Role of IFAs in pensions

dunstonh

Layo909 wrote: »

I went to see the bank about a mortgage on the weekend. To work out the house price we could afford, they took details such as salary, age, credit check, any loans, any children etc etc. Then within minutes gave us the max house price we could afford.

I thought an IFA would do the same, assess my circumstances, then come back to me with the ideal pension which he chose using his expertise. However, this doesn't seem to be how it works, so I'm now seriously considering side stepping the IFA altogether.

Bizarrely,mortgages are much lower regulated and in effect you get less consumer protection. Although they are also a much easier product to understand and has less variables and unknowns.

As I have already said, if you don't want the best options and want something simple then all you had to do was tell the IFA that. He could then eliminate all the more advanced options that require a greater understanding (of concept, not specific detail) and put you in a simple pension with simple investment options. I don't want to sound rude but your posts suggest that the IFA is probably better off not dealing with you as you don't appear to want to understand and just want to be able to put a complaint in years later blaming the fact you didnt understand.

Layo909

dunstonh wrote: »

Bizarrely,mortgages are much lower regulated and in effect you get less consumer protection. Although they are also a much easier product to understand and has less variables and unknowns.

As I have already said, if you don't want the best options and want something simple then all you had to do was tell the IFA that. He could then eliminate all the more advanced options that require a greater understanding (of concept, not specific detail) and put you in a simple pension with simple investment options. I don't want to sound rude but your posts suggest that the IFA is probably better off not dealing with you as you don't appear to want to understand and just want to be able to put a complaint in years later blaming the fact you didnt understand.

I'm fine with getting a more advanced pension, but if I'm paying an IFA a lot of money, then surely I don't need to understand. If I need to understand (which appears to be the case), why use an IFA?

jem16

Layo909 wrote: »

I'm fine with getting a more advanced pension, but if I'm paying an IFA a lot of money, then surely I don't need to understand. If I need to understand (which appears to be the case), why use an IFA?

You mentioned in your first post that using an IFA would mean that you could complain if things went wrong. Could you clarify what you mean by this? When would you feel things went wrong? Would it be when your pension fund went down or hadn't made as much as you were told it would or what?

Layo909

jem16 wrote: »

You mentioned in your first post that using an IFA would mean that you could complain if things went wrong. Could you clarify what you mean by this? When would you feel things went wrong? Would it be when your pension fund went down or hadn't made as much as you were told it would or what?

I thought the role of an IFA was to recommend a pension based on my circumstances, therefore if he's recommended a pension, he should get blame if it goes wrong.

jem16

Layo909 wrote: »

I thought the role of an IFA was to recommend a pension based on my circumstances, therefore if he's recommended a pension, he should get blame if it goes wrong.

You haven't answered my question.

What does "goes wrong" mean for you?

Layo909

jem16 wrote: »

You haven't answered my question.

What does "goes wrong" mean for you?

If I don't have a financially comfortable retirement

dunstonh

I'm fine with getting a more advanced pension, but if I'm paying an IFA a lot of money, then surely I don't need to understand. If I need to understand (which appears to be the case), why use an IFA?

You dont have to understand the mechanics of how it works but you have to understand the basics and concept.

It is a regulatory requirement that the recommendation from the adviser fits your ability to understand. Effectively, the adviser has to dumb down the recommendation to those that cant or wont understand it.

What if he builds the perfect portfolio with a decent provider and along comes a market crash and it loses 40%. Do you have the knowledge and undertanding to accept that will happen from time to time or will it panic you? If you complain, would you then say that the adviser didnt tell you it could do that?

To comply with FSA rule RU64, the adviser is required to show that the alternative is more suitable to you than a stakeholder pension. If he cant get you to understand why its better, then he is leaving himself way open to a redress payment if you later complain.

Jem's question on what you perceive to be "wrong" is pertinent.

Also, would you have been employing the adviser on a servicing agreement or a transactional one? (transactional = one off or ad hoc).

jem16

Layo909 wrote: »

If I don't have a financially comfortable retirement

What does that equate to? £10kpa, £20kpa, £30kpa or what?

Unfortunately, although your IFA would love to do so, performance is not guaranteed. There are so many factors involved such as attitude to risk - as dunstonh asks, what would you do if you saw your pension fund drop by 40%, will you or the IFA be monitoring the pension over the 40 years or so or will you just be setting it up and forgetting it?

These are the kind of questions I suspect your IFA is trying to get from you.

sandsy

Irrespective of the advice you receive, it's just commonsense for consumers to take some responsiblity for their own financial future.
Over the life of a pension, you'll be sent statements telling you how it is doing, what your future retirement income may amount to etc.
It at least makes sense to familiarise yourself with some of the terminology so that you can get something useful out of the info you get sent.

A pension is likely to be the seocnd most valuable asset you ever own (after your house) - why wouldn't you want to take an interest in it, at least to some extent?

Layo909

So to finish off, would somebody mind summarising exactly what an IFA is expected to do (in terms of pensions advice)? What should I expect to receive in return for the money I pay?