Helping a friend - was her 75 year old mother given wrong advice

dunstonh

but why do you say that IFAs aren't tied to certain products? we all know IFAs don't advise on direct share holdings or property etc. they only advise on packaged financial products.

I suppose 50,000 odd investments is too narrow for you.

IFAs dont advise on televisions, cars or yachts either. So, that must mean they are not independent.

RetiredInThailand

lisyloo wrote: »

You seem very cynical which may reflect your actual experiences.

Not at all. I have always handled my own investments, and it seems to have paid off. I have never had any dealings with any financial advisor and I doubt that I ever will.

But honestly if you wanted to consider you transport options - bus, cycling or car, would you go to an AUDI dealer for advice?
You wouldn't think there was anything wrong with an AUDI dealer wanting to sell you an AUDI would you. Neither would you think it's morally wrong they get comission on the sale even if it appears rather high (remember they have a lot of tyre kickers too and so do FAs).

This is not relevant. The Audi salesman sells only Audis. I would not expect him to recommend anything other than an Audi, and for this reason I would never ask him for advice about anything, even about Audis, as he would surely be biased. I might ask him a factual question such as "does that model come with satnav?" but that is all. And of course I could find that out from the Audi website anyway.
An untied IFA should be in a position to recommend any and all types of investment, even including putting cash under the mattress. But my point is that this is probably not what they do; human nature makes them inclined to recommend investments that earn them commission (especially high commission), even when these are not in the best interests of the client. I dont blame them for this any more than I blame an Audi salesmen for trying to sell me an Audi; it's what he does. But I dont expect either the IFA or the Audi salesman to pretend to the uninitiated that they are actually unbiased and completely honest when they almost certainly are not.
There is no shortage of crooks with the letters "FSA" after their name, and even if the vast majority aren't out and out crooks, those letters dont make them magically unbiased or honest, any more than "MP" or "JP" or "Rev" do. Anyone who thinks they do is a fool.
As for tied FAs, they dont even merit the description of "advisor"; they are just selling from a small catalogue.

The old lady in question probably thought that she was getting unbiased advice, but in the end she was sold something that carried a high fee and paid high commission, when other types of investment carrying no fee or commission would probably have been much more suitable. I for one am not surprised.

Moist_von_Lipwig

lisyloo wrote: »

Perhaps you went to the wrong advisors too.
That doesn't make it THEIR fault, just as if you went to an Audi dealer it wouldn't be their fault if they tried to sell you an Audi when actually a bicycle would have been a better bet.

.... http://audi-bike.com/

dunstonh

This is not relevant. The Audi salesman sells only Audis. I would not expect him to recommend anything other than an Audi, and for this reason I would never ask him for advice about anything, even about Audis, as he would surely be biased. I might ask him a factual question such as "does that model come with satnav?" but that is all. And of course I could find that out from the Audi website anyway.

It is relevant as the Op's friend's mum so an FA with the equivalent tied restrictions.

An untied IFA should be in a position to recommend any and all types of investment, even including putting cash under the mattress.

Which is the case and happens.

But my point is that this is probably not what they do;

How do explain that they do?

human nature makes them inclined to recommend investments that earn them commission (especially high commission)

Most investment contracts have been on a fee equivalent basis for some years now. IFAs have had to have a fee based structure available for many years. So, commission is not an issue on those cases.

The old lady in question probably thought that she was getting unbiased advice, but in the end she was sold something that carried a high fee and paid high commission, when other types of investment carrying no fee or commission would probably have been much more suitable. I for one am not surprised.

She saw a tied agent. Not an IFA. She would not have been charged a fee as the banks operate on bonus structure (so the seller doesnt get the commission, the bank does - the seller gets an award towards a target which then influences their bonus or a percentage of the initial commission).

There is no shortage of crooks with the letters "FSA" after their name

I am not experienced with those working for the food standards agency so cant really comment on that.

pqrdef

lisyloo wrote: »

If you went to a car salesman would you expect them to tell you not to bother and get the bus?

Perhaps they should, if it's clear that I ought not to get behind a wheel.

But everybody knows that car showrooms are there to sell their cars.

The era of banks seeing their mission as one of marketing their range of financial products is a relatively recent one. Many people still think a bank offers some kind of professional service. They regard a bank manager as more akin to a solicitor than to the manager at Tesco. And they think they're paying for his professional services by having their money in his bank.

Some of us dinosaurs remember the old Barclays TV ads where the manager would pop out of the wardrobe. A salesman squatting in your wardrobe waiting to jump out and sell you stuff would have been a less marketable concept.

Before any selling is done there needs to be a clear understanding of the true nature of the relationship between the bank and the customer.

(Come to think of it, it's not unheard of for a shopkeeper to say he hasn't got the thing you're after, but try So-and-sos.)

lisyloo wrote: »

I agree she went to the wrong place, but that still doesn't mean it would win a mis-selling case.

No, but they need to widen the definition of mis-selling.

lisyloo

The old lady in question probably thought that she was getting unbiased advice, but in the end she was sold something that carried a high fee and paid high commission, when other types of investment carrying no fee or commission would probably have been much more suitable. I for one am not surprised.

I agree with everything you say.
That still doesn't mean it was mis-sold in the terms of the real-world definition that the OP has to deal with.

No, but they need to widen the definition of mis-selling.

Morally I agree with all of you that the situation is not great and needs to be improved.
However I think the OP wanted advice on mis-selling in the real world that we live in and not about the morals of it all, which actually has no effect on the reality of the case.

atush

Not at all. I have always handled my own investments, and it seems to have paid off. I have never had any dealings with any financial advisor and I doubt that I ever will.

Then how do you know what IFA's do and say? ?you have never been to one, and again I will say that no IFA was involved here, but a tied bank agent who is like the Audi salesman?

lisyloo

Not at all. I have always handled my own investments, and it seems to have paid off.

How do you know that you couldn't have done better with advice, even after charges?

darkpool

dunstonh wrote: »

I suppose 50,000 odd investments is too narrow for you.

IFAs dont advise on televisions, cars or yachts either. So, that must mean they are not independent.

not if those 50,000 investments do not include direct property or shares.

you're never going to be truly independent when you get kickbacks from some product suppliers but not others....

even with RDR i'd imagine there will be ways around it.... maybe seminars for top selling IFAs in the maldives, maybe a weekend seminar in butlins for less good IFAs.

you've never said how you make your 12% a year?

JohnRo

lisyloo wrote: »

How do you know that you couldn't have done better with advice, even after charges?

There's the rub. The contention that DIY investment is cheaper and more cost effective and by extrapolation more lucrative is subjective and conveniently unverifiable, when accounting for all aspects involved.

The implication by advocates seems to be that DIY investors know best, and that those who don't DIY and choose to pay for professional financial advice and management are just stupid and/or lazy.

Personally I find the whole contention staggeringly arrogant, misguided and irritating. I can't help wonder how much of a saving, if any, is really being made when the extraordinary amount of time spent reading, fretting, studying, always "getting it right" and arguing about the fact are factored into the DIY equation.

Without statistical evidence to properly contrast and compare all aspects of the two, the argument seems entirely pointless to me and the perceived wisdom that DIY is cheaper and therefore better, fallacious.