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  • FIRST POST
    • Jon_W
    • By Jon_W 20th Mar 17, 9:40 AM
    • 108Posts
    • 17Thanks
    Jon_W
    Questions for IFAs
    • #1
    • 20th Mar 17, 9:40 AM
    Questions for IFAs 20th Mar 17 at 9:40 AM
    Sorry for starting another thread but any replies to this could help quite a few other people and any valuable info could be lost if in one of the other threads I started.

    Here's what I think I will be asking:

    1. Are you self-employed or en employee of the organisation this appointment has been organised through? (Important for liability in case he does a runner with my cash )

    2. Your fees for:

    i) Implementation
    ii) Ongoing management
    iii) Future appointments to discuss strategies if I go DIY but want advice on an ad hoc basis

    3. How often will you update me as to the progress (or regression) of the portfolio?

    4. If I choose a definite asset mix I want and if the funds held depart from it by more than a few % will you rebalance the portfolio, automatically?

    5. My brother is also seeking to invest do I get a referral bonus if he goes with you as well?

    6. If any of the funds I invest in are income and not accumulatory, will you invest the dividends, etc, and keep my chosen asset mix %ages?

    7. What is the value of your liability insurance? (Is it a bit cheeky/insulting to ask this?)

    8. How many other clients' portfolios do you manage?

    9. Would you be happy for me to contact any of your other clients (with their permission) regarding your work? (again, is this cheeky?)

    Have I made any glaring omissions?
Page 1
    • dunstonh
    • By dunstonh 20th Mar 17, 11:00 AM
    • 88,811 Posts
    • 54,162 Thanks
    dunstonh
    • #2
    • 20th Mar 17, 11:00 AM
    • #2
    • 20th Mar 17, 11:00 AM
    1. Are you self-employed or en employee of the organisation this appointment has been organised through? (Important for liability in case he does a runner with my cash )
    Irrelevant. The IFA does not handle your money. They cant do a runner with it.

    4. If I choose a definite asset mix I want and if the funds held depart from it by more than a few % will you rebalance the portfolio, automatically?
    That would require discretionary investment management permissions and IFAs are not DFMs. You also want the move apart from the target allocations for a sufficient period before rebalancing. Moving it back too quickly can be counter productive.

    7. What is the value of your liability insurance? (Is it a bit cheeky/insulting to ask this?)
    What is the point of asking it? The FCA take data on IFAs PI insurance every year. It has to meet the FCA criteria.

    8. How many other clients' portfolios do you manage?
    What has that got to do with anything? What answer is better in your eyes? An IFA with 50 or an IFA with 500? What if the IFA with 50 does everything himself and the IFA with 500 has a team?

    9. Would you be happy for me to contact any of your other clients (with their permission) regarding your work? (again, is this cheeky?)
    If I recall, your investment amount is not very high. I would think you are in multi-asset territory for an IFA recommendation. Not a full blown bespoke portfolio.

    Don't try and act like a high roller when you don't have the chips to back it up. Let the IFA do their job and then ask questions that are relevant and important. Don't come across like a Daily Mail reader (someone that acts like they know it all but knows nothing). Don't focus on irrelevant areas as an IFA that can pick their clients may think you are going to be high maintenance and you don't have the investment value for them to be interested in taking you on. We turned away a £150k investor a few weeks back as we considered them a complaint waiting to happen if we took them on. Established IFAs don't want trouble. That would leave you with the sales type (who dont care) or the new advisers who dont have the client bank to be picky.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Jon_W
    • By Jon_W 20th Mar 17, 11:16 AM
    • 108 Posts
    • 17 Thanks
    Jon_W
    • #3
    • 20th Mar 17, 11:16 AM
    • #3
    • 20th Mar 17, 11:16 AM
    Cheers. Oh, I know there's a quid pro quo and that I am not calling all the shots, don't worry on that score. I just don't want them to think I'm a total moron and/or ask things which are pointless and none of my effing business.
    • JuicyJesus
    • By JuicyJesus 20th Mar 17, 2:53 PM
    • 2,906 Posts
    • 2,985 Thanks
    JuicyJesus
    • #4
    • 20th Mar 17, 2:53 PM
    • #4
    • 20th Mar 17, 2:53 PM
    We turned away a £150k investor a few weeks back as we considered them a complaint waiting to happen if we took them on.
    Originally posted by dunstonh
    OK now you have me curious, what happened there to make you think that?
    urs sinserly,
    ~~joosy jeezus~~
    • EdGasket
    • By EdGasket 20th Mar 17, 9:39 PM
    • 3,456 Posts
    • 1,444 Thanks
    EdGasket
    • #5
    • 20th Mar 17, 9:39 PM
    • #5
    • 20th Mar 17, 9:39 PM
    Don't try and act like a high roller when you don't have the chips to back it up. Let the IFA do their job and then ask questions that are relevant and important. Don't come across like a Daily Mail reader (someone that acts like they know it all but knows nothing). Don't focus on irrelevant areas as an IFA that can pick their clients may think you are going to be high maintenance and you don't have the investment value for them to be interested in taking you on. We turned away a £150k investor a few weeks back as we considered them a complaint waiting to happen if we took them on. Established IFAs don't want trouble. That would leave you with the sales type (who dont care) or the new advisers who dont have the client bank to be picky.
    Originally posted by dunstonh
    Spoken like a true IFA !

    Forget who's paying them (Don't try and act like a high roller when you don't have the chips to back it up.)

    Patronizing ( Don't come across like a Daily Mail reader)

    Want money for old rope (Established IFAs don't want trouble)

    Think they are doing you a favour ( That would leave you with the sales type (who dont care) or the new advisers who dont have the client bank to be picky.)
    • HappyHarry
    • By HappyHarry 21st Mar 17, 6:58 AM
    • 377 Posts
    • 447 Thanks
    HappyHarry
    • #6
    • 21st Mar 17, 6:58 AM
    • #6
    • 21st Mar 17, 6:58 AM
    Spoken like a true IFA !

    Forget who's paying them (Don't try and act like a high roller when you don't have the chips to back it up.)

    Patronizing ( Don't come across like a Daily Mail reader)

    Want money for old rope (Established IFAs don't want trouble)

    Think they are doing you a favour ( That would leave you with the sales type (who dont care) or the new advisers who dont have the client bank to be picky.)
    Originally posted by EdGasket
    Really?

    IFAs are businesses.

    Any business gets to chose its clients. If the business is a UK wide supermarket, then the business can afford to have some disruptive clients.

    If the business is a small local concern, then a few disruptive clients can cause a massive impact to its smooth running and profitability.

    The best IFA/client relationships are built on mutual trust and understanding. Without this being present, there would be little benefit to the client, and little value to the IFA, to start working together.

    I too have recently had to decline to deal with a new client with a six figure sum to invest, as the IFA/client relationship was clearly not going to exist. (One of the first comments made was "I don't like IFAs, but feel I'm being forced to come here.")

    IFAs are not looking for "money for old rope", rather, to add value to the client and make a profit for the IFA.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
    • Jon_W
    • By Jon_W 21st Mar 17, 1:50 PM
    • 108 Posts
    • 17 Thanks
    Jon_W
    • #7
    • 21st Mar 17, 1:50 PM
    • #7
    • 21st Mar 17, 1:50 PM
    I did wonder whether I should shake hands or bow... ;-D

    Joking aside, dunstonh has been incredibly helpful to me on here, all for free. He's a top fella in my book.
    • JohnRo
    • By JohnRo 21st Mar 17, 2:27 PM
    • 2,369 Posts
    • 2,101 Thanks
    JohnRo
    • #8
    • 21st Mar 17, 2:27 PM
    • #8
    • 21st Mar 17, 2:27 PM
    No doubt about that but I still think you're burning hundreds unnecessarily, it's your money though, well it is until the bill arrives.
    'We can't solve problems by using the same kind of thinking we used when we created them.' ― Albert Einstein
    'Facts do not cease to exist because they are ignored.' ― Aldous Huxley
    • Jon_W
    • By Jon_W 22nd Mar 17, 9:08 AM
    • 108 Posts
    • 17 Thanks
    Jon_W
    • #9
    • 22nd Mar 17, 9:08 AM
    • #9
    • 22nd Mar 17, 9:08 AM
    I met one last night. He doesn't want me as my investment is too small. Which begs the question as to why he met me when I made it very clear in my emails about the extent of my investment?!

    He said to have a look at Vanguard LS options. I was going to meet with a few other IFAs but was leaning towards this until I saw someone on another thread say 'it's the elixir of life but so were endowment mortgages'.

    But I suppose there, there was always the risk there that the endowment wouldn't cover the mortgage amounts. Whereas the Vanguard LS are a diversified, multi-asset passive fund with diversified risk, so relatively 'safe' as far as investments go, if you have the nerve to hold.
    • Malthusian
    • By Malthusian 22nd Mar 17, 9:27 AM
    • 2,607 Posts
    • 3,725 Thanks
    Malthusian
    I met one last night. He doesn't want me as my investment is too small. Which begs the question as to why he met me when I made it very clear in my emails about the extent of my investment?!
    Originally posted by Jon_W
    Because there could easily have been other areas on which the IFA could add value that you hadn't considered before you met him. Pension funds, a substantial protection requirement, future lump sums. You probably knew there weren't but the IFA doesn't know that.
    • Jon_W
    • By Jon_W 22nd Mar 17, 10:04 AM
    • 108 Posts
    • 17 Thanks
    Jon_W
    Because there could easily have been other areas on which the IFA could add value that you hadn't considered before you met him. Pension funds, a substantial protection requirement, future lump sums. You probably knew there weren't but the IFA doesn't know that.
    Originally posted by Malthusian

    I agree but as soon as we began talking and I confirmed the extent of my investment, he said he was out (adding in the average amount of his client ) and then we just chatted generally.
    • dunstonh
    • By dunstonh 22nd Mar 17, 10:18 AM
    • 88,811 Posts
    • 54,162 Thanks
    dunstonh
    But I suppose there, there was always the risk there that the endowment wouldn't cover the mortgage amounts. Whereas the Vanguard LS are a diversified, multi-asset passive fund with diversified risk, so relatively 'safe' as far as investments go, if you have the nerve to hold.
    The investment funds on endowments were broadly similar. Indeed, in unit linked cases, the most common fund used was the multi-asset 40-85% equity fund. If you had used VLS in an endowment (had it been possible) the endowments would still have run short. The problem was not the investment return. It was the target growth rate required that was rigid and couldnt cope with the changing economic position of the UK.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Jon_W
    • By Jon_W 22nd Mar 17, 10:23 AM
    • 108 Posts
    • 17 Thanks
    Jon_W
    So the problem was that (in effect) the aims were not realistic, rather than being any reflection on the performance of the assets themselves. Why did people fall for this? I mean, as you know, I am no economist. But even before I started dabbling I knew that Elliott Nelson described the cyclical nature of economies and that Mr Brown was talking out of his hate when he said 'No more boom and bust'!

    PS - I have to say that even if he had accepted me I wouldn't have gone with him. Not very well presented but a bit of a wide boy, I felt.
    • dunstonh
    • By dunstonh 22nd Mar 17, 11:01 AM
    • 88,811 Posts
    • 54,162 Thanks
    dunstonh
    So the problem was that (in effect) the aims were not realistic, rather than being any reflection on the performance of the assets themselves.
    Correct.

    Why did people fall for this? I mean, as you know, I am no economist. But even before I started dabbling I knew that Elliott Nelson described the cyclical nature of economies and that Mr Brown was talking out of his hate when he said 'No more boom and bust'!
    Endowments had never fallen short using those target growth rates. You have to remember that the UK was very different in the past. High inflation, frequent boom/bust and a pound that was in decline almost continuously, meant gross investment returns were consistently higher than the target growth rates. The stabilisation and rebuild of the UK economy (which began in the 80s) meant that gross investment returns began to fall. These things are largely hindsight and you couldnt predict. This wasnt about saying what could happen over an economic cycle. This was a complete change in the economics of a country.

    Modern investment products would have been able to adjust as they could tell you to pay in £x more to hit target based on a revised target growth rate. Endowments couldnt as they were set at the outset. So, when people were starting to pay much less on their interest only mortgages (in the hundreds of pounds) if the product had been more flexible, they could have taken £25-£50 of that money saved and put it into the investment element and the plans wouldn't have fallen short.

    There were several other issues. The removal of LAPR. Tax relief on life assurance. It was removed for new plans but reduced and eventually culled on existing plans that had expected it to be there for the term. MIRAS was mortgage interest relief. That made endowment mortgages much cheaper than repayment. When that went, endowments were often still the cheaper option (which is why most chose it). The regulator forcing insurance companies to target solvency before returns in with profits funds following the equitable life mess saw most of the funds pull out of equities at a low. Some WP funds have still to recover to their pre 2001 position.

    One thing many do not realise is that people are so much better off for change in economics that occurred. Yes, their endowment fell short but their monthly payments went down, their house value increased faster and the lower inflation aided the standard of living. £20pm difference in monthly cost over 25 years is £6000. That is a typical endowment shortfall figure. Yet those people were seeing their mortgage payments hundreds of pounds lower (and dont forget that £20pm was typical of the lower cost of the endowment mortgage vs repayment mortgage and finding £20pm at the start was harder for many people than finding £6000 at the end - remember inflation. £20pm in the 80s was about 5% of your annual income).

    Finally, complacency set in. Endowments had been around for generations and had always paid out big surpluses. I remember seeing maturities that were 4-5 times their target level. They were a risk but it was a risk that had never failed. So, the view of the risk fell away. Until they failed and then people look back with hindsight and point out the risks that had been forgotten or not foreseen.

    One area of concern for the future is going to be pensions and income drawdown. You can see it already. You could think of income drawdown as an endowment in reverse. It people are too rigid on their drawdown and take too much and the investments do not hit their target growth rate, then they could have problems in the future. These few good years are going to put people into a false sense of security. You watch the media after the next crash and you will see very quickly how they report people losing their pension income because they handnt factored in loss periods and their pension will run out as they have lost money. The media will blame everyone apart from the person but it will be the person that is at fault.

    What this should tell you is do not assume anything long term and keep things flexible and build target figures with low projections even if you have a history (short or long) of beating it.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Jon_W
    • By Jon_W 22nd Mar 17, 12:48 PM
    • 108 Posts
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    Jon_W
    A great insight, thanks for that. Was there no escape route for those tied-in to endowment mortgages? I'm guessing not else people would have taken them when the economic rebuilding started to occur.

    Have multi-asset funds a likelihood of somehow falling way short of hopes and expectations - aside from the likelihood of the markets themselves tanking - from any 'extraneous' factors like these which impacted on endowments? I know you've no crystal ball.
    • badger09
    • By badger09 22nd Mar 17, 3:36 PM
    • 5,112 Posts
    • 4,325 Thanks
    badger09
    A great insight, thanks for that. Was there no escape route for those tied-in to endowment mortgages? I'm guessing not else people would have taken them when the economic rebuilding started to occur.
    Originally posted by Jon_W
    I don't know if anyone was 'tied in' to an endowment mortgage. There was an escape route, which many, myself included, chose to take. It was possible to switch to either full or part repayment mortgage. I switched to full, and managed to pay off my mortgage several years before the Endowment matured. The final value of the Endowment was 75% of the target amount.

    I'll leave others to answer the second part of your question.
    • LHW99
    • By LHW99 22nd Mar 17, 4:56 PM
    • 829 Posts
    • 652 Thanks
    LHW99
    You could also sell the endowments on - we did this with one of our that was running a shortfall.

    It meant you could get a better value than just asking the endowment company to provide a value. But you had to then deal with the mortgage repayment in another way.
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