Anyone been to an IFA and not been advised to buy Unit Trusts?

jem16

gadgetmind wrote: »

However, ITs can present problems due to premiums and discounts, which some ITs allow to grow rather large. Is an IFA supposed to tell a lump sum punter to come back in a few months to see if the premium has reduced?

I think that's one of the biggest problems for an IFA to try and explain to the average client, most of whom are totally inexperienced and cautious.

One of the other problems has been the general lack of availability of ITs within the tax wrappers and on investment platforms. That is changing with the modern unbundled platform being able to give access to every investment option.

In some cases I would imagine an IFA will use them for specific clients who may have above average experience but for most clients, the increased risk from gearing and the premium and discount charging structure will rule out their use.

jem16

Maverick_Money wrote: »

If they've any sense, I don't think IFAs will switch to recommending ITs following the RDR - they would either be challenged for not recommending them originally and/or be accused of "churning and burning" ...

Be a pretty easy challenge to refute if previously they were not authorised to advise on them and now they are.

The Suitability Report has to acknowledge the reasons why or why not and the FSA are keeping a close eye on these.

By the way what does your role as a "personal finance consultant" as you claim to be in your profile entail?

dunstonh

All the IFA has to do is show the alternative is better. Its not churning unless it is unjustified. On servicing clients where the ongoing servicing includes suitability of contracts, failure to adjust contracts when you know alternatives that could be better are available is now a complainable event.

Sounds like another example of the financial services industry keeping knowledge of lower-cost and arguably better performing products to "insiders"...

.. and using the above excuse to justify it ...

Using higher risk investments which require more monitoring and greater investment knowledge and experience leaves you wide open to complaints and regulatory action in future.

Maverick_Money

jem16 wrote: »

Be a pretty easy challenge to refute if previously they were not authorised to advise on them and now they are.

The Suitability Report has to acknowledge the reasons why or why not and the FSA are keeping a close eye on these.

By the way what does your role as a "personal finance consultant" as you claim to be in your profile entail?

Agreed. As with so much these days, as long as a box on a form is filled in then I'm sure that will be OK ...

As for your interest in my role - I just "suggest" ideas regarding saving and investment products to anybody's who's interested. I encourage such individuals to expand their knowledge and take more of an active role in managing their finances, thereby potentially saving money in fees and commissions to third parties whose interests aren't necessarily aligned with those of their clients...

.. I guess I should add that I offer such information at no charge!

(Haven't articulated that very well but hopefully you'll get the gist!)

jem16

Maverick_Money wrote: »

As for your interest in my role - I just "suggest" ideas regarding saving and investment products to anybody's who's interested. I encourage such individuals to expand their knowledge and take more of an active role in managing their finances, thereby potentially saving money in fees and commissions to third parties whose interests aren't necessarily aligned with those of their clients...

Thanks for the explanation.

So have you any formal training for this or is it just purely an interest of yours coupled with your own experience?

Maverick_Money

dunstonh wrote: »

All the IFA has to do is show the alternative is better. Its not churning unless it is unjustified. On servicing clients where the ongoing servicing includes suitability of contracts, failure to adjust contracts when you know alternatives that could be better are available is now a complainable event.



Using higher risk investments which require more monitoring and greater investment knowledge and experience leaves you wide open to complaints and regulatory action in future.

You either adequately convey the message regarding risk and reward to your client or you don't. And doesn't the signing of a suitability report put most of the risk back with the client anyway?!

Maverick_Money

jem16 wrote: »

Thanks for the explanation.

So have you any formal training for this or is it just purely an interest of yours coupled with your own experience?

Nope, no formal training (apart from actuarial experience). Otherwise its just knowledge gleaned from my (slightly obsessive) interest in saving and investment .. and occasionally assisting an IFA friend who's fed-up with the whole industry ... (although of course it could be the extra exams he's having to do that's getting him down!)

Maverick_Money

gadgetmind wrote: »

That's one of the factors, but there are others.

However, ITs can present problems due to premiums and discounts, which some ITs allow to grow rather large. Is an IFA supposed to tell a lump sum punter to come back in a few months to see if the premium has reduced?

I can't say I really care any longer as I'm going to slowly sell my OEICs, while continuing to build my ITs and acquire trackers, and others can please themselves!

Well, the IFA could suggest drip-feeding the money into an IT that's trading at a premium, or suggest sources of information where the client could glean premium/discount information and try to time his/her investment accordingly (does it really take that much time to monitor this?!)

Your decision to switch from OEICs to ITs and trackers does tend to validate my thoughts though, so I thank you for that!

dunstonh

You either adequately convey the message regarding risk and reward to your client or you don't.

That isnt how it is done. You recommend to the risk profile of the client. Not raise the risk profile of the client to match what you want to do.

And doesn't the signing of a suitability report put most of the risk back with the client anyway?!

No. Ability to understand is important. I go to meetings periodically where often they get a complaints handler in to discuss current complaints and issues to be aware of. In one example that looked perfectly fine on paper, the complaint was upheld as the person was a courier and would not have been able to understand investments. These were bog standard funds and nothing appeared wrong with it. It was because a selection of single sector funds had been used to build a portfolio rather than a bog standard balanced managed fund. Another board poster mentioned recently that an accountant had a complaint upheld as he couldnt be expected to understand the tax position (bizarre i know).

The advice has to be tailored to the individual and the individual has to be able to understand it. a signature on a form carries little weight as the person with low knowledge is not able to sign to say they understand something they dont understand.

and occasionally assisting an IFA friend who's fed-up with the whole industry

I dont blame him in some respect. Its not so much about giving out best advice nowadays but protecting your backside. We were told recently that the biggest threat to advisers going forward as an industry was not RDR but consumers being encouraged to put in fake complaints by claims companies. Especially in volatile markets as when the PPI issue runs dry for claims companies they will need to generate something else and it feared investments will be their target i.e. "has your investment gone down? yes, then complain and we can get you back thousands". In reality, the chance of success on a well documented case is low but the £500 FOS fee that would apply to each one referred to the FOS could wipe out small IFAs.

darkpool

Lokolo wrote: »

But no-one does have to use him? He's not the only IFA out there. I don't understand what point you are making, IFAs aren't there to give everyone advice. Plumbers charge extortionate fees, and so do chimney sweeps! Massive amounts. Where's your ranting about these professionals?

How much do you spend on plumbers/ chimney sweeps each year? I doubt it would be more than a few hundred, at least with a plumber you can generally tell the quality of his work straight away.

With IFAs some people spend 4 and 5 figures each year. The quality of their work isn't clear and they only seem to sell UTs.... a financial product not exactly favoured by the rich.....