Suspicious about FA

suzybrown

My FA phoned last week and said he was coming over to review our financial status i.e our pensions. He then came over and only discussed our ISA which is a stocks ISA and told us that he is going to change it over to a Property ISA due to the volatile nature of the market. Anyone any thoughts on this. I personally think it is a way of him getting a deal for himself. Previously he recommended one pension company only to change it to another a week after we had opened the first! Any thoughts would be grateful.

ReportInvestor

I'd personally like to have both stocks/shares and commercial property in my overall investment portfolio (pensions & other investments together). Is that the overall effect of the change he is suggesting? If so, he is helping to spread risk.

I know what you're saying, but I suppose that if the IFA just let your portfolio run & run, without making changes and drawing 0.5% annual commission (if he does that), then we'd probably criticise him for taking money for no effort / input .

One thing I do for myself is to create spreadsheet that tells me the % of my investments in cash/shares/property/bonds so that I can readjust if one sector (e.g. shares to April 2006) outperforms the rest and threatens to overbalance the portfolio or create additional risk where it was not intended.

Chrismaths

How much is he charging you for his advice? (including commission!) If it's a straight switch, there's no reason he should be charging more than 1.5%. If he's charging you a full 3%, then it's likely he's churning.

Xbigman

As a layman I would be suspicious of your FA's latest advice. Bail out of the stock market after a downward correction, then get into property before a possible (but overdue) downward correction. Is he giving a reason?
Regards



X

dunstonh

Damned if you do, damned if you dont.

There are some areas to be aware of here.
1 - if the adviser is taking a new commission for the switch, then you have to be notified of that commission before the switch. Many advisers do switches for free but there are some that will charge for it.
2 - Is your whole portfolio being switched or just some of it? Some of it, then its a good move. All of it, then its not a good move as you are sticking all your eggs in one basket. That said, as an individual sector, its more cautious than the UK All companies sector. If your risk has gone down, then it could be a good move.

I arrange switches and rebalances periodically and you should expect your IFA to do the same. It shows that they are following your investment. However, that system can be abused by low skilled advisers to get some money out of you. If you were told that a fund you have has lost it's fund manager and the new one has no known track record so a switch to an alternative fund(s) is worth it, then that is fair enough. As long as the reason is justifiable, then its fine.

As a layman I would be suspicious of your FA's latest advice. Bail out of the stock market after a downward correction, then get into property before a possible (but overdue) downward correction. Is he giving a reason?

Do not mistake commercial property funds with residential property.

suzybrown

Thanks to everyone for their comments. It is about 12k in stocks and shares. However, my husband and I already have a property pension for which we pay £1100 per month! He wants to put all the £12k into a property pension. I am a bit dubious as he was a bit vague and said he would get back to us on it (not done this yet). He is no charging commission to us but I think he gets commission from the relevant companies as he got £10.5k when we opened up our pension!

nrsql

He wants to close your 12k share isa and pay the proceeds into your property pension?

He may have a reason but that sounds very dubious - especially if that is the bulk of your savings.

Chrismaths

I didn't realise he wanted to put it in your pension. He's most likely doing this for commission. The best thing you could do is to repension, as he will be making fortunes out of your regular contributions - if you cut this out you will make more in the long run. It is irrelevant whether you pay the commission or whether the companies pay the commission - you will pay either way. Which would you prefer - paying £30 on a £1000 investment, or buying an investment for £1000 that is immediately worth £970? You are still paying for it. Get a new model advisor. Give dunstonh a PM.

dunstonh

He doesnt need to pay it into your pension and given the post 6th April 2006 rules ("A" day), pensions have almost been shoved right down the list of best products for most basic rate taxpayers. ISAs replacing them big time.

Whilst there could be valid reasons (always looking for the possible positives ), I find it hard to see a benefit unless you are higher rate taxpayers. The only pensions I do nowadays are switching old crap plans into better ones and where someone requires the tie in of the pension because they cannot trust themselves with the accessibility of the alternatives.

Get a new model advisor. Give dunstonh a PM.

Thanks CM.

If the original commission was over 10k, then you would benefit enourmously from an NMA. You would probably have found around £9000 of that commission, would not have been taken by an NMA. That would either result in your investments being 9k higher (plus growth) or the annual charges being lower.

It has been reported that the FSA want to investigate all commissions over £10,000 with a view to them breaching the TCF rules. Whilst you may not see the commissions directly on some products, you are paying them in the charges over time. There are no transactions that an IFA does which deserves being paid over £10k for.

Its time for you to seek out a new adviser and get a new model adviser if you can.

suzybrown

Sorry really green about the ears on this but where would I find a new model adviser. Also we have a Company Pension of which both my husband and I are Directors. We pay over £500 a month each. Does anyone think that we should not be doing this. I was a bit dubious as we are both on the same scheme and would like to spread the risk a bit.

Thanks

EdInvestor

What is a 'property pension' exactly?