Is my IFA cheating me?

Tiggs_2

I dont have the details in front of me but other areas of importantce where things like locality of firm, relationship with adviser, simplicity of advice, etc, etc

In summary people in general (and dont forget this board is NOT normal folk ) arent too fussed about the status of the adviser and arent too fussed about how he's paid. They want to understand the advice, like the person they are dealing with and knwow they can reach them when they want now and in the future.
Actually this infomation is nothing new to anyone in the industry but its still interesting to see a load of clients all say the same thing at once.

and any doubt about it....just look at the figures, most people still dont visit IFAs, many advisers are still making money on upfront commision and places like St James Place (multi tied) are making the IFA networks look a bit of a joke when it comes to productivity, profits, share price, etc, etc.

I have NO doubt that a NMA is an ideal high ground to aspire to within this trade.....but its a high ground in the eyes of the industry and those in the know - its not in the eyes of "the public" and they are my clients.

dunstonh

and any doubt about it....just look at the figures, most people still dont visit IFAs, many advisers are still making money on upfront commision and places like St James Place (multi tied) are making the IFA networks look a bit of a joke when it comes to productivity, profits, share price, etc, etc.

I bet if you sampled those clients using the multi-tied or tied the majority would tell you that they thought the adviser they saw was independent.

In summary people in general (and dont forget this board is NOT normal folk ) arent too fussed about the status of the adviser and arent too fussed about how he's paid.

I agree on the part about being paid but I find it is the IFA bit to begin with that makes them contact me.

They want to understand the advice, like the person they are dealing with and knwow they can reach them when they want now and in the future.

Yes. That would come up as important and I would expect that if you have existing relationships and then when tied, many of your clients would follow you without any concerns. However, what of new business?

I have NO doubt that a NMA is an ideal high ground to aspire to within this trade.....but its a high ground in the eyes of the industry and those in the know - its not in the eyes of "the public" and they are my clients.

NMA works. I have never been busier and I have earned more in the last 3 years on NMA terms than I have in any previous years on old model basis. It's a leap to begin with and often you have to be both new model and old model at the same time until you get there. NMA doesnt get advertised though and the majority of clients phoning up are doing so because of IFA promotions or yellow pages. Not because of NMA. NMA does give you good referrals though without asking. Those are are certainly on the increase.

I guess it really comes down to what sort of business you focus on as an IFA as to how important IFA status is to you and your clients.

Tiggs_2

dunstonh wrote:

I bet if you sampled those clients using the multi-tied or tied the majority would tell you that they thought the adviser they saw was independent.

no doubt, as the recent national survey showed - but i belive that says a lot about the lack of care the clients have at the inital stage. It may be easy to brush over status and end up with a client who isnt sure what you are (and when asked may assume IFA) but its NOT easy for a client who WANTS an IFA to end up with one that isnt.

dunstonh wrote:

I agree on the part about being paid but I find it is the IFA bit to begin with that makes them contact me.

I suppose that comes down to how you source clients, all of mine come to me from IHT seminars/workshops or IHT related news articles i write.....so their priority is that i am a local specalist. The numbers attending seminars are the same as an IFA as they were years ago when i was tied (in fact the numbers are only just back to where they were pre-market collapse)

dunstonh wrote:

Yes. That would come up as important and I would expect that if you have existing relationships and then when tied, many of your clients would follow you without any concerns. However, what of new business?.

agree, but as above- my clients seek me out because of my field not my status.

dunstonh wrote:

I guess it really comes down to what sort of business you focus on as an IFA as to how important IFA status is to you and your clients.

5 years ago (as a tied adviser) it was vital for ME even though no clients ever spoke about it, i just felt it was the right way to go. Now i have got there i realise that its not as important to the way i run my business as i thought.

My business is 99% IHT investment based so is perhaps not the best example of an ideal general practice IFA anyway.

Scully's_Girl

Ok, lets get back down to the nitty gritty. How does someone like me find a "good" rather than "bad" IFA? I didn't really start questioning my IFA at all until I realised he had an enormous incentive to invest me in a certain product.

I am someone who knows alot about personal finance. My husband and I have maxed out our shares ISAs (as you all know because Sterling was what caused this thing) but even so, we've maxed that out, we have sufficient savings, good jobs. House paid off. Both contribute the max to our pensions (mine is a USbased 401k, his is a Prudential plan with work). However, last summer I felt I had come to the very edge of my knowledge and decided an IFA could take us even further. I thought he was a great guy. He seemed fair and seemed to care about us.

So my question is, how can you tell who is good and who isn't? I'm more than happy to give a good, decent IFA a chance, and my money, but I dont want to get burned again.

dunstonh

Best way to tell if an IFA is any good or not is look at the recommendation and ask to see the research. Single fund solutions are rarely the best option so if you get an investment recommendation and its all in one investment fund, walk away. Look at the quality of the research and see if it is thorough. You may not understand the research but you would be able to tell if time has been spent on it.

Throw a few technical questions in that you know the answer to. Judge the results.

Avoid salesforces and large local/regional firms with lots of IFAs. Try and get the owner/partner/director of the firm to see you. Owner/Partners have a lifetime of liability on the advice they give and directors, though not personally liable, it would hit their profits. Employed advisers of self employed attached to firms do not have personal financial liability. It's surprising how much better a job people will do if they know they will be hit from their own pocket if something was to go wrong.

Most IFAs will do a good job for you. However, it is a good idea to get one that specialises in the area you want to discuss. A jack of all trades is usually a master of none.

Tiggs_2

"I didn't really start questioning my IFA at all until I realised he had an enormous incentive to invest me in a certain product."

dont let that be your guiding motivation in feeling negative towards the advsier.......an adviser can be hugely rewarded for placing you into X,Y or Z and still provide you with excellent advice and a supreb level of service. Equally, some adviser can earn very little and give you grim advice and no service.

Consider the issue, but dont be guided by it alone....dunstonh makes some good points above.

Chrismaths

1) Experience of the adviser. If he is not experienced, then should be very qualified. The basic exam which almost all IFAs have is FPC, if the adviser has the AFPC, this at least demonstrates that he has more knowledge than just the basics.
2) How the adviser is remunerated. Ideal would be fee based (although offsetting commission received against fees is the best from a tax point of view). Alternatively, if the adviser takes 1% upfront + 0.5% ongoing, this incentivises the adviser to keep looking after your interests after the initial advice.
3) How you get on with the adviser. This is less important, as most good salesmen will be personable to get on with - but it is still important to have a rapport with your adviser.

dunstonh

Speaking of good points, Tiggs is right about commission.

Lets assume its not NMA basis. You could see one adviser and he gets paid £2000 for arranging the product and see another adviser and he gets paid £1200 for arranging the same one. Yet the charges to you are the same. Providers do not pay the same commission to all advisers. So, that example could see the first IFA rebate £500 of his commission and still earn more than the other. Yet if you only focused on the commission and went with the one paying £1200, you would lose out.

Another point to consider that commission declared is gross of cost and tax. My running expenses were over £70k last year. So not all of the commission goes into the advisers pocket. An awful lot goes out to cover costs.

Scully's_Girl

Yes Tiggs, I hear where you're coming from. I wasn't too concerned with his remuneration; let him have whats coming to him, but as dunstonh & Chrismaths will remember from a while ago, my IFA put my ISAs into a company that has had some negative press on these forums, and he took the most expensive option that granted him the absolute maximum return. That was when I started thinking I should look elsewhere.

Tiggs_2

Scully's_Girl wrote:

my IFA put my ISAs into a company that has had some negative press on these forums, and he took the most expensive option that granted him the absolute maximum return.

ok...pretty obvious all is not well then.

I suppose my point was that the chances are MOST people will end up dealing with someone who is very interested in making money for themselves....but that doesnt always mean they will stitch up their client! Its quite possible to get paid very well and still give advice of a high standard.