IFA Charges - Where do I stand ?

Shrimp_Stu

I was considering taking out a SIPP, as my company doesnt run a company pension scheme but contribute to a private pension. Therefore, I walked into a local IFA and arranged an appointment and spent 2 appointments discussing my options.
When I asked if some of the IFA's commission could be rebated into my scheme the IFA took offence and started telling me that he had worked 9 hours on my file (our meetings lasted approx 3.5 hours in total) and that he charged £100 per hour. I said to the IFA that I was unsure what I would do concerning my pension requirements and then today I received a letter from the IFA asking me what I intended to do and he also enclosed an invoice for £250.
This £250 is a minimum charge with relation to Professional charges. Now I am unsure if I signed something to say that I was paying for advice given but not taken. I was under the impression that the advice was free and the IFA was paid commission on any policies I executed.
Is this standard practice ? I cant find any documentation stating that I would pay £250. I will request that I receive a copy to see what I signed then post up here.
If I take out a SIPP with him will he likely waive this £250.
I dont want to pay £250 for something that I dont intend to use ?

What do others suggest ? Should I contact the FSA ? Financial Ombudsman ?
Thanks for any advice (free)
SJ

Paul_Varjak

I would suggest looking at the following:

http://www.fsa.gov.uk/consumer/02_HOW/Complain/mn_complaint.html

Check with your IFA as to what agreement had been reached on how he was to be paid. If he claims that fees had been agreed I think he would have provided you with details of those before offering any advice.

If you are sure you made no agreement that complain to the owner of the firm. It may be that he is not directly registered with the regulatory authorities but via what of those IFA networks. In which case, I think you complain to the network.

Ask your IFA for details of the complaint procedure, bearing in mind the info on website above.

If you complaint gets nowhere I think that is when you go to the FSA.

dunstonh

There is an initial disclosure document that details how you will pay for the services. This would have been given to you at the start of your meetings.

There are generally 3 levels of remuneration.

1 - commission only
2 - fees only (£100 per hour is about right. Plus on a SIPP, there probably is a couple of hours research on top of the visits. I average out 3-4 hours behind the scenes on cases)
3 - a hybrid of the above. i.e. you agree a fee and that fee may be covered by the commission or within the product. Insufficient commission will mean you make up the rest or if there is extra commission, it can be rebated into the plan or provide lower plan charges.

Whenever a fee is intended to be charged for services, the client must be provided with details of the basis of the charges and allow at least 24 hours between providing the details and undertaking any chargeable work. This is usually why the first appointment is free.

There is no regulatory requirement for a fee agreement to be issued separately to the initial disclosure document but it is recommended to assist in the case of disputes. (like this)

You need to ask for a copy of the documentation that states a fee would be charged and where is the fee agreement. Failure to supply that would really invalidate the request for you to pay.

edit: 10:24pm...

There are certain classes of business that I will deal with where i state that there will be a £250 charge (or similar) whether someone transacts the business or not. This charge will usually be waived if the product proceeds and commission is paid that covers it. Pension transfers or higher risk transactions are usually the case there. Mainly as fees are incurred by the IFA to get a transfer analysis or report completed. The IFA is charged whether you proceed or not. However, again, they should be disclosed first.

deemy2004

£100 an hour... I'm in the wrong business

Is it still the Financial Planning Certificate made up of 3 exams ?

dunstonh

deemy2004 wrote:

£100 an hour... I'm in the wrong business

Is it still the Financial Planning Certificate made up of 3 exams ?

If only it was £100 net. Ignoring premises and travel, i pay out around £2000 per month just for being an IFA.

deemy2004

dunstonh wrote:

If only it was £100 net. Ignoring premises and travel, i pay out around £2000 per month just for being an IFA.

How does it cost £2,000 a month ?
Do you employ staff ?, just seems like a lot £2k running costs, excluding premises.

Shrimp_Stu

Do you think that this is fair standard response to receiving my charge, as I dont want to annoy him if I just set up the SIPP through his office.
Thanks
SJ


"Thank you for your letter dated xx xxxxxxxxx 2005. In response to your question on my intention to set up a SIPP, I am still deciding and shall come to a decision imminently. My company is constantly enquiring what stage I am at.
In relation to the Invoice No. xxxxxx I would be grateful if you could forward onto myself a copy of the document I signed in respect of this minimum charge. I was under the impression that your renumeration was linked to my execution of the SIPP through your offices ,if I decide to transact my SIPP through yourself will this initial fee be waived due to the commission generated to yourself from my instruction.
I shall endeavour to keep you informed , as a matter of priority, of my SIPP requirements in due course."

dunstonh

Do you think that this is fair standard response to receiving my charge, as I dont want to annoy him if I just set up the SIPP through his office.
Thanks
SJ

Seems good to me. Personally, I would think twice about using him again anyway. If full disclosure of fees hasnt taken place, what else has been left out?

How does it cost £2,000 a month ?
Do you employ staff ?, just seems like a lot £2k running costs, excluding premises.

PI Cover, FSCS levy, software (research and office, analysis) amongst other running costs.

My business year ends 31st March and my current running total on my expenses in total (so everything this time) has just gone over £65k. That is £5428 a month. I am the only regulated advisor in my office but some introducers are on the books.

Regulatory costs have increased by over 600% on levels of 5 years ago and account for the third biggest outlay i have (behind introducers pay and network deductions).

This is one of the main reasons many IFA firms have shut down. The cost of business is so high. (although some IFA firms have poor business models and only have themselves to blame).

Shrimp_Stu

I dont actually want to use him but additionally I dont want to pay £250.
So if I set up a SIPP I will let my company contribute the 10% and I shall contribute about 1% of my salary. This should set up an initial starting fund of around £1900 - this should generate enough commission to cancel out this initial £250 charge ?

Also, I should ask for how much the annual charge is for them to adminster my SIPP ? (based on the figure above). What should be a reasonable cost for this? (I think he said £100).I have an old company Pension Scheme that I could switch into the SIPP (£30K) but dont know if I want to do this yet as this might earn extra commission, and alternatively after a year I might want to switch this SIPP with another IFA, although keeping the underlying SIPP provider (is this possible?).

Darryl

Why are you using an IFA to setup a SIPP? You can set one up yourself direct with the provider if you want, and choose your own investments. If you want advice on which investments to choose, then fine, use an IFA, but be prepared to pay for it.

Despite my usual anti-IFA views, if you have received advice you should be willing to pay for it (either via commission or in cash).

Which SIPP provider are you going for, if you don't mind me asking? My SIPP provider (Hargreaves Lansdown) charges no annual fee, so £100 per year is for what exactly? Are your investment transactions free or do they apply fees for these as well?

Also, have you checked to see if there will be any charges/fees applied by the SIPP provider for transfers in (from your old 30k company pension) or transfers out (in the future)? Some have high charges, whereas others don't apply any fees. You should factor this in to your SIPP choice decision (if you haven't already).

Hope this helps

Darryl.

DavidLaGuardia

£250 for advice on a SIPP seems fair. Look what you pay solicitors etc. Thinking commission makes it fee is silly, it is a cost.