Financial Advisor That Charges Monthly Fees?

hens00

dunstonh wrote: »

To charge on top of taking full commission is greedy unless you really have something special to offer that can really justify it. .

Interesting...

Your opinion is enough for me to reconsider and look elesewhere. The primary reason I was interested in using his services is due to the fact he works about 20 metres away from me. Probably not the most sensible reason to opt for a financial advisor due to proximity and my laziness...

Thanks everyone for the advice.

dunstonh

"Commission-bias" is a major problem with advisers

The FSA have looked at this a number of times in the past and have never found any evidence of widespread abuse. There has been evidence of some but nothing close to major. Although they did acknowledge that the perception that there will be a bias was widespread. Perception and reality though are different. However, the changes from 2012 should put an end to that as fee agreements signed by the consumer will state the remuneration in advance regardless of the product, version, provider or whatever.

It has been pointed out though that if IFAs are allowed to go down the route of Customer Agreed Remuneration (CAR) that will simply be commission by another name and little will have changed.

Not at all. The fee will be agreed in advance. The product providers will be factory gate pricing their products but will allow the fee to be taken from their product if that option is chosen by the consumer. So, no bias can exist. CAR (not that its called CAR now) is a good option.

earlgrey_3

Dunston I rather doubt that the FSA would be proposing to outlaw those describing themselves as Independent Financial Advisers from taking commission kickbacks from the fund managers if no problem currently exists.

I don't accept your suggestion that commission bias is just a widespread but mistaken "perception".

Frankly, after reading these forums and some of the replies from IFAs I've been amazed at just how blatant the bias is.

You for example have been encouraging people to invest in commission-paying products throughout this year (and even encouraging people to invest borrowed money) despite all the advice from unbiassed quarters to do the opposite. Even the radio programme Moneybox was telling listeners back in April that "cash is king". It was clear to anyone with any sense long before that.

Have IFAs who didn't encourage their clients into cash been merely incompetent or were they more interested in the on-going commission they receive by keeping they clients fully invested?

It's wholly understandable. If clients move half their funds to bank deposits then the IFAs who gain from kickbacks lose half their earnings.

In not a single post have I seen you suggest this year that investors exercise caution or move to cash. If you have advised your clients in the same way then, while you still got your commission on their falling investments, your clients will have lost huge chunks of their capital.

The opinion on "Client agreed remuneration" isn't just mine. It's also the view of Peter Hicks, Head of IFA Channel at Fidelity International:

"If Customer Agreed Remuneration (CAR) - which looks like commission by another name - can be defined as a fee then it is purely a change of name, not of practice." http://www.retirement-planner.co.uk/478448

If IFAs stand to gain by encouraging "investment" rather saving then bias will remain.

dunstonh

Dunston I rather doubt that the FSA would be proposing to outlaw those describing themselves as Independent Financial Advisers from taking commission kickbacks from the fund managers if no problem currently exists.

The proposals are an ongoing trend that started 20 years ago to increase the professionalism. Its zig zagged over the years with some proposals good and some useless but its an ongoing trend. One of the current thoughts long term is to push the standards right up to degree level and put it equal to solicitors and accountants.

I don't accept your suggestion that commission bias is just a widespread but mistaken "perception".

Not my suggestion. It was publised by the FSA.

You for example have been encouraging people to invest in commission-paying products throughout this year (and even encouraging people to invest borrowed money) despite all the advice from unbiassed quarters to do the opposite.

No I havent. I give no advice on the forums and never recommend products. I give responses to the questions asked but usually keep them a little vague and unspecific to ensure they are not given as advice.

Have IFAs who didn't encourage their clients into cash been merely incompetent or were they more interested in the on-going commission they receive by keeping they clients fully invested?

No-one has a crystal ball and events like this occur on average once every 7 years. Trying to pick and choose when to invest usually results in worse returns over the long run.

It's wholly understandable. If clients move half their funds to bank deposits then the IFAs who gain from kickbacks lose half their earnings.

IFAs are the biggest introducers to NS&I products. They pay zero commission. Your views do not reflect reality.

In not a single post have I seen you suggest this year that investors exercise caution or move to cash. If you have advised your clients in the same way then, while you still got your commission on their falling investments, your clients will have lost huge chunks of their capital.

You havent read my posts very well at all then. Frequently I have mentioned NS&I and cash ISAs. Your selective memory is not my problem.

The opinion on "Client agreed remuneration" isn't just mine. It's also the view of Peter Hicks, Head of IFA Channel at Fidelity International:

"If Customer Agreed Remuneration (CAR) - which looks like commission by another name - can be defined as a fee then it is purely a change of name, not of practice." http://www.retirement-planner.co.uk/478448

He has his opinion and you have yours. I disagree. Fidelity is a good example actually of a provider that doesnt allow CAR to take place so perhaps there is a bias there as they dont offer it and they wish to be negative towards those that do. Especially when you consider CAR is usually cheaper than commission.

I dont understand how anyone can say that a level of remuneration agreed in advance regardless of product or investment type can be considered biased. If the fee is £1000 then it doesnt matter if you write a cheque out for £1000 or the £1000 is taken from the investment (with the exception of pensions where taking it from the investment is more tax efficient).

MrMicawber_2

Earlgrey - surely there are many good reasons for staying in the market. One being if you are in for the long haul. Another being that a falling market is an opportunity to buy not sell. If only I had a crystal ball I would sell at the highest point and buy at the lowest point just like we all would. In my own case my only wish is that I had kept back a larger pot of cash as part of my investment 'fund' to feed in when the market started going down.

I would be very wary of anyone who told me to sell the lot. No-one really knew what was coming.

By the way you do rather have it in for IFA's. Tied advisors I wouldn't touch and there might be a fair number of IFA's who indulge in sharp practice but not the majority. It's a big industry and there are always going to be some rotten apples who get a lot of publicity and gain a bad reputation. Is Shipton representative of all Doctors. Is the odd policeman or teacher who gives their role a bad name also representative - NO.

Most will be decent people - but I'm all in favour of a fixed payment / fee. And granted - high commission rates, a generally very ignorant public and a good salesman are a dangerous mix.

Lokolo

MrMicawber wrote: »

By the way you do rather have it in for IFA's.

Talk about understatement of the year.

jem16

earlgrey wrote: »

In not a single post have I seen you suggest this year that investors exercise caution or move to cash.

Out of interest how much of your investments are in cash and how much is still invested?

whiteflag_3

No one has actually asked the question-

"what do you get for your £30 per month?"

How can anyone decide what is value for money when you dont know whats on offer?

Bit like asking "is my gym membership too expensive" when it might be a shed with a running machine or a 5 star place with an Olympic size swimming pool and a personal trainer. How can anyone answer with any certainty.?

Then you get the even cleverer people like earlgrey, who without asking seems to know what the gym is offering and that all personal trainers are cowboys!

earlgrey_3

Dunston has made thousands of posts here promoting his trade on a board used by many unsophisticated investors. He's said in the past that the amount of business he picks up here isn't very large and I assume that's true.

I've tried to encourage a more balanced approach with the difference that I have no vested interest. I hope you don't think that's too unreasonable? Isn't that the purpose of this board?

No one has a crystal ball but when even programmes like Moneybox were issuing warnings about the markets back in April then I would expect an unbiased professional adviser to be sufficiently well informed to understand the risks and advise accordingly.

Instead, in August when someone asked in a post (one of many):
"Should I cut my loses, sell the shares and put the money in my Cash ISA (which will no doubt give a better return at the moment) or shall I keep feeding money in for the long term and spread my loses?"

Dunstonh answered:
"Selling after a stockmarket drop only crystallises your losses. However, the monthly payments you make now are buying units much cheaper. So, if you sell up you would crytallise a loss and miss a buying opportunity."

Are yes, the old but totally illogical "crystallising loses" line rather than ever consider a stoploss. Those gems of wisdom were when the FTSE was still above 5500 and 35% higher than now.

So an expensive bad/unlucky call.

Now unlike Dunston I certainly wouldn't be rash enough to persuade someone either way and certainly not predict which way stocks or the markets will go but for IFAs selling on commission it's always a good time to buy. :rolleyes:

I know that Dunston is a bright bloke and the question is whether he seriously wasn't aware of the risks or whether he was just letting his own wishful thinking and self interest colour his views. He must have realised that by making it known that he was an IFA that his opinion might carry weight and could have serious consequences.

Another Dunstonism:
"Salesforces are the spawn of evil in financial services. When you have people whose career is based on hitting targets then you have the risk of bias taking place." http://forums.moneysavingexpert.com/showthread.html?t=906653
And:
"Whilst potential for bias exists on commission option with any type of adviser, you reduce the chances of it with an IFA." Of course. :rolleyes:

Also said advisers he takes onto his firm are expected to be capable of earning £100k pa in commission. Most of whom of course would formerly have been salesmen/tied agents on salary plus commission (as he was himself before becoming an IFA). Note that he didn't say new advisers must have a record of generating good returns for clients.

jem16 wrote: »

Out of interest how much of your investments are in cash and how much is still invested?

I'm currently around 20% invested in markets (though that's still a six figure sum).

I would always persuade anyone who needs it to seek advice but please, please be aware of how difficult it is to get good, unbiased advice either from tied agents or commission based IFAs. If an adviser is earning commission then take that into account just as you would any salesman. If you don't do that it could cost you dear, as it has many punters this year.

That also applies to the flyers and recommendations from companies like Hargreaves Lansdown. They will always try to persuade you to invest.

Last time I talked to several advisers was many years ago (apart for a character from Norwich Union who phoned several times a month ago). I saw stockbrokers, independent advisers and one tied adviser. I was appalled at how lousy and self-interested their advice was.

Since then there have been various attempts by the regulators to improve the situation and I came to these forums hoping that was the case with the intention of seeking a decent adviser yet again. It's obvious there's still a long, long way to go. Too often, commission still drives advice.

That's a great shame. I hope the latest attempts by the Financial Services Authority to clean things up by 2012 with ther Retail Distribution Review will work but I have reservations. Sales-oriented advisers used to earning good livings from commission will be very reluctant to give that up.

Lokolo, I understand that you are an impressionable 20 year old and from your siggy with total savings of £4,700. Did someone advice you to put some or all of that into investments or is it in savings?

Lokolo

Read my signature 'Save £15k by graduation'...

I have some investments but very little. I am using the savings for house deposit when I am 25 (well... thats my plan anyway!), I think £15k + any earnings after uni I have saved will be a nice deposit.

Um you say that dunston is suggesting still buying blah blah blah even when stockmarkets are falling because obviously as you say 'theres never a bad time'. What you are missing out is dunston is saying buy in dripfeeding, not a big lump sum.

You say that he hasn't said about any new advisors bringing in good returns etc. but surely no-one is going to pay someone £100k to give out completely sh*t advice? So they must have done something right!

Also last thing promise! You keep saying that dunston gets some service from this forum, could you link me? I have yet to find someone that has gone to see dunstonh in rl, am quite interest actually.