How much is an IFA worth?

EdInvestor

-£67 an hour say the customers

-£170 an hour say the IFAs

http://www.ifaonline.co.uk/ifaonline/news/1558369/independent-advice-worth-gbp67-hour-consumers


That's quite a big gap.:eek:

purch

£67 an hour say the customers

Have you missed out the decimal point ??? :eek:;)

MiloH

I have a client who is a financial adviser for a High Street Bank. The value of their remuneration package (incl car, bonus, pension, PMI etc) is about £55,000 per year.

The costs of providing advice are heavy (compliance, litigation insurance, levies for the FSA, staff, premises, technology, training, on-going competence etc) and a fairly typical arrangement for a large financial advice business is that for every £100 of income generated for the firm about £30 goes towards the adviser's remuneration. That means this adviser generates around £180,000 of income for the company.

Advisers have to undertake training and competence and do other admin work not related to client work. If we assume the adviser works for clients on average 5 hours a day for 45 weeks a year (bank holidays + holidays) then that's 1,125 hours of client work per year.

£180,000 of income over 1,125 hours = £160 per hour. That's my estimate of what a High Street Bank financial adviser is costing their clients, just through commission rather than fees.


My cat got run over last week and broke his leg. The vet's fee for the surgery was £500 per hour. Using the example in the thread linked to above, my barber gives me a short back and sides which takes him 10 minutes and costs me £10 (£60 per hour). I can't help feeling that £170 per hour from a qualified, authorised, regulated, experienced adviser, in a firm with good quality support staff delivering an efficient service, who is responsible for your life savings (and who you can sue if the advice is wrong) fits about right between those two examples.

Ultimately you have to get value for money from the advice or that adviser won't stay in business. And that's the crux. However you're paying for your advice, you need to know and understand the costs before you commit and you need to understand why that amount represents value for money. Although the costs of advice are typically set by calculating the cost of providing it rather than based on the value to the client, the client has to recognise value for money. A good IFA will make sure that the work they provide is good value and proportionate to your circumstances so that it's easy for you to see the value.

As an example, I spent three hours this morning analysing a client's pensions and their options on divorce which has led to a recommendation that I calculate will save the client approaching £5,000. I think most people would see £500 spent to make £5,000 as money well spent.