Is my IFA cheating me?

Scully's_Girl

Last July my husband & I hired an IFA to help us manage our finances. We paid him a fee of £500 for his services. He immediately recommended we move OH pension (it was legitimately a non-performer, I agreed there) and were slammed with a stiff penalty. The IFA insisted I start a letter writing campagne with the pension lender, and after hundreds of letters we finally went to the FOS, where we lost the case. What a waste of time and postage.
Meantime, when I checked my statements for the investments we did open up due to his recommendations, I realised he was paid pretty large sums by the firms for recommending us. Those commissions were never shared with us. Can there be an advisor who is both fee and commission? I never heard of that.

In addition, because we were his youngest clients (both in our 30s) he put pressure on us to recommend our friends to him. I did at first, recommend a few that were less than impressed by his lack of follow up. At no time were we compensated in any way for our referrals. He kept asking each time I spoke to him, so I stopped referring people.

I must admit I am decidedly uncomfortable with this. I will call the FSA tommorrow (he is regulated) & see if they have any advise. I want to trust an IFA, and I know there are good ones out there, but do we just look young and naive? I just dont know. We really dont know any others who use IFAs, so I cant go to anyone for their recommendations.

Chrismaths

When you go to an IFA, he should give you a 'menu' that outlines whether he charges a fee, a commission, or a combination. Commissions should have been disclosed in any paperwork he gave you - a 'Key Features Document'. Check your paperwork to see if you he sent you these documents. If he didn't send them to you, you have a claim against him. If he did, I'm afraid it's a case of reading the small print. The FSA are unlikely to be able to help you.

Deemy

Thats why I say, educate yourself, its not hard ! Don't be lazy by going to the middle man that invariably only looks after himself and then when the !!!! hits the fan its too late ! You have been screwed !

dunstonh

Those commissions were never shared with us.

So you are saying that no illustration was given to you at point of sale (or earlier)?
Was it a SIPP rather than personal/stakeholder pension? No disclosure is required on SIPPs.

Can there be an advisor who is both fee and commission? I never heard of that.

Of course there is. Every IFA can make that choice.

I must admit I am decidedly uncomfortable with this. I will call the FSA tommorrow (he is regulated) & see if they have any advise.

Can you clarify what you think he has done wrong?

A difference of personality or not providing ongoing advice or service are not grounds for complaint.

When you go to an IFA, he should give you a 'menu' that outlines whether he charges a fee, a commission, or a combination.

All that on investment class business may not have been in place at the point of the first visit.

You have been screwed !

I'm sorry but I see nothing on this thread that suggests the OP has been screwed. There is clearly a difference in personality and approach which is easily resolved by going to a different IFA with a personality that matches your own. However, the advice sounds good (out of bad pension into good). We know not what the commissions/charges are (how many times on here have we seen seen people mix up commission and charges on the assumption that they are the same thing?)

There could be issues or it could be a misunderstanding but its far too strong to say that they have been screwed without knowing the facts.

defender_of_the_weak

So we moved the pension got hit with a large penalty and then the IFA says write to the provider. Should not the client have been made aware of this penalty before shifting the fund, probably, this is not a clash of personality it is poor advice.

Out of bad pension into good in isolation sounds fine but how long will take for the client to recover the penalty incurred by the depated fund?

Are the investments any good?

Scully's_Girl

You know, Ill be honest, we moved the pension from Abbey Life to Legal & General & its doing pretty good. I am happy we moved it ultimately because Abbey Life hadnt made a cent.
My husband had taken out the pension with Abbey Life like 12 years ago, so he had no recollection of a penalty. I did ask Abbey Life for a factfind & the original contract prior to moving, but I must admit the documentation was very unclear; even now I cannot find any justification of such a high penalty. But they, and the FOS, seem to think its all over the docs, but no one will point it out to me no matter how much I ask.
I went through my IFA's original docs last night as well. They are also moderately unclear. It states you can choose fee or commission, but doesnt really list both, however, his fee is considerably more than the £500 we paid (its £100-200 an hour, & he's spend more time with us on that)
I think in the end Im disenchanted with his follow up. He doesnt contact me when I ask him to, he's difficult to reach, that sort of thing. I just get this sneaky suspicion he is discriminating against me because of our age. He might think since we're young we won't know any better. I know thats horrible to say, & please, no offense to you IFA's on the boards, your input is great! I just feel my IFA isnt giving that little bit of his time I believe we paid for.

dunstonh

You know, Ill be honest, we moved the pension from Abbey Life to Legal & General & its doing pretty good. I am happy we moved it ultimately because Abbey Life hadnt made a cent.

Neither Legal & General's personal pension or stakeholder pension charge any initial fees and only suffer the usual annual management charge. I have done bucket loads of transfers over the last 3 years and Abbey Life pensions are usually very expensive and L&G are one of the cheapest.

The minimum required would have been an illustration from L&G using the transfer value compared against Abbey Life projections using the same rates. L&G also have TVAS software available for transfers and the results of that are not required to be given to you but held on file.

I went through my IFA's original docs last night as well. They are also moderately unclear. It states you can choose fee or commission, but doesnt really list both, however, his fee is considerably more than the £500 we paid (its £100-200 an hour, & he's spend more time with us on that)

I believe you are mixing up annual managment charges with commission. L&G do not show commission on their statements but do show amc. The amc is not paid to the advisor.

I think in the end Im disenchanted with his follow up. He doesnt contact me when I ask him to, he's difficult to reach, that sort of thing. I just get this sneaky suspicion he is discriminating against me because of our age. He might think since we're young we won't know any better.

Personality of an individual is something you cannot regulate and if you dont feel comfortable with that, then fair enough. However, if he has chosen L&G, it is clear that he hasnt been ripping you off. L&G are one of the cheapest providers out there. You have gone from an expensive Abbey Life contract (I have transferred around 10 of those in the last 2 years so have a fair idea of the pricing) to a cheap L&G contract.

I know thats horrible to say, & please, no offense to you IFA's on the boards, your input is great! I just feel my IFA isnt giving that little bit of his time I believe we paid for.

Apart from personality issues and poor communication, I cannot see anything wrong with the product recommendation based on what you have said so far. The choice of provider is certainly not one that you would use if you did want to rip someone off with commission. (L&G also pay fairly low commissions and if the transfer fund value was below 10k, they pay no commission at all).

Scully's_Girl

dunstonh, I cant put a pricetag on the peace of mind you've given me, thank you so much.
You've clarified this for me perfectly. I am happy that you've confirmed that one of the products he chose were based on performance, & not on commission.
He also set us up with Sterling shares ISA's. My husband & I each pay £583.33 into the ISA. I know Sterling paid him a commission, but is it a company you would recommend as well? I haven't lost any money on it yet, &, except for not being able to see my balance online, which is ideal for me, I am quite happy with the company.

Chrismaths

I'm very familiar with this product as I contacted the New Model Advisor (trade rag) about it, which was subsequently picked up and mangled by the Telegraph (hence why I wasn't quoted in that article).

There is a 24% indemnity commission on this product, in addition to high Fund based ongoing charges ([STRIKE]I seem to remember Aberdeen Asia pacific costing around 3% pa![/STRIKE]). If the IFA has not rebated the commission to you on this product, then you are most certainly being ripped off.


Edit - It wasn't Aberdeen, it was First State Global Opps, that had 1.5% AMC + 0.5% Sterling charge + additional 0.5% charge (that is charged on 'selected funds'???)

Speculator

is this the article ?

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/03/08/cmnifa08.xml

Chrismaths

A shortened version. There was a longer version inside the paper. I had a corresponence with the John Greenwood at the time. I'll post here when I get a second.