Commission to IFA

dunstonh

Ok so, dunstonh, before January 2013 would you have sold someone a pension and in formed them of the commission you would receive and inform them that part of the monthly contributions they were to pay would be used by the pension company to repay that commission?

If I used a mono charge pension then no. If I used a multi-charge pension then yes. the charges on multi-charge pension appear on the illustrations and I also put them in the suitability report. I always benchmark the projections on either mono-charge and multi-charge against a stakeholder pension as well to indicate total cost over the term (that is unless it was a stakeholder pension recommended).

mania112 that's exactly what you'd expect. Thank you. What if there's no mention of anything like this?

Assuming its multi-charge, it should appear on the illustration exactly what the charges are. Pre Jan 2013, it may not say that the adviser is receiving part of those charges (although it will say what the adviser was receiving). However, it will state what the charges are.

I just looked at a couple of multi-charge illustrations from pre-RDR and they all state the charges and they all state what the adviser is getting paid. There is no explicit wording to say one is paying for the other but then there is no need for that an in most cases, it is pretty logical. e.g. one illustration says initial charge percentage 1% / initial charge amount £5. Total initial contribution £500. Net amount £495. There will be an initial charge of 1% of each of your regular contributions with the balance being invested into your selected funds...... Where is shows adviser remuneration it says "we will pay your financial adviser initial commission equal to 1% of each regular contribution....... For example, for a regular contribution of £500, we will pay your financial adviser £5 in initial commission in respect of that contribution.

So, it both tells you the charges and the remuneration and you dont need to be a rocket scientist to see that one equals the other.

Is your pension mono-charged or multi-charged? Who is the provider?

mgdavid

dunstonh wrote: »

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

Agreed, and not unexpected. RDR and the general tightening-up of controls on the industry is likely to have shaken out some of those on the threshold of retirement, the lowly-qualified who know they would struggle to improve, some who cannot be bothered to take more exams etc etc. Meanwhile the well-qualified and experienced professionals who can demonstrate it will go from strength to strength. Just hope you don't get too busy to continue posting !

mania112

thenewwoo wrote: »

mania112 that's exactly what you'd expect. Thank you. What if there's no mention of anything like this?

There are 2 places where information like this should be given to you. In the illustration and in the report from the IFA.

If it is not in either, there could be an issue. It would be very rare there it's not mentioned in the illustration because that's the basis for the actual application (so an IFA would probably have to produce 2 illustrations and apply with the one which is different to the one you saw).

If it is not on the report but on the illustration you would find it difficult to make a claim (especially pre 2013) because the report will probably say 'please refer to the illustration'.

mania112

Having said that if you want to complain the process is to question the IFA first.

Then, if he/she doesn't respond or you're not happy with their response, you'll need to go to the Financial Ombudsman Service to escalate the matter.

There is no cost to you to do so.

N1AK

mgdavid wrote: »

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%.

So he was entitled to call it a made up statistic then. I don't use an IFA but I think a lot of the criticism they get can be unfair. When you consider that someone with a small sum will have to pay a proportionately higher fee for proportionally less benefit, may get a bad IFA, may not like the advice they get etc.

What's interesting is that people with larger sums being managed are happier. Maybe they tend to get better advisers or are less bothered by fees...

I think there's a decent chance I'll start using an IFA at some point. As the amount of money I have invested increases, work pressures increase and possibly personal time commitments (kids for example) build it makes more sense. That said, the more money I have invested the less comfortable I would be delegating decisions about how it is used.

dunstonh

So he was entitled to call it a made up statistic then. I don't use an IFA but I think a lot of the criticism they get can be unfair. When you consider that someone with a small sum will have to pay a proportionately higher fee for proportionally less benefit, may get a bad IFA, may not like the advice they get etc.

As is typical on these things, the media dont quite report it right and twist it and then the anti-IFA posters twist it further.

1 - The research did not specify IFAs. It said FAs
2 - The media article said "One in three investors who have taken financial advice in the past five years says they will never consider paying for the service again". Yet the research said: "Of those planning further investment within the next 12 months, one in three now says they would not pay for advice again". So, the sample is going to be small.
3 - since RDR, most FAs (such as the banks) have ceased to exist. A third of advisers have gone.
4 - Many IFAs (indeed, possibly most) turn away small investments or price them to act as a passive blocker. That used to be the FA territory.

The growth in DIY is going to have an impact but mostly on small value things that IFAs are not typically interested in. However, many DIY investors return to advice when the novelty runs off or they go through a market crash and realise that they are just as susceptible to losses and possibly greater losses as many inexperienced DIY investors invest above their risk profile and fashion invest.

There is room for DIY and IFA. Thankfully, it is mostly the FA market that is in decline. Although some are thriving (e.g. SJP - one of the most expensive distribution channels going - is thriving apparently).

bigfreddiel

doughnutmachine wrote: »

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.....

i've often thought that - hardly taxing, i guess you're paying for the professional's skill at stock/fund picking that fits your perceived risk profile, but as we all know that's impossible, todays winners are tomorrows losers - you cannot beat he market without spending loads of money

sometime ago as an experiment a bunch of professionals were asked to create a portfolio of stocks that would bomb - 70%+ beat the market! would they have done as well if they had been saked to beat the market?

the point is no one can predict how a portfolio will do - they can only mitigate risk

so after all that you can do as wel as any professional - so jdi

fj

atush

the point is no one can predict how a portfolio will do - they can only mitigate risk

so after all that you can do as wel as any professional

Do you know how to do a risk profile?

I expect not, as most amateur investors misjudge their own attitude to risk and only find out how wrong the were about their own attidude to risk when their investments go t*ts up.

We get those here all the time who say " I am not investing in equities, I want something risk free " and it turns out they invested all their spare cash into one dot com share during the boom and lost badly- so now eschew all equities because they once stupidly invested above their own risk threshold and had all their eggs in one basket.

tell_it_how_it_is

I decided I'd go it alone after having a meeting with an IFA last year. Unfortunately, despite me saying I'd be interested in transaction/fee only, he tried in person, via phone, and via email to get me to agree to an ongoing commission. I also wasn't comfortable with no reasoning as to he suggested why one pension should be moved.

Ironically, a work colleague showed me his pension statement just today, showing commission payments of almost £60 a month to the very same IFA. He'd been paying it since 2010, and has had no contact from them since - so they've taken out in excess of £2k in that period.

Granted, I don't know if that cost has been or will end up being good value, and neither does he, and that is in effect where it falls down for me - there's no way I know of which would have proved that moving to option B was better than staying with option A. But as alluded to, maybe those with bigger portfolios feel more comfortable than those with lower ones like myself, where the fee figures seem to be excessive.

I simply did my own analysis of figures from previous statements, monitored ongoing changes online, and decided the way it was going was acceptable for me. Others may have analysed it differently of course, and it's not to say I haven't dropped a b***ock. :-)

So it's not meant to dismiss IFAs out of hand, but just my thoughts considering my own experiences and financial status.

bigfreddiel

tell_it_how_it_is wrote: »

I decided I'd go it alone after having a meeting with an IFA last year. Unfortunately, despite me saying I'd be interested in transaction/fee only, he tried in person, via phone, and via email to get me to agree to an ongoing commission. I also wasn't comfortable with no reasoning as to he suggested why one pension should be moved.

i had a similar experience - maybe it was the same one - or mine was a different one but went to the same sales school

fj