Services of an IFA

Aegis

MarcoM wrote: »

Hi,

Assuming one has a large sum to invest (500k plus) and is considering the services of an IFA, what should I be looking for?

What you should be looking for will vary depending on your personal circumstances and preferences. If, for example, you are a staunch believer in the Efficient Market Hypothesis, then you'll want an IFA who understands how to construct a portfolio of passive investments at ultra-low charges without sacrificing the asset allocation and tax management strategies that you pay them for.

In all cases you should look for someone who has a good understanding of tax wrappers and is able to quickly come to terms with your goals and shortfalls.

You will also want to look for cost effectiveness. At £500k you can probably eliminate most IFAs who are charging 3% or more, and should ideally be looking for probably 1% or less, whether that's expressed as a percentage of invested assets or a fixed fee. At 1% and assuming a fee rate of £200 per hour, that should buy you 25 hours of the IFA's time, which might be realistic if they are investigating all options (e.g. including a review as to whether it would be appropriate to introduce you to a discretionary manager for the actual selection of your investments or to carry on that process in-house).

How many consultations should take place between customer and IFA when planning the investments? How long should a consultation last?

The answer from the consumer point of view is "as many as it takes before you're confident that you have been presented with the right solution". The correct answer from the adviser's point of view will be "as many as it takes to make sure they're confident, within reason based on the fee I'm charging them".

My meetings generally get booked for 90 minutes, but sometimes run over and sometimes stop after an hour. It really depends on the client and the complexity of their affairs.

Some time ago I phoned a couple of IFAs in my area and when asked whether they would work for a fixed fee they would not give me an answer on the phone. They said it depended on many factors including my own circumstances.

For comparison, my answer would have been "Yes, but I need to understand your affairs before I can quote on that basis because I cannot otherwise know how many hours I will likely spend on you". I still probably couldn't give you an answer over the phone immediately, but after an initial review of what a client is looking for, I will happily quote on a fixed fee basis. I'm sure many other advisers would also do so, however there will also be those for whom that business model doesn't make sense.

Can I insist before the first meeting that everything is done on a fee basis?

Yes. You are the client, you decide whether you will pay them or not. If you tell them that you want a fixed fee basis and they propose a variable fee, you have every right to walk away.

dunstonh

I'd argue it was probably both really. The bank doesn't really care about losing a savings balance here and there, but it will jump on an opportunity to get an investor on board. At the same time, the call was probably prompted by concerns re the validity of the cheque if there was no notification in advance such a large sum was going out (especially if it's unusual for the drawer to pay out large amounts).

You are being too generous. I have had many attempts by banks over the years to try and divert the investment into their own service. Some of the reasons given were totally bogus. One couple was told they needed to go in to sign a new joint authority as the one the bank held had become scruffy and the signatures were no longer clear. They went in to the bank only to spend the time with the clerk who tried to get the in-house sales rep to join in to sell them their investment. It was only when they were heading back home that they realised the bank clerk hadnt once mentioned the authority to be signed and they hadnt signed anything.

One had her cheque bounced by the bank with the excuse the signature doesnt match. When she went in to sign a new signature card, the signature was the same as the card and the clerk spent nearly all the time trying to get her to stop the investment to use them.

You see similar pop up in the financial press from other advisers as well as IFA forums.

This isn't as much work as I make it sound. And I'd recommend using cheque rather than CHAPS as it wont cost you anything (CHAPS will cost you anywhere between £20-£50 depending on your bank).

Cheques are fine. The vast majority go through without the bank trying to muscle in. Now the banks have sacked their salesforces, it is unlikely that they would try a sales process using a fake reason now.

grizzly1911

dunstonh wrote: »

You are being too generous. I have had many attempts by banks over the years to try and divert the investment into their own service. Some of the reasons given were totally bogus. One couple was told they needed to go in to sign a new joint authority as the one the bank held had become scruffy and the signatures were no longer clear. They went in to the bank only to spend the time with the clerk who tried to get the in-house sales rep to join in to sell them their investment. It was only when they were heading back home that they realised the bank clerk hadnt once mentioned the authority to be signed and they hadnt signed anything.

One had her cheque bounced by the bank with the excuse the signature doesnt match. When she went in to sign a new signature card, the signature was the same as the card and the clerk spent nearly all the time trying to get her to stop the investment to use them.

You see similar pop up in the financial press from other advisers as well as IFA forums.



Cheques are fine. The vast majority go through without the bank trying to muscle in. Now the banks have sacked their salesforces, it is unlikely that they would try a sales process using a fake reason now.

Are these recent experiences or historic?

With so much processing done away from the front line these days I am not so sire the link still exists for sales reasons.

I know it used to happen in the past.

dunstonh

Are these recent experiences or historic?

Nothing in the last two years for me other than a few clients saying they had phone calls from their bank trying to get them booked in when they paid the money in to the account (in readiness for the cheque). I havent had that since RDR but if the staff are no longer targeted to book appointments then that probably accounts for it.

With so much processing done away from the front line these days I am not so sire the link still exists for sales reasons.

The last dodgy one I had was Lloyds. At that point the processing was central. Yet the contact was from branch.

bowlhead99

Speaking of Lloyds, while moving large sums out of my accounts through online banking Faster Payments, where it would usually go to a confirmation screen, it first threw up a splash screen saying something along the lines of "why not give one of our savings advisors a call and talk about the best options for your savings, on ..."

So not quite as intrusive as being called into the branch but definitely a bit of "we would rather you didn't take money out of our bank and put it in somebody else's". They don't bother for a few thousand but at £20k+ they would, as it doesn't cost them anything to try.

Last time was when I was moving a tranche of house deposit to a solicitor early this year but I think I've also had it when moving money from current account to a non-Lloyds savings /investment account. When it happened last time, a friend said it had also happened to him with his house deposit too (this was back in Jan).

Caladan

dunstonh wrote: »

You are being too generous.

Not generous, Devils advocate

dunstonh wrote: »

I have had many attempts by banks over the years to try and divert the investment into their own service. Some of the reasons given were totally bogus. One couple was told they needed to go in to sign a new joint authority as the one the bank held had become scruffy and the signatures were no longer clear. They went in to the bank only to spend the time with the clerk who tried to get the in-house sales rep to join in to sell them their investment. It was only when they were heading back home that they realised the bank clerk hadnt once mentioned the authority to be signed and they hadnt signed anything.

I can see that happening, specially back in the sales targets days. A good investment could be a months target for me, and all I had to do was book them in with an adviser, didn't even have to make the sale myself. The signature part was probably legit though, where I work if we take an instruction with an incorrect signature and fail to update it, I fail audit, just like that. Kinda dumb to forget to update it just because your sales pitch fails though!

dunstonh wrote: »

One had her cheque bounced by the bank with the excuse the signature doesnt match. When she went in to sign a new signature card, the signature was the same as the card and the clerk spent nearly all the time trying to get her to stop the investment to use them.

Again, taking the opportunity of a bad signature (even if the one signed on the card was the same as the cheque, it may not have been the same as the record, or vice versa) to put a pitch in

dunstonh wrote: »

Cheques are fine. The vast majority go through without the bank trying to muscle in. Now the banks have sacked their salesforces, it is unlikely that they would try a sales process using a fake reason now.

I still argue the reasons aren't fake, more that the staff are encouraged to 'make the most out of every opportunity.'

I sure don't miss sales targets

jamesd

Caladan, maybe not fake when you are the one doing things, but sometimes staff don't necessarily act in ways that would be desirable in an ideal world. Nor do companies sometimes.

MoneySaverLog

Surely banks don't behave in such underhanded ways when transferring large amounts of cash to a competitor?

dunstonh

MoneySaverLog wrote: »

Surely banks don't behave in such underhanded ways when transferring large amounts of cash to a competitor?

Staff were rarely handed targets to retain cash on deposit or even get cash on deposit. They were given targets to book appointments for the sales rep who in turn was on target to sell an investment. Not a savings account.

MarcoM

the cheque was for 70k and the bank was hsbc.
the actual branch manager rang me not the central office.

I think what has happened to dunstonh is disgraceful. I wonder if his clients complained officially or claimed something if they lost some interest due to the delayed transaction.

I will admit that my signature is a mess but when hsbc rang me they did not query the signature.....they wanted to know what the money was for...and then "would you like to come in to discuss investing your money?".