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magpiecottage

Mishomeister wrote: »

So why should IFA have to disclose the profit he makes?

Actually they don't. They disclose what they are paid, which is rather different. Out of that money you are paying:

• Fees to the FSA
• Fees and levies to FOS
• Levies to the Financial Services Compensation Scheme to bail out the victims of firms that have gone bust
• Professional indemnity insurance premiums
• The cost of studying for the new qualifcations
• The adviser's study time
• The adviser's ongoing professional development
• For £10,000 to be kept doing nothing because the FSA says so
• The cost of getting somebody to sign to say the adviser is competent
• The costs any other business would incur
• A profit if there is anything left.

Mishomeister

magpiecottage wrote: »

Actually they don't. They disclose what they are paid, which is rather different. Out of that money you are paying:

• Fees to the FSA
• Fees and levies to FOS
• Levies to the Financial Services Compensation Scheme to bail out the victims of firms that have gone bust
• Professional indemnity insurance premiums
• The cost of studying for the new qualifcations
• The adviser's study time
• The adviser's ongoing professional development
• For £10,000 to be kept doing nothing because the FSA says so
• The cost of getting somebody to sign to say the adviser is competent
• The costs any other business would incur
• A profit if there is anything left.

Well that is actually even worse

thelawnet

Mishomeister wrote: »

There is one thing I still struggle to understand.
If I walk in to let's say PC World and buy a TV for say £500, I will agree with PC World that I buy this particular TV with particular features for particular price.
The PC World has got it for from China could be £100 . This is something I will never find out about.
So if I was an Independent Adviser I would find it extremely intimidating to disclose what is the profit I make from that particular deal.

Intimidating?
Not sure about that.
It's nothing to do with profit. An adviser's fee is not profit, it is the cost of his product. If you went into PC World and there were no prices on the TVs, and you asked 'how much is this?' and they said 'don't worry, we'll skim a bit off your Sky TV subscription', and you said 'how much and for how long?' and they said 'I'm not telling you', you'd probably say 'eff off then, I'm not buying'.

There is no other industry where the seller has to disclose his profit to a customer.
I don't know what kebab shop owner will make of selling me a kebab if the price and features suits me I will buy it if not leave it. So why should IFA have to disclose the profit he makes?

It's not profit, it's the selling price. You could pay £500 for advice to one firm, and £1000 to another, but if the £1000 firm does more work and incurs greater costs, then they make less profit out of you. You have no idea how much profit they are making, but it's not much to ask how much they're going to charge you.....

dunstonh

That is a typically glib insurance salesman's answer, which avoids the question. No wonder there is so much distrust of salesmen.

pathetic response. Is that the best you can come up with?

Pincher

FICTIONAL Example
=============

I had £10,000 to invest in 2003, and I paid £250 to a nice man in a suit. He said to me, buy gold, so I did. My £10,000 is now worth £60,000, and I have not paid any follow on commission whatsoever. Best £250 I have ever spent.

Aegis

Pincher wrote: »

FICTIONAL Example
=============

I had £10,000 to invest in 2003, and I paid £250 to a nice man in a suit. He said to me, buy gold, so I did. My £10,000 is now worth £60,000, and I have not paid any follow on commission whatsoever. Best £250 I have ever spent.

Which would have been shot down by the FOS as really bad advice if you'd ever felt the need to complain about it, as it would have been a speculative punt on a volatile asset class continuing to bubble upwards.

Had your gold instead dropped to £5,000 in your fictitious example, the IFA would likely have had to cough up about £6,000 because he hadn't recommended a diversified portfolio.

Not what IFAs are there to assist with, therefore not a particularly good example of good service from an adviser.

Pincher

FICTIONAL EXAMPLE 2
==============

I had £10,000 to invest in 2003, paid an IFA £250.
My fund is now worth £10,500, but somehow the redemption value is £10,000. I think if I hadn't paid the £250, I would have done much worse. My IFA really added value to my investment.


I guess this is how an IFA sees himself in the mirror.

A similar butcher dream would be cows put on wings and fly straight to heaven from the abattoir.

gadgetmind

I don't think you can compare buying physical goods with paying for professional advice.

The reason why payment for such advice is being moved from commission to direct fees is to try and ensure that said advice is more likely to be what's best for the customer rather than what's best for the advisor.

dunstonh

Pincher seems to want a crystal ball to be a requirement of advice.

Pincher

I want a real small investor to come forward and say he got good value advice for a ~£250 fee.

FICTIONAL EXAMPLE 3
==============

I paid £250, and the advisor said put the £10,000 into cash ISAs. Looking at what happened to all the funds, I am convinced it was the right thing to do.