Drop in well paid using IFA's

darkpool

So why would the well paid stop using IFAs? Maybe it's because they don't see any value for money?

"According to a new study of 2,073 adults in the UK released today by AT Kearney, the global management consultancy in accordance with YouGov, increasing numbers of high earners with a salary over £100,000 are choosing not to use independent financial advisers (IFAs) since the financial crisis began, with a 50% drop of customers opting for IFAs since 2008."

http://www.moneyvista.com/news/news-articles/50-drop-in-those-earning-more-than-%C2%A3100,000-a-year-using-ifas/

2010

Maybe they`ve finally woken up to the fact they are getting ripped off with massive commission, fat fees, and given mostly, poor advice.

Aegis

2010 wrote: »

Maybe they`ve finally woken up to the fact they are getting ripped off with massive commission, fat fees, and given mostly, poor advice.

Do you have any data to back up the "mostly poor advice" comments? The Financial Ombudsman Service statistics don't bear this out, as IFAs have a very low proportion of complaints compared with the volumes of business they transact for their clients.

Don't get me wrong, there are some absolute cowboys out there taking advantage of extremely high commission structures, but they're the exception, not the rule.

2010

Aegis wrote: »

Do you have any data to back up the "mostly poor advice" comments? The Financial Ombudsman Service statistics don't bear this out, as IFAs have a very low proportion of complaints compared with the volumes of business they transact for their clients.

Don't get me wrong, there are some absolute cowboys out there taking advantage of extremely high commission structures, but they're the exception, not the rule.

Well you would say that, wouldn`t you.

People are voting with their wallets because high commission/fees and poor advice.
FA recommend products with no come backs whatsoever.
If they perform good, bad or indifferent the fat commission still rolls in.

Aegis

2010 wrote: »

Well you would say that, wouldn`t you.

Of course, dismiss what I say because of the vested interest, even though what I said can be easily backed up.

People are voting with their wallets because high commission/fees and poor advice.

Again, evidence please. To me it looks more like a temporary cost-cutting measure coupled with the market uncertainty of the last few years causing fewer people to retain the services of an IFA. I'd like to know where your insight on their specific reasons for not going to an adviser comes from, if you don't mind.

FA recommend products with no come backs whatsoever.

No idea what you're even trying to say here, whether you're referring to commission or return. If the latter, demonstrably false in the vast majority of cases, if the former I'm not sure why you'd complain about it.

If they perform good, bad or indifferent the fat commission still rolls in.

That's what happens when you as a client elect to retain someone on a commission basis. If you pay a fee instead, then no commission rolls in.

No client has been forced to take commission by an IFA for a very long time, as they are required to offer a fee service for which all commission must be rebated.

dunstonh

A study of 2073 is not exactly reliable given the size of the population.

Current trends appear to be that 30% of IFAs are closing their doors with RDR. Some have already gone, some are winding down. So, you would expect some contraction to reflect that. Anecdotally, my experience is that established servicing IFAs are busier than ever. However, transactional IFAs are suffering. It seems a shift in models is happening.

2010

Yet more evidence of poor performance.
Just like FA`s who take the money and then fail to deliver


Active fund managers failing investors:

Every year investors pay millions in fees to UK fund managers who then fail to deliver. Now experts are urging savers to stop pouring money down the drain and make more use of low-cost UK tracker funds.


Read more: http://www.metro.co.uk/money/60562-active-fund-managers-failing-investors#ixzz1m5auGjM4

atush

I think it is because more people are trying the DIY method. If that owrks for them or not oanly time will tell.

Dont' think it is because of poor advice by IFAs, more likely poor adivce by bank FAs and the bloke down the pub.

2010

atush wrote: »

I think it is because more people are trying the DIY method. If that owrks for them or not oanly time will tell.

If they do proper research and go to an "execution only" broker, they`ve got just as much chance of of finding a good investment as paying for poor, expensive advise from a FA.

atush

True, but then again if they want good adivce from an IFA (as opposed to an FA) they may also want to go that route.

Not everyone has the time or inclination or in fact the intelligence to engage in 'proper research'. I know this as I have tried (but failed) to explain pound cost averaging to a number of girlfriends lol. I was trying to get them to understand investments. And I am good at explaining things so little minds can understand having raised 3 boys ;-)

Rollinghome

Aegis wrote: »

Do you have any data to back up the "mostly poor advice" comments? The Financial Ombudsman Service statistics don't bear this out, as IFAs have a very low proportion of complaints compared with the volumes of business they transact for their clients.

Don't get me wrong, there are some absolute cowboys out there taking advantage of extremely high commission structures, but they're the exception, not the rule.

I'd disagree that the number of official complaints to the Ombudsman was in any way a reliable measure of the extent of poor advice. Too much bad advice goes below the radar and is not the subject of official complaints.

An example would be the rip-off "advice" a friend got very recently from a local IFA for which they would have got around £20,000 in initial commissions plus huge ongoing annual commissions for only a few hours of low quality work.

With around half a million or so to invest, he was told to move his ISA which he currently holds with HL to themselves using Skandia. They claimed he would save by not having to pay switching fees which of course HL don't in fact charge for. They "forgot" to enclose the required documents setting out the costs with the initial and on-going commission they'd receive.

He asked for them and found they were going charge him 3% initial plus, instead of the normal trail commission, had opted to take almost double - a full 0.9% annual trail on everything. There was also a further annual charge for use of the Skandia platform. His request for details of paying on a fee basis was ignored even though they advertise themselves as fee-based.

The funds they suggested for his ISA was a standard hotch-potch list they described as a "balanced portfolio". They hadn't even asked about or taken into account the £100k in investment trusts and shareholdings he had which would of course had a major bearing on funds selected for an ISA.

They also recommended insurance bonds for the bulk of his money even though he had made clear he didn't want them and falsely gave the impression that they would be tax-free - when in reality they couldn't even be described as tax-efficient in his position. They did however pay them a generous 4.5% initial sales commission of about £14,000 plus ongoing trail commission.

None of their suggestions would have saved a penny in tax but would have huge costs, much of it going to them as commission.

For this rubbish advice and a few hours work they would have got around tens of thousands of pounds whereas the cost though HL would have been just a few hundred and even less from CavendishOnline. In my view it was quite wrong to try to persuade him to move to the Skandia platform knowing he would be many thousands of pound worse off.

And yet, as far as I know, there would be no way of complaining to the Ombudsman against that sort of behaviour despite the potential harm to his financial interests. They will continue to take advantage of the gullible and to get away with it because there is no one to stop them.

I have all the details here to look through - 140 pages of complex bumph that most people are unlikely to read and with all the costs well buried.

I can only talk from personal experience and while I'm sure there are honest IFAs out there giving decent advice, I have yet to find one. There are far too many dodgy characters out there, both FAs and IFAs. Which is a pity because I know several people who would benefit from decent, honest, cost-effective advice. Even worse, many people don't even realise how they've been taken for a ride by slick salesmen or how much they're paying.

As I understand it, people can only take action against an IFA after the event and then only if they can prove clear mis-selling. If you have any suggestions on what actions could be taken against an IFA who is known to give poor advice or how someone can find an honest cost-effective adviser then then I'd be very interested.