Drop in well paid using IFA's

dunstonh

Another reason for the (some say) high costs of advice

Compliance and regulation cost is the major expense for most IFAs. The explicit cost can be anywhere between 10% and 20% of your turnover. By the time you add in implicit costs (time to comply with regulations then you can double that).

Software is damned expensive as well. You need so much of it nowadays and they are all on recurring licence so you have a annual cost there going into 5 digits a year.

Add in an office and staff and you take out another 20-30%.

his kind of confirms my suggestion that IFA might be OK for the wealthy, but be too expensive to flog to the masses. The client in this example was probably worth a lot more than £150K, yet on these boards we keep seeing suggestions that people should consult IFAs about comparitively trivial 5-figure sums

I wouldnt want to put a figure on it as it will vary but it is possible for £100pm pensions to still be profitable (just) to an IFA and still be value for money for a consumer. (pension could pay £500 gross to the adviser and still be cheaper than a stakeholder pension). For investing, I would say a figure at around £50,000+ for IFAs for transactional and £100k plus for servicing.

In general, IFAs have always dealt with the middle to upper end. Its the FAs who tend to deal with the lower and middle end. That wont change. Except there will be less to deal with the lower to middle end as FAs on full advice process. There is the potential for a simplified advice process to cater for them where the remit will be "better than doing nothing" which will offer lower consumer protection but require less administration. This may see the return of the salesforce and its the salesforces that have done the damage over the years.

yeah, it annoys me when people come on here with 50k to invest and the IFA groupies say "go and see an IFA".

What are the alternatives for someone that doesnt know what they are doing?

i mean that recent thread with the woman with 80k to invest went to an IFA and was told to buy a bond that paid 3% annual fees. if that's IFA advice it's pretty poor.

Stop telling lies. You keep repeating this but it doesnt make it any more truthful. The IFA charge p.a. will range from 0% to 1% typically. Not 3%. There has been no thread where someone was paying their IFA 3% p.a. You just assumed they were (and the op and that thread never even hinted anything like that).

atush

My OH is a chartered acct. He is on salary, so does not charge clients. His company charges clients and the charge is (I beleive) in excess of 160 per hour. But he doesn't earn that I hasten to add.

oldvicar

dunstonh wrote: »

What are the alternatives for someone that doesnt know what they are doing?

A best-buy deposit account, preferably with a nice cuddly Building Society would be a good start. CAT-standard in principle (without having to brand it as such) would be nice.

I know people struggle to understand even deposit accounts, interest rates etc., especially if they are also an ISA. But that's the place for them to start.

darkpool

dunstonh wrote: »

Stop telling lies. You keep repeating this but it doesnt make it any more truthful. The IFA charge p.a. will range from 0% to 1% typically. Not 3%. There has been no thread where someone was paying their IFA 3% p.a. You just assumed they were (and the op and that thread never even hinted anything like that).

no, i'm not telling lies. The fees/ charges work out at 3% a year. Perhaps you could get a passing schoolkid to check the maths for you?

you must work for an IFA public relations firm?

https://forums.moneysavingexpert.com/discussion/3788445

"I realise 4% might be considered conservative, but really, when I think about the growth that would be required to pay for the fees and offer the same return, my mind boggles. In short, for an investment of £70k at 4% I'd get back £81,500 after 15 years. When, really a clean (without charges) 4% growth yoy would be £126,000. Thats nearly £45k in charges? They'd be making four times as much as I am."

Linton

oldvicar wrote: »

......
This kind of confirms my suggestion that IFA might be OK for the wealthy, but be too expensive to flog to the masses. The client in this example was probably worth a lot more than £150K, yet on these boards we keep seeing suggestions that people should consult IFAs about comparitively trivial 5-figure sums

A bit of an exaggeration but yes it does demonstrate a serious problem. The state is placing more responsibility on individuals to manage their own financial affairs. But many of these individuals just dont have the knowledge or understanding to properly handle this responsibility. And if they get it wrong they can destroy their and their families financial security for the rest of their lives.

The provision of advice is expensive in any field. And this is made worse by the compensation culture and regulation which is perhaps more onerous for financial advisors than any other profession. Protection has to be paid for.

As the cost of advice is only partially dependent on the sum involved there is a case for commission whereby the wealthy subsidise those with small amounts to invest. But this is being stopped because of the undesirable side effects.

I cant see the voluntary sector being able to help much if the volunteers are personally responsible for the advice they give - no volunteer is going to take the risk of making a mistake.

I see no answer. We try on these forums to help a bit but the problem is that advice needs to be specific to the individual's situation which cant really be discussed on an open forum. And of course we cant really provide advice at all, just discussion around the subject.

As far as advice is concerned the relatively poor will have to pay the cost of an IFA or make do with their equally ignorant mates at the pub and the office canteen or information from the internet where they need to distinguish between those with some knowledge and those with little knowledge but a strong agenda. Of course neither of these informal methods provide any sort of protection against bad advice.

dunstonh

no, i'm not telling lies. The fees/ charges work out at 3% a year. Perhaps you could get a passing schoolkid to check the maths for you?

You are telling lies because the IFA is not getting 3%.

"I realise 4% might be considered conservative, but really, when I think about the growth that would be required to pay for the fees and offer the same return, my mind boggles. In short, for an investment of £70k at 4% I'd get back £81,500 after 15 years. When, really a clean (without charges) 4% growth yoy would be £126,000. Thats nearly £45k in charges? They'd be making four times as much as I am."

OF course, there is no such thing as a clean return of 4%. If you are looking at savings account then the rate given is after implicit charges typically around the 0.5-3% range (depending on base rate). Investments have explicit charges and you measure returns net of charges. So, measuring a fund at 4% before charges and a savings account after charges is not consistent.

2010

dunstonh wrote: »

I will tell that to the person that I recently saved £150k. I am sure they will agree that paying £150,000 for something they were not aware of is better than paying my fee.

You keep telling others to "stop telling lies" and then you come out with something completely unsubstantiated as this, which has to be dismissed because there is no proof.

Whenever you search about IFA two things clearly come out.

1. rip off charges
2. mis selling of products

http://compensationprovider.co.uk/blogs-a-news/entry/ifas-in-the-dock-over-financial-mis-selling.html

An increasing number of independent financial advisers (IFAs) are being accused of financial mis selling as the regulators crack down on firms with increasing severity.

Now it seems that it is almost it’s another day, and another IFA, or firm being accused of financial mis selling and millions are having to be set aside for client compensation.

dunstonh

An increasing number of independent financial advisers (IFAs) are being accused of financial mis selling as the regulators crack down on firms with increasing severity.

Now it seems that it is almost it’s another day, and another IFA, or firm being accused of financial mis selling and millions are having to be set aside for client compensation.

That article was dated 28th Sept last year and is from an ambulance chaser company that encourages people to complain to make its money. It also seems to fail to understand what an IFA is as it says IFAs "...who are tied to a firm...". So, clearly would not be an IFA in that case.

It also contradicts the complaints stats which show IFAs getting fewer complaints. Stats which the FOS publish every year. Also, the FOS also stated that the last decrease still included a large proportion allocated to just one IFA firm. A firm that has often been discussed on here and their complaints were not about advice but about mishandling administration.

2010

opinions4u wrote: »

Not being funny, but are you saying that if people are a bit stupid they should be excluded from an independent service and restricted to a narrow range of poor value deposit only products from a bank that have little to no chance of providing real returns ahead of the rate of inflation?

I have posted many times on this forum about my experience of a WP bond.
The upshot being that over the 10 year period the bond was in existence, I would have been better off and with no risk attached, putting the lump sum into a 5 year fixed rate account and then doing the same again for a further five.

So I wouldn`t entirely brush aside simple, basic, risk free, saving products.
With them there are no sticky fingers raking in commission and management charges for years on end and no chance of them diving because of the old chestnut "market conditions".
Also when the term ends there is no MVR of 20% either.

2010

dunstonh wrote: »

That article was dated 28th Sept last year and is from an ambulance chaser company that encourages people to complain to make its money.

There would be no need for these firms to exist in vast numbers if the IFA didn`t mis sell on a grand scale.