Is my IFA cheating me?

Chrismaths

But seeing as this is MSE, conversely if you can get the same quality of advice for cheaper, then you probably want that.

This is an important point. The most appropriate tax wrapper for a client might be (say) an investment bond. But if the adviser is taking out 6% commission, that can often outweigh any tax benefits. It's a complex situation, even for those of us who in the trade.

OT rant: The UK tax system must be the most complicated in the world - the amount of tax wrappers still in play is absurd - no wonder people get confused, leaving the way open for unscrupulous people. For example, you can use: ISA (maxi and mini), PEP, UT, OEIC, SICAV (UCITS or non-UCITS?), Investment Trust, SIPP, Personal Pension, GPPP, SSAS, Investment Bond, Offshore Investment Bond (capital redemption or lives assured?), Discretionary Trust, A&M Trust, IIP Trust, Bare Trust etc....

The whole system needs chucking out and starting again: My suggestion would be a lifetime savings account - you can pay into it gross (like a pension currently), the investment growth and income is not taxed in the account, but you pay income tax on any amounts withdrawn. Combine that with a flat tax, and you've just saved the country fortunes in admin costs at the HMRC.

Tiggs_2

Chrismaths wrote:

This is an important point. The most appropriate tax wrapper for a client might be (say) an investment bond. But if the adviser is taking out 6% commission, that can often outweigh any tax benefits. It's a complex situation, even for those of us who in the trade.

Of course there are then advisers that will take their 6% commision from the provider and then give a superb level of service which is not always possible to measure in pure investments performance terms alone. As you say, this is MSE so the slant is different but in the "normal" world many people are happy to pay extra for a level of service beyond the norm. For example, when i get my car serviced i pay more than if i went to small independant garage....i doubt the mechanic is any different but i get coffee and a nicer place to visit with the BMW garage.

This isnt to suggest MSE folk should trade savings for levels of service of dubious value....but it does explain why large numbers of the public will support a company that gives them great service even if it cost more - and while that continues the market for it will live on.

Of course....added confusion for the cleint is that great service can mask all sorts of nonsense....i am very lucky in that i have a small number of clients who all do large investements thus allowing me to spend a lot of time on "fluffy" service stuff far beyond the norm but it keeps them happy. Behind the scenes i work damm hard to ensure my advice is also top notch but i know for a fact i could let that side fall away and most clients wouldnt realise as long as the service levels stayed high.
always going to be a problem in an industry that most people join to earn big money ahead of anything else....finding the ones that then add "client care" to their intentions as well is hard work!

Scully's_Girl

I concur. While I got where I am now by being very careful with my money, I am not opposed to spending more to receive better service. I pay someone to maintain my garden because I'm pretty rubbish at it. With money I am just ok. I work in corporate finance (which has vastly differing principles to personal finance, when you get down to it) so all I know from Personal Finance I learned from the School of Hard Knocks (and you fine people)
I will look further into. I'll check out unbiased.co.uk again & see if I can find anyone reliable somewhere in the London area (near the Bank of England or surrounding environs *hint hint*)

Chrismaths

The point about service is well made. As investment managers, we charge 1% on the first £500,000 - we provide a discretionary management service which has higher costs and higher level of service.

However, I think it is best to stick with IFAs who get paid more on an ongoing basis than on a sales basis - it's just common sense that if you have a revenue stream going on into perpetuity, you a) want to make sure that that client stays with you, so you provide good ongoing service, and b) you want the client's assets to increase in value so that your revenue stream increases in value.

It's just aligning your interests with your client's interests.