How to check out a IFA

jack_douglas7

What is the best way to make sure my IFA is OK and reputable ??

dunstonh

jack_douglas7 wrote: »

What is the best way to make sure my IFA is OK and reputable ??

Make sure they really are an IFA (surveys have found that over half of those seeing FAs actually thought they were seeing IFAs). Aim to see owner, partner, directors of firms as they tend to be there for the long term whereas employees tend to come and go (or perhaps ask how long an IFA has been with the firm).

Statistically, IFAs account for the majority of regulated transactions but have under 2% of complaints. So, the odds of getting a bad one are unlikely. Not impossible as there are always the odd bad apple. However, things are much better today than they were 10 years ago.

Another thing is to ask what the adviser will be doing post retail distribution review (2012). If they are not sitting the qualifications and winding down then it may be better to look at one that is going to be there post 2012.

Rollinghome

jack_douglas7 wrote: »

What is the best way to make sure my IFA is OK and reputable ??

It really depends on what you mean by "OK and reputable" and what you expect from them.

It's important to understand that the majority of IFAs are from direct sales backgrounds and are paid by the product providers to sell their products. See www.moneyweek.com/personal-finance/need-unbiased-advice-youll-be-lucky.aspx

One way is to get recommendations from friends. A problem with that is that often people aren't very good at judging the quality of advice and service they've had especially if they've only ever used one IFA. Many aren't aware of just how much they've paid by way of commission or what they should have got for that money.

Some expect too much. Many IFAs will have only very basic qualifications (which the FSA want improved under the RDR to be implemented by 2013) so shouldn't be expected to be able to tell you which way markets are going for example. They may not want to tell you anyway if they think markets are heading down and it would lose them a sale.

It may help if the IFA has some specialisation in investment rather than just general experience in everything including insurance and mortgages. They should be able to avoid the very worst investments but whether they will if they offer top commission is another question.

You should be able to overcome the perennial problem of 'commission bias' by using someone who is fee-based only. But beware that many sell themselves as "fee-based" only to switch-sell a hybrid arrangement that's no different to commission.

The only real way to judge is to shop around and gather some understanding of investment yourself. After all, you wouldn't just rely on what a single salesman tells you when buying a new car.

A few books could be a good investment: Be Your Own Financial Adviser - Financial Times series £9.99, new April 2010 edition, covers all financial planning. It includes a bit on how to find an IFA if you need one and how to avoid the dodgier ones. http://www.amazon.co.uk/exec/obidos/ASIN/0273727796

(PS. I read your post as meaning you were looking for an adviser. If you mean an adviser you're already using then you'd need to look at what he's sold you and what it's cost you in charges and commission payments.)

Linton

Rollinghome wrote: »

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Many IFAs will have only very basic qualifications (which the FSA want inproved under the RDR to be implemented by 2013) so shouldn't be expected to be able to tell you which way markets are going for example. They may not want to tell you anyway if they think markets are heading down and it loses them a sale.

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And someone with more qualifications can tell you which way the markets are going??????

If the OP is checking up on his existing IFA, I would suggest that a good criterion is that the IFA is interested in the customer's circumstances and why he/she wants to invest and therefore what sort of investments are appropriate. Look upon an IFA as someone to help you get your strategy right, not someone with "tips".

With that as a starting point and a long term view of investing, IMHO it is rather unlikely that you will be sold something inappropriate purely because it benefits the IFA.

Rollinghome

Linton wrote: »

And someone with more qualifications can tell you which way the markets are going??????

Strange though it may sound to you, there are highly paid people employed in the investment industry to judge which way markets will move, both for individual shares and markets generally. Their level of success may vary.

No one should expect a mere IFA to have that expertise as many investors do - possibly the result of advisers trying to give exactly that impression. The essential skill of an IFA is to sell investments.

Linton wrote: »

With that as a starting point and a long term view of investing, IMHO it is rather unlikely that you will be sold something inappropriate purely because it benefits the IFA.

Your guess is as good as anyone's why many sold the now collapsed supposedly low-risk Arch Cru funds that paid double the usual commission but looked iffy from the start. http://news.bbc.co.uk/1/hi/programmes/moneybox/8501831.stm

feesarefare

dunstonh wrote: »

Another thing is to ask what the adviser will be doing post retail distribution review (2012). If they are not sitting the qualifications and winding down then it may be better to look at one that is going to be there post 2012.

Thats an excellent point- I know of many IFAs that dont intend to carry on post 2012, therefore no real incentive for these advisers to develop long term relationships.

Just out of interest what are your plans for post 2012 Dunstonh?

Rollinghome

feesarefare wrote: »

Thats an excellent point- I know of many IFAs that dont intend to carry on post 2012, therefore no real incentive for these advisers to develop long term relationships.

Just out of interest what are your plans for post 2012 Dunstonh?

It's interesting how many of the old-time salesmen, after fighting for years against the ending of that tasty commission, seem to have belatedly come round to your point of view now that the writing is on the wall - the RDR.

I hope it's genuine. One of the things I'd be looking for in advance of the implementaion of the RDR is a straightforward fee structure made known in advance - as I believe you have.

feesarefare

Rollinghome wrote: »

One of the things I'd be looking for in advance of the implementaion of the RDR is a straightforward fee structure made known in advance - as I believe you have.

Rollinghome fyi, I was recently at a meeting in Birmingham where the other eleven firms attending have already adopted the post RDR regime with straightfoward fee structures and none of this nonsense of "fees" being a % of the amount invested.

As you have highlighted you dont have to wait until 2013 to reap the benefits of the RDR.

Rollinghome

feesarefare wrote: »

Rollinghome fyi, I was recently at a meeting in Birmingham where the other eleven firms attending have already adopted the post RDR regime with straightfoward fee structures and none of this nonsense of "fees" being a % of the amount invested.

As you have highlighted you dont have to wait until 2013 to reap the benefits of the RDR.

I'm hoping it will be a big step forward but I expect many of the former salesmen who came into the industry as IFAs will rant against it to the end. Their main skill is selling so understandably don't look forward to the time when there'll be greater emphasis on the quality of their advice. Should be a great opportunity for people like yourself.

Would be interested like you in what Dunstonh will be doing post RDR. Seems like quite a few will be moving on when commission based selling ends.

dunstonh

Would be interested like you in what Dunstonh will be doing post RDR.

Exactly the same as I am now.

div_ad

feesarefare wrote: »

Rollinghome fyi, I was recently at a meeting in Birmingham where the other eleven firms attending have already adopted the post RDR regime with straightfoward fee structures and none of this nonsense of "fees" being a % of the amount invested.

Feesarefare I'd love to have a list of the12 firms who attended (I'm Birmingham based) becayse I just cannot find an advisor who wants to do other than work on a percentage basis (typically 1 to 1.5% up front and .5% per anum). As someone says they will do a hybrid deal about how that ios paid.