MSE News: Beware financial adviser 'Ferrari' salesmen: Guest comment

doughnutmachine

Pincher wrote: »

They are just going to take backhanders in some other way.

1. Prizes "not related to individual sales", but reward for "volume" of business.

2. Lottery tickets in rigged open to members only draws, e.g. win a car.

3. Gifts from toasters to holidays.

4. Cash or payment to offshore accounts.

5. High Class Escorts in Las Vegas.

All they have to do is con old ladies out of their retirement money.

Nobody goes to jail, so they just keep going until they get struck off, and then switch career into pushing Pay Day Loans instead.

yeah, i predict a lot of "training courses" in exotic places for FAs in the coming years.

harebell

I paid over £250 in commission to my IFA and the investment company on an investment of £15k for a five and a half year term, and at the end of it I only got £350 interest, I mentioned a couple of times I didn't really understand the paperwork i kept getting but was told that to take my money out would incur penalties. My G*d was i a gullible 75 year old fool.

claret_mike

dunstonh wrote: »

I'm surprised the article didnt cover what appears to be one of the main areas affecting advice. Restricted and IFA. With the IFA classification opening up to a wider spread of areas to cover with no restrictions allowed (except in very few areas) and many advisers moving to restricted advice (which is usually linked to a restricted products with incentives thrown into the package). Whilst there has been tied agent and IFA before, the differences are now greater than ever and if you have to pay a fee for both, then why would you go with a restricted adviser?

My understanding is that a "restricted" Adviser could advise on every kind of collective investment out there and pretty much any mainstream product. However, because they may not look at certain other types of products such as say direct stocks and shares or VCT's etc because their typical clients are not high risk investors or want to look at the more exotic end of the range of solutions out there, they cannot call themselves independent?

I.E. An adviser could be restricted in the sense, they are tied to one provider - such as L&G or they could be restricted because whilst they have access to pretty much every collective provider out there but may not want to focus on VCT or Complex Pension Advice etc due to their clients not needing that service will put them in the same category.

If you are a low - medium risk type of investor, then restricted necessarily would not be a bad thing as I would imagine that if your research costs, administration costs etc should be lower in theory and therefore you may save money with lower advice fees.

It's a very unclear thing for consumers but why would a client want to go restricted rather than independent - in the past, it would be to avoid bias, now that in essence has gone, there are probably a whole host of reasons why people should consider restricted?

That article is about useful as a chocolate fire guard and will only cause to confuse further imo.


Also re ongoing service or no ongoing service. I think it's important to also clarify that it is possible to get advice with no ongoing service - i.e. it's not execution only or even information only as I think it has been called on here.

The easiest way I can explain it is that there are 3 routes that you can go down.

1- Advice - with ongoing service
2 -Advice - one of transaction
3 -No Advice - Information - Execution Only - Simplified advice through decision tree systems.

If you are the kind of person who wants the Advice to be ongoing, I.E you expect regular reviews or want to take advantage of additional benefits that may be offered through the Advice taken then Advice with an ongoing service may be suitable for you - however you will pay for this.

If you are the kind of person that is just not sure on a certain area of planning or feel that you will not need to review as regular, you may decide that Advice only - no ongoing service is better.

If you have a pretty good idea or are simply put off by charges and think you do not need advice then 3 will be the route.

The great thing about advice qualifying under RDR and Ongoing Service - if you do not feel that the Adviser warrants their ongoing fee, you can stop it. I.E. no longer will you have Advisers who are taking ££ from your investments when they are doing nothing to justify it. You will lose the ongoing benefits but my guess is if you have decided there is no value in the service, this will not be an issue. This is not really possible in terms of investments that may have been put in place prior to the RDR rules.

Also it is important to understand that there is talk about trail commission from advice given in a non RDR world which means that there is a possibility that this could be switched off unless the Adviser can justify the work they are doing - this could really upset a lot of people in the industry as a lot of firms have built their business on trail commission and when they look to exit the market, sell their practices/clients on this basis.

Ultimately, there is a lot more to RDR from a consumer point of view which has not even been covered in that article. Hopefully, Martin will seek some guidance on this and put together a better piece together on the subject.

sabretoothtigger

I contacted an IFA 12 years after I had bought a tracker via his rebate service. I was pretty sure I never got the the rebate cheque or at least never cashed it.
He checked his records and is happy to send me out a cheque after all this time. Thought that was pretty cool thing to do

dunstonh

My understanding is that a "restricted" Adviser could advise on every kind of collective investment out there and pretty much any mainstream product. However, because they may not look at certain other types of products such as say direct stocks and shares or VCT's etc because their typical clients are not high risk investors or want to look at the more exotic end of the range of solutions out there, they cannot call themselves independent?

Correct. However, the vast majority of restricted advisers will be going further than just saying they will not transact here or there. A lot of advisers are moving to panel based options.

If you are a low - medium risk type of investor, then restricted necessarily would not be a bad thing as I would imagine that if your research costs, administration costs etc should be lower in theory and therefore you may save money with lower advice fees.

If we look at one of the larger restricted adviser networks, they only have one enhanced annuity provider on their panel. The one that has being coming out second best pretty much for most of this year. So, even if you do get a slightly lower fee to the adviser, the terms of the product are likely to be lower as well.

It is unlikely fees will be any lower as they still need to do the same research. Most restricted options have a whole of market platform on their panel. The adviser still has to do the due diligence on the investments. Historically, tied agents have been more expensive than IFAs. There is nothing to suggest that trend will continue. However, if as many IFAs call it a day as has been suggested, then the IFAs left may decide to price themselves more favourably for the higher net worth end and price themselves out of the bottom end and leave that for the restricted advisers.

In theory, a restricted offering where an adviser remains whole of market but chooses not to transact in certain areas should be fine. There are suggestions that over the next few years even more IFAs will move to that classification as the cost of being an IFA could sky rocket on professional indemnity insurance as there is just so much the insurers have to cover. If the adviser restricts themselves to not transact in high risk areas, the insurers will price lower. However, at this time, it is the multi-tie networks that seem to be most active in recruitment.

Ultimately, there is a lot more to RDR from a consumer point of view which has not even been covered in that article. Hopefully, Martin will seek some guidance on this and put together a better piece together on the subject.

The article isnt great and a better one would be worthwhile. That said, for as much as things change, a lot stays the same. New names for things doesnt mean the service or charges will change. Especially where the advising firm has been working on RDR basis for years, as many have. I think the main thing from a consumer point of view is that it will push out the low skilled ones who were already hanging on by the skin of their teeth. All those that I know that are calling it a day are generally low knowledge. Honest and have long history with their clients but their knowledge isnt up to modern standards. Also, most of the banks seem to be pulling out of advice. That has to be a good thing given their dire track record.

Moneylady

doughnutmachine wrote: »

yeah, i predict a lot of "training courses" in exotic places for FAs in the coming years.

The original poster does need some education concerning the new Financial Adviser marketplace.
There isn't enough money around these days to have sandwiches at a training meeting let alone courses overseas. People cannot have it both ways- they cannot have free advice and then have a pop at advisers particularly when it's based on misinformation. Needless to say we've been fee charging for years and have a clear contract with clients about what they will pay for and what they will get.

There will be advisers who join the growing band of overseas advisers that's another story- go to a country where there is no regulation and you can sell whatever you want to.

But please- get your facts right ok?

doughnutmachine

Moneylady wrote: »

There isn't enough money around these days to have sandwiches at a training meeting let alone courses overseas. People cannot have it both ways- they cannot have free advice and then have a pop at advisers particularly when it's based on misinformation. Needless to say we've been fee charging for years and have a clear contract with clients about what they will pay for and what they will get.

But please- get your facts right ok?

you must admit that financial advisers done themselves no favours with their "all free advice, we get paid from the person you invest with" routine? it's not really free advice is it? i would call that misinformation.

like it or not, a common perception is that financial advisers do better from the clients money than most of the clients...

of course some financial advisers must be very good, but there do seem to be a lot of people on the pensions board not too happy with financial advice they got decades ago....

sabretoothtigger

Its free if you never take the plan, seems a fair description. That happens lots, you can go into a shop try out the product then go order it cheaper online and people do.

harebell

harebell wrote: »

I paid over £250 in commission to my IFA and the investment company on an investment of £15k for a five and a half year term, and at the end of it I only got £350 interest, I mentioned a couple of times I didn't really understand the paperwork i kept getting but was told that to take my money out would incur penalties. My G*d was i a gullible 75 year old fool.

No interest ? oh well I'm a newbie thanks :-(

dunstonh

harebell wrote: »

No interest ? oh well I'm a newbie thanks :-(

Probably as it was unrelated to this thread topic, no indication of any problem and you didnt ask a question.