the advisor's communication style?
    • Do you understand the advisor's explanations?
    • Do you feel like you can ask questions and get honest answers?
  • Do they believe in their investment strategy?
    • This is crucial because if a financial advisor believes in the strategy they recommend to you, it's worth considering their services, even if their independence is not guaranteed.
  • Can this advisor help me achieve my specific financial goals, such as saving for retirement, paying for my child's education, or buying a house?
  • Does this advisor have experience working with clients with similar financial situations to mine?
  • Does this advisor use a financial planning process that I am comfortable with?
  • Am I confident that this advisor will be there for me in the future when I need help?

By asking yourself these questions, you can get a better sense of whether a particular financial advisor is right for you.

How to Verify that your Financial Advisor is Independent?

Finding out if your financial advisor is independent is quite simple. Just ask them. 

They should be able to tell you about their licences and any restrictions they may have. You can always double-check on their website, as most independent financial advisors will mention this.


Working with an independent advisor is a choice, but not essential.

It is however essential to find the right financial advisor, as they will be working with you for a long time.

The key is to pick the one that fits your financial needs and what you're comfortable with. Don't hesitate to ask questions. This is your money we're talking about, and you deserve the best guidance. So, explore your options and choose the advisor that feels right for you.