IFA Advice

Rollinghome

div_ad wrote: »

I have been posting my trials and tribulations in other posts but I'm trying to find this out too.

They will either charge a fee or commission.

From my experience they will mainly want to do it on commission.

My experience has been similar. One I saw was clearly determined to work on a commission basis even though it was a seven figure sum involved. Worse still, it became immediately obvious he was totally clueless about any investment that didn't pay him commission. Interesting but a waste of time.

If you want fee-based advice to avoid commission bias then the only way is to use someone who only works on a proper fee basis - i.e. charging by the hour or by transaction. Avoid all those with the salesman mentality who love to sell investments on commission. Let's hope it's better when the FSA reforms to ban commission and the old ways arrive.

div_ad

Following on from my earlier comments here (and comments on other postings which Dunstonh has kindly and helpfully replied to) I want to use the example of what has happened to me today.

I have been advised by Lloyds to take out an AXA distribution bond with my cash. Now leaving aside the issue of the whether this is good or bad advice (safe and stodgy is my thought), independent or not, I have had two one hour chats with the adviser,and he has given me a cut and paste letter and two leaflets. To close the deal might take another half hour and a further letter. Because of the nature of the product, though I also get an ongoing support, there is no flexibility to move units around, and it would be madness to do anything for the first five years so not much support would be needed.

The payment to Lloyds from AXA is £17,000. Yes seventeen thousand pounds.

There is no way on gods earth that I have received a service that comes even close to justifying that money!

I know I am preaching to the converted but....

jem16

feesarefare wrote: »

All good genuine fee based advisers would always give an estimate with the proviso that the client would be informed if for some unforeseen circumstances that the figure might be breached.

All advisers (fee based or not) know how long on average a piece of work will take so to estimate isnt difficult. I always build in a margin then the clients get a pleasant surprise when the bill is less than expected.

Is it not possible to agree an actual fee beforehand?

IMHO most people want to know exactly what they will pay for a service whether it be car servicing, boiler servicing or financial services. It's fear of the unknown that puts most people off fee-based advisers and send them into the hands of banks.

Hope this helps?

Yes thank you.

jem16

div_ad wrote: »

though I also get an ongoing support, there is no flexibility to move units around, and it would be madness to do anything for the first five years so not much support would be needed.

Assuming the AXA distribution fund is part of its investment bond why is there no flexiblilty to change funds in the first five years?

The payment to Lloyds from AXA is £17,000. Yes seventeen thousand pounds.

Here being the reason to avoid banks for investments.

See an IFA, agree a fee and have that £17k paid into the investment bond as an increased initial allocation thus reducing charges over the first 5 years.

dunstonh

Because of the nature of the product, though I also get an ongoing support, there is no flexibility to move units around, and it would be madness to do anything for the first five years so not much support would be needed.

As Jem says, the AXA investment bond has multiple funds available within it and the ability to switch at no charge between them.

The payment to Lloyds from AXA is £17,000. Yes seventeen thousand pounds.

Disgraceful isnt it. Hence why fee basis will be better. Not just a little better but a lot better. Also note that the illustration should show the cost of ongoing remuneration which is then used to pay for ongoing servicing. If there is no ongoing remuneration, how are they going to pay for future servicing? Instead it sounds like they are indemnifying around 4 years of trail commission to take it up front. Not ideal.

Also, one assumes that it wasnt all going into that single bond was it? You have the 2009/10 ISA allowance and just a couple of weeks away from the 2010/11 ISA allowance. So, there is money available there which should be allocated. If they havent considered and recommended ISAs (assuming you have the allowance available) then its a potential mis-sale as ISAs should be up number 1 in the pecking order. It may also be worth holding some in unit trusts rather than bond to allow bed&ISA over the next few years (depends on your situation). Hopefully they did a cost/tax comparison between bond and unit trust (I bet not).

feesarefare

div_ad wrote: »

The payment to Lloyds from AXA is £17,000. Yes seventeen thousand pounds.


I know I am preaching to the converted but....

With an hourly rate fee IFA you would be about £15,500 better off or to put it another way , a decent family car or a super holiday......

But as pointed out earlier in the thread

Thats mostly consumer driven though. Most consumers prefer commission

.:eek:

feesarefare

jem16 wrote: »

Is it not possible to agree an actual fee beforehand?



By quoting a maximum thats kind of what I meant.

jem16

feesarefare wrote: »

By quoting a maximum thats kind of what I meant.

OK - fair enough.

feesarefare

this might be of interest to those who deal with an IFA/plan to in the near future
http://www.fsa.gov.uk/pubs/plan/sdg_ri.pdf