Commission to IFA

mania112

bigfreddiel wrote: »

in fact 40% of people who have used an ifa have ditched them - the reason being this lack of clear information on charged and what they actually do

That's a fact? Please post the source.

bigfreddiel wrote: »

fo example an annual review that confirmsno changes need to be made - to be quite honest you can do this yourself now with the wealth of info on the web, and who cares more about your investments than you?

You can confirm that no changes need to be made yourself? So how do you know that will be the case? You're going to research the other investments available to compare?

And being fair to you, being overly cynical like you - an IFA makes more money when they're on a % for ongoing management if the investment improves, so what benefit would they have NOT to recommend the best performing funds?

bigfreddiel wrote: »

now, if you could negotiate a fee on performance you may be getting somewhere, say 3% of actual gains (not on the entire pot) and he pays you a very generous 1% of actual losses - that should work nicely

So I wrote an annual review yesterday for someone who had made circa 20% in the last 12 months (in a range of asset classes, primarily using AXA's Elite range, check it out if you like to 'DIY')

[calculator ready?]

If the client started with £100,000 he would now have £120,000.

Your proposal would be to charge them 3% on £20,000 = £600.

0.5% on £120,000 = £600 (and that 0.5% is paid monthly, from a lesser amount throughout the year, so it would be less than that).

How many times does a fund fall in value from one year to the next?

Your point... has no point.

mgdavid

bigfreddiel wrote: »

.......
in fact 40% of people who have used an ifa have ditched them - ......

I think it may be based on this:
GfK latest research survey, as reported in today's Daily Telegraph Money section, state:
"among consumers who have less than £50000 invested, almost 40% say they will never return to their financial adviser". In the £100k and over sector it's 20%.

mania112

thenewwoo wrote: »

I think I should be a little clearer about my complaint. I was ware that commission would be paid to my IFA, but not the way it was paid.
If I was told then I could have made an informed choice. I wasn't, so I couldn't.

Can you be more specific to improve the responses you'll get?

jem16

thenewwoo wrote: »

I think I should be a little clearer about my complaint. I was ware that commission would be paid to my IFA, but not the way it was paid.

Have you looked back at your illustration? Mine certainly laid it out clearly.

If I was told then I could have made an informed choice. I wasn't, so I couldn't.

It was part of the regulations that it must be disclosed so you were told. Unfortunately, as you have said yourself, you didn't read it.

You paid nothing up front to the IFA. How did you think you were paying for the advice?

dunstonh

I think I should be a little clearer about my complaint. I was ware that commission would be paid to my IFA, but not the way it was paid.

On a implicit commission product, the provider pays the adviser a commission but charges you to cover that (and probably a lot more). on an explicit commission product, the fee is charged explicitly. e..g if the fee is £5000 then £5000 will either be deducted from the pension in one go or over a defined period. Nothing above that. The explicit method is nearly always cheaper than the old implicit one.

The IFA needs to make you aware of the remuneration. That has taken place. So, job done. Most illustrations also tell you the charges as well.

I think it may be based on this:
GfK latest research survey, as reported in today's Daily Telegraph Money section, state:
"among consumers who have less than £50000 invested, almost 40% say they will never return to their financial adviser". In the £100k and over sector it's 20%.

I survey of a small number isnt an indication of reality. For example, many IFAs wouldnt take sub £50k investors to begin with. Let alone after RDR. FAs tended to deal with the small stuff but there isnt as many FAs now. The FSA said before RDR that smaller investors will be less covered by advice and a reduction will exist. I cannot imagine there is a single IFA that has either removed or lost 40% of their clients. 4% is more likely but natural new clients would cover that. Also, remember that the majority of advice is transactional. Not serviced. FAs rarely had any servicing. That was more an IFA thing. Most consumers wouldn't know the difference (unless they have a servicing IFA).

I have just finished a record year and am turning people away. Other IFAs I know are similar.

Aegis

bigfreddiel wrote: »

fairly typical of not only ifas,but most financial 'professionals'

transparency and actually stating their actual charges is not high on their agenda

Evidence?

hats one reason for rdr, but 8 months in its not really working

Evidence?

in fact 40% of people who have used an ifa have ditched them - the reason being this lack of clear information on charged and what they actually do - fo example an annual review that confirmsno changes need to be made - to be quite honest you can do this yourself now with the wealth of info on the web, and who cares more about your investments than you?

Already dealt with by others.

now, if you could negotiate a fee on performance you may be getting somewhere, say 3% of actual gains (not on the entire pot) and he pays you a very generous 1% of actual losses - that should work nicely

Stupid idea, as you have been told many, MANY times before. If you assume average annual gains of 7% per annum, this would result in an IFA getting a fee of around £210 per £100,000 invested. I wouldn't deal with a client for only £210 per year, it's simply not enough to cover regulatory costs, let alone actually monitoring the portfolio, conducting a meeting, discussing changing objectives, responding to legislative changes, implementing new strategies, etc.

In addition, in years where the investment markets pretty much all tank unexpectedly, such an adviser would lose a large amount of money, likely go out of business and leave clients without an adviser at a time they likely need one the most.

You'd need to massively increase the performance fee to make this workable from an adviser's perspective.

doughnutmachine

£5k for setting up a pension seems a rip off to me.

But I bet this thread will not prevent the same people saying "go onto unbiased.co.uk and get an IFA" for anyone wanting investment advice.

kidmugsy

Why are people prepared to pay for a plumber but not an IFA? Strange things, superstitions.

jem16

doughnutmachine wrote: »

£5k for setting up a pension seems a rip off to me.

Of course it's too high but it doesn't mean it's indicative. With explicit charging you would be unlikely to see a fee anywhere close to that but if you do then simply walk away and find someone else.

But I bet this thread will not prevent the same people saying "go onto unbiased.co.uk and get an IFA" for anyone wanting investment advice.

I will still suggest seeing an IFA where I think it warrants it. Reading some threads, it is quite clear that some people do not have the knowledge to DIY.

doughnutmachine

kidmugsy wrote: »

Why are people prepared to pay for a plumber but not an IFA? Strange things, superstitions.

I set up a SIPP for myself. It only involved filling in a few forms......

It's hard to imagine what work an IFA has to do that justifies charging £5k to start a pension.....