New IFA needed - should I go big or little?

darkpool

jem16 wrote: »

Yes I do - Towry Law is one such example and deserves the bad press it gets on here.

By salesforce method I mean offices all over the UK employing many advisers. Staff turnover is large and frequent meaning you are never able to build up a relationship with an advisor which is the most important part of financial advice in my opinion. By being employed the adviser has 2 sets of people to keep happy - his employer and his client. This can lead to a conflict of interest.

However even an IFA at a large national salesforce cannot be described as "just a salesman". An IFA's role is much more involved than simply selling a product as you imply.

yeah i agree there is a conflict of interest between an IFAs duty towards his client and keeping himself in a job. but why do you think only large firms have this conflict of interest? at what number of employees do you think an IFA firm suddenly has a conflict of interest?

i understand most IFAs get a large part of their income from sales bonuses, is that not a mark of being a salesman? can you think of many other professions whose income is dependent on what they manage to sell their clients?

darkpool

gadgetmind wrote: »

Yes, it is now, but only because regulatory hurdles were placed between them and their goal.

It really was the Wild West a few decades ago and I don't think things have changed simply because the investment industry spontaneously decided to research first and sell later.

i think as soon as the General Public understand that the IFA/ fund management industry make their living by flogging high commission products the better.

you look at a lot of advice on this website. people post threads wanting to know the best place to invest money and well meaning posters come along with "go and see an IFA". they don't seem to realise that IFAs really only sell Unit Trusts and other packaged products. It is highly likely that direct share holdings and property will be a better investment than UTs.......

gadgetmind

darkpool wrote: »

It is highly likely that direct share holdings and property will be a better investment than UTs.......

Only for those with the attitude and aptitude. Most of the population are ignorant regards investing and property, some because these things don't interest them, but many because they are ignorant about pretty much everything around them.

dunstonh

but why do you think only large firms have this conflict of interest?

smaller local firms that have been established for a while do not need to go out and get business to survive. Also, if the adviser is self employed or a partner then they are financially liable for the advice they give. A director of a small firm, whilst not personally liable, will have to pay the redress out of the company and if it is a small "own" company with a small number of directors, then it is as good as their own money.

Employed advisers working for larger firms tend to be paid remuneration that is based on a product being sold. They have no personal liability for the advice they give. That is where you start to see differences. Knowing that any mis-sale comes out of your pocket vs an employer paying it makes a difference.

at what number of employees do you think an IFA firm suddenly has a conflict of interest?

It isnt the number so much. It is the culture and the remuneration method. Most salesforces reward top performers, have league tables etc. They have sales managers that put pressure on those to achieve targets and that pressure can be intense. That culture doesnt go with financial advice. You dont get that culture in small firms.

can you think of many other professions whose income is dependent on what they manage to sell their clients?

Just about every other retail trade and manufacturer going.

you look at a lot of advice on this website. people post threads wanting to know the best place to invest money and well meaning posters come along with "go and see an IFA". they don't seem to realise that IFAs really only sell Unit Trusts and other packaged products. It is highly likely that direct share holdings and property will be a better investment than UTs.......

You do realise that telling someone who doesnt know how to invest to use shares and property (no doubt geared) would be higher risk than the typical consumer would be willing to accept and would be considered a mis-sale in most cases. MIFAD requires the advice to be consistent with the ability of the person to understand what they are doing, what risks they are taking etc.