Is there such a thing as a truly independant IFA

UsernameAlreadyExists

BobQ wrote: »

My you have had a bad experience!

No, Not at all. I used to be one a long, long time ago
I just like winding them up every so often, and estate agents too.

ozzage

Some of the comments here are probably symptomatic of a deeper problem. People sometimes see the job of an IFA as maximising returns.

If they start with an IFA, but then go DIY and get higher returns, they would assume that the IFA hadn't been worth the money. But that's obviously not true.

They may well have been lucky: maybe the market climbed and they'd gone high-risk and made a lot. But if the market tanked then they might end up in tears, where-as a good IFA would have analysed their attitude to risk and made sure their exposure was appropriate.

The real issue is that there is NO WAY OF KNOWING how much value an IFA is actually adding. Nobody runs two identical portfolios side-by-side and compares results in all market conditions. Even if you back-validate a DIY strategy and decide it was better than what the IFA gave you, you can't say that you would have chosen that at the time, or stuck with it!

I don't really know what the answer to that is. How can you measure an IFA? Just with instinct?

UsernameAlreadyExists

I've already made the point about measuring their value.

It's an interesting one ...

An IFA with the best intentions for the customer at heart won't be wanting to take their money away from them - because that 3% sliced off a pension transfer (for example) could have a huge compound effect. So ... is a "poor" IFA a good one?

Whereas the IFA driving round in the flash merc and the pressed suit to the country estates for the meetings with the captains of industry may appear to be hugely successful and doing very well for himself, but is in fact only "that rich" because he's creaming off a nice big fat slice of their "hard" earned.

Equally 2 IFAs with the same number of clients? ... The one doing "better" is the greedier one!

I think an IFA charges based on their own choice of lifestyle that they need to maintain

grey_gym_sock

UsernameAlreadyExists wrote: »

The one doing "better" is the greedier one!

does that apply equally to every paid occupation? if not, why not?

BobQ

GhIFA wrote: »

It's not about "outperforming" though - it isn't purely measured on performance, it's about the effectiveness of the overall planning, in line with what the client's objectives are. Purely making a decision on the basis of performance is ineffective. Any IFA that makes a recommendation purely on the ability to outperform a particular benchmark is, in my opinion, not doing the job properly.

Bear in mind that there is also a degree of subjectivity to the planning advice as well - different advisers with different experience would suggest different approaches - that doesn't mean that either approach is less justifiable or appropriate than the other, but on that very basis it is likely to give different results.

I accept all of the above is the reality and I used the word outperform loosely.

My point remains that the average punter (with all his particular circumstances) cannot really assess the merits of the advice provided. Even accepting its independent and provided in good faith based on the client's circumstances, the client gets what you admit is a partially subjective but largely informed view of what they could/should do to achieve a desired outcome at some point in the future. They have no way of knowing whether you have a track record of giving good advice (compared with another IFA (as you say a different opinion is not necessarily wrong).

They just have to ask "do I believe this is the best advice for me?", there are no measures of effectiveness for the IFA.

GhIFA

BobQ wrote: »

I accept all of the above is the reality and I used the word outperform loosely.

My point remains that the average punter (with all his particular circumstances) cannot really assess the merits of the advice provided. Even accepting its independent and provided in good faith based on the client's circumstances, the client gets what you admit is a partially subjective but largely informed view of what they could/should do to achieve a desired outcome at some point in the future. They have no way of knowing whether you have a track record of giving good advice (compared with another IFA (as you say a different opinion is not necessarily wrong).

They just have to ask "do I believe this is the best advice for me?", there are no measures of effectiveness for the IFA.

Absolutely Bob, I accept that. In my experience a lot of it comes down to relationship. A client will stay with an adviser who they are comfortable with for many years. There's no hard and fast rules - It's why whenever the question is asked on here about how to go about finding an adviser I tend to suggest asking friends/family/colleagues - the best measure is a happy, satisfied client - how that state of "happy satisfaction" is quantified is another question entirely!

dunstonh

Your entire "profession" has no tangible value. You're not accountable for your actions, and whatever advice you provide is given with the disclaimer that there's always a risk.

We are accountable and risk is always there. It has never been a requirement for any adviser to have a crystal ball. That would just be stupid. The advice has to be suitable. If it is unsuitable then there is consumer protection. However, not picking the number one performer out of 50,000 investment options which all have different levels of risk is not something anyone should even think is possible, let alone criticise.

But you do have a point that its very difficult for a punter to know if IFA1 with Advice A will outperform IFA2 with Advice B. I would be interested to know what an IFA thinks on that question.

Absolutely irrelevant. An IFA's job is not to outperform. It is to provide advice and financial planning. With investments, it is to ascertain objectives, risk profile, capacity for loss and knowledge and understanding and put in place solutions applicable for that individual. With some that would be using investments that you would never use yourself. Investments that are never going to be top of the pile. To try and attempt that would quite probably be a mis-sale.

atush

UsernameAlreadyExists wrote: »

I've already made the point about measuring their value.

It's an interesting one ...

An IFA with the best intentions for the customer at heart won't be wanting to take their money away from them - because that 3% sliced off a pension transfer (for example) could have a huge compound effect. So ... is a "poor" IFA a good one?

Whereas the IFA driving round in the flash merc and the pressed suit to the country estates for the meetings with the captains of industry may appear to be hugely successful and doing very well for himself, but is in fact only "that rich" because he's creaming off a nice big fat slice of their "hard" earned.

DO you look at your surgeon driving in his merc the same way? Your dentist? Your lawyer? Your MP?

richardg_ifa

UsernameAlreadyExists wrote: »

Your entire "profession" has no tangible value. You're not accountable for your actions, and whatever advice you provide is given with the disclaimer that there's always a risk.

Sorry, but that is one of the funniest posts about my profession I have read in a long time, and shows a clear lack of understanding about how my profession works (even though I see you were an adviser & probably should know better.)

If we weren't accountable then -

• We shouldn't have to pay millions in regulatory fees every year to the FSA, Financial Ombudsman Service & Finanacial Services Compensation Scheme.
• I & every single IFA would not have had to spend hundreds of pounds & many hours on study over the last few years to get to or beyond the new minimum level of qualification required by the FSA (who we now aren't accountable to apparantly)
• I wouldn't have to spend my time keeping my knowledge up to date with hours of Continual Professional Development
• I wouldn't have to pay for membership of a professional body each year and renew my certificate to practice. No certificate, no advice available

The reason we put risk warnings on our advice is exactly why we are held accountable. No risk warnings & we would be crucified by all & sundry.

rochja

If there were no problem with IFAs there would be no RDR, no shift from commission to fee based, no additional training requirements. These changes only became effective this year. The full effevt of the changes has not been assessed yet. Therefore it is perfectly reasonable to ask the question 'how do I find a decent IFA?' Interestingly, a certain North Eastern mutual building society had just offered free financial planning followed by annual management fees! The quality of the advice was awful. They are contracted to a provider who is pushing a cautious portfolio, a balanced portfolio and a high risk portfolio together with a couple of specific products targeted at retired people. I see no matching to personal need. Before anybody points it out to me I know a building society is not an IFA, but it has been forced to recommend products from across the market place and this shambles is the result