Financial advisers - are they worthwhile

turnbull

Okay, that is a silly question. Let me re-phrase it. For a person with say 20k in savings (a bank account) who is aware of various investment options but a little risk averse, can they add value?

I love the idea of shares or a fund, but am dubious about the risk of losing money. I have ISAs and no mortgage to pay off. Would someone like me be wasting their tim going to an IFA or could they really provide solutions that don't involve high risk?

I'd love to hear your views please!

dunstonh

love the idea of shares or a fund, but am dubious about the risk of losing money.

What about the options in between?

Would someone like me be wasting their tim going to an IFA or could they really provide solutions that don't involve high risk?

Risk is not a choice of nothing or high. There is a whole sliding scale.

If you dont know the options and are not willing to spend the time to research or dont know how to research then it is worth getting someone to do it. Just as the same as if you cannot decorate, you get a painter & decorator in. Or when you car needs servicing you get a mechanic to do it.

debbie42

I'm in the position where I do know a bit about savings and investments, but the more I read and learn, the more I realise I don't know!

I've made an appointment to see an IFA and am keeping an open mind as to how and if they can help me improve and balance my investments.

Desperate_Housewife_2-2

Hi Guys, can I jump in on this thread?

I have just contacted an IFA via the unbiased website (thanks Dunstonh for all your previous advice) and they visited today. I have a list of charges and wondered if it best to pay an upfront fee or go via the comission route. We're not talking mega bucks really, I want to pay in around £110 pm for my pension and OH around £300-400 pm. We are both basic rate tax payers (not sure if this matters much)

The fee quotes I got are above the market average ie 'our maximum fee for pension over 25 year term is 44.8% of first 12 months payments plus 0.5% of your fund value each year from year 2' whereas the market average quote is 10.6% of first 12 months payments plus 0.5% of your fund value each year from year 2.'
The fee option is £100-200 per hour depending on who you have in the company plus admin £25 per hour.
I suppose looking at the amounts it might be cheaper in the long run paying a fee (depending on how long they spend working on it).
Can anyone help me make a decision please?
Many thanks DH

dunstonh

Did they give you the actual fee or are you just reading that from the menu?

I say that because the menu is just an example. It isnt actually what you will be charged in many cases. For example, mine still says £150 an hour but I havent done a "by the hour" case ever. The menu commissions also show the avearge and maximums but I take under the average. So, don't rely on that as gospel as its a generic guide.

If you end up going stakeholder or mono charged personal pension, then commission could be cheaper as they are low commission paying products and going commission free on those may not save as much. Multi-charge contracts (e.g. SIPP) dont fit in with the menu examples very well.

The company should be able to price a fee to do the work in total rather than by the hour. Then you will have a better idea which is best.

Desperate_Housewife_2-2

Thanks Dunstonh, its all very confusing to a layperson so thanks for explaining it for me. I'll ask them what the actual amount is when they get back to me as I read it from the blurb they left me (serves me right for reading it!). Its all small steps at the mo but hopefully I'll get their eventually.
Thanks again DH

dunstonh

The FSA's menu system is highly confusing. It was meant to highlight typical commissions and fees so you could compare advisers. However, there are restrictions on what you can type into the menu reflecting your remuneration. So, for example, if you work on NMA basis I cannot put that I take 1% initial commission and keep the 0.5% natural fund based commission. So, I have, like nearly all others, have some by the hour charge on there which most will never use.

The EU is looking at the menu system and it may get abolished anyway as it is apparantly considered to be a breach of EU rules on competition.

chesky369

I first went to my IFA three years ago and can only say I wish I'd gone ten years earlier (before that I had too little money to even make the 'phone call). He's been worth every penny that he's charged.

EdInvestor

Is there a "Reduction in Yield" figure mentioned anywhere?

This figure enables you to see the impact of the charges more clearly.

dunstonh

Menu's dont include a reduction in yield as it is not product specific. It is commission driven. That in itself is daft because one IFA may have negotiated better terms than another.

Picking full upfront commission for the case of an example. Norwich Union Bond is about 4.5% initial commission as default. Then, depending on your terms negotiated with the provider, Norwich Union may increase that upto 7.5% at no cost to the client. So, you may have one IFA getting just 4.5% commission and rebating nothing and another getting 5% but rebating 2.5% making the contract cheaper. Yet the cheaper one would show higher commission on the menu making them appear more expensive.

It is a major failing in this country and we are the only one's in Europe where the focus is on what an individual earns from a contract and not what the person pays for it.

It is akin to going into Currys, Comet and a few others and buying a washing machine not based on the price you pay but the one that makes the least profit from the transaction.

Hopefully, the EU will put an end to commission disclosure and the focus will turn to charges in it's place as that is the true cost to an individual.

EdInvestor

It's hardly surprising when the system is so opaque that many people are now choosing to go to discount brokers such as

https://www.h-l.co.uk
https://www.bestinvest.co.uk
https://www.cavendishonline.co.uk
https://www.chelseafs.co.uk


At least they make it reasonably clear what they are charging, they rebate many excessive charges (eg the initial ones) and their websites often provide quite a lot of information which enables the investor to do without the expensive "advice" from IFAs.

I'd suggest anyone thinking of investing has a good look around these sites first.Even if you decide you want to go with an IFA later, you will be better informed, and thus equipped to judge how good his advice really is.There's no doubt that though some IFAs are competent and ethical, others are "commission driven".

A little research first will help you to ensure you've picked a good one.:)