Reasonable IFA commission

Linton

Rollinghome wrote: »

The FCA tends to agree with you and has expressed concerns as to whether charging for advice on a percentage basis is compliant with the aims of RDR:

"FCA warns of ‘dealing bias’ from percentage charges" http://citywire.co.uk/new-model-adviser/fca-warns-of-dealing-bias-from-percentage-charges/a692355

The advantage of a percentage charge to society as a whole is that it provides people with small pensions access to financial advice. And such people may be in greatest need of basic help. Simple payment for work done is obviously desirable for those with large investments but leaves perhaps the majority of the population to work things out on their own.

IronWolf

dunstonh wrote: »

And how does that product get priced? Do you pluck a price out of thin air or do you work out what the costs are?

The products are articles and the price is fixed by the website I sell them too. There is no guarantee they will even accept it, usually they will be paid per view of the page, but the good ones get a fixed fee to be included in their 'best stock picks' emails.

ds1980

I dont know your situtation and your aspirations but you can invest directly with vanguard. Minimum 100k. Easy. If in a sipp the us withholding tax can be 0. Therefore buy some big us companies that have 50 plus years of dividend increases. Lastly buy Berkshire Hathaway shares. No dividend but the best in the business and the chances of them producing annual growth is the best bet you'll ever make. Giving someone 2% before you've even started is quite frankly absurd what does he care whether he makes you money or not? your mentality is like most ( no disrespect ) same for people that have had the same bank account since 2 and therefore only use their banks products. People feel honour bound and forget the big picture. There are plenty of calculators online that show the effect of these costs and charges. Try one and let us know how sick it makes you feel. You could be giving that money to your children. Whatever way you go ditch the Ifa. GL.

my_names_dave

IronWolf wrote: »

The products are articles and the price is fixed by the website I sell them too. There is no guarantee they will even accept it, usually they will be paid per view of the page, but the good ones get a fixed fee to be included in their 'best stock picks' emails.

So your costs are time essentially. So knowing there is a fixed price for the article I take you probably have a fixed amount of time that you spend on each article before moving on?

My flatmate is a copywriter and his best friend is his egg timer.

IronWolf

my_names_dave wrote: »

So your costs are time essentially. So knowing there is a fixed price for the article I take you probably have a fixed amount of time that you spend on each article before moving on?

My flatmate is a copywriter and his best friend is his egg timer.

Yes a lot of time. Not just writing the article, but researching and reading to try and find the ideas to write an article.

Luckily I do a lot of research anyway as I invest my own money so the articles are a way of monetising what I'm doing anyway and I think that's what a lot of other writers do too.

Still its less risky than my other venture which is writing a novel. 100,000 words and no assurance it will even be published, let alone make money!

my_names_dave

IronWolf wrote: »

Yes a lot of time. Not just writing the article, but researching and reading to try and find the ideas to write an article.

Luckily I do a lot of research anyway as I invest my own money so the articles are a way of monetising what I'm doing anyway and I think that's what a lot of other writers do too.

Still its less risky than my other venture which is writing a novel. 100,000 words and no assurance it will even be published, let alone make money!

But the point is, in other industries there are some tasks the require so much time that you would then not have enough time to do everything else, and the business would not be viable. Hence why it becomes 'cheaper' to outsource the work to another firm who specialise in that, and pass those cost along to the customer.

IronWolf

my_names_dave wrote: »

But the point is, in other industries there are some tasks the require so much time that you would then not have enough time to do everything else, and the business would not be viable. Hence why it becomes 'cheaper' to outsource the work to another firm who specialise in that, and pass those cost along to the customer.

Yes, I'm not against people hiring an IFA at all if they want to outsource the work, but I'm just saying if I did it I would rather pay a fixed fee than a % of my portfolio every year.

I think people prefer a % because it doesn't 'feel' like you are actually paying anything.

bigadaj

IronWolf wrote: »

Yes, I'm not against people hiring an IFA at all if they want to outsource the work, but I'm just saying if I did it I would rather pay a fixed fee than a % of my portfolio every year.

I think people prefer a % because it doesn't 'feel' like you are actually paying anything.

Percentage fees are generally quite outmoded for professional services, working for consulting engineers its now never a percentage fee and hasn't been for twenty years or more. Similar for architects and others, its normally lump sum for defined work packages though obviously much of our work is for large companies who frequently have specialist knowledge themselves so different to a retail investor/ consumer. Percentage fees are really for rough estimates, like half your age in a pension, 35k saved by 35, 100 minus your age in bonds, good for a rough estimation but surely the type and scope of work should be defined and agreed, x hours at a particular rate.

The problem, or benefit depending on your perspective is that this promotes fee based competition, and its down to persuading a client that you're adding value, or reducing risk to justify why you charge more than the guy down the road.

There are a wide range of fees quoted for IFAs, from under £100 to nearly £300 per hour though no explicit competition on price that I can ascertain. The numbers of IFAs seem to be reducing also rather than rates reducing which is an interesting outcome.

dunstonh

The numbers of IFAs seem to be reducing also rather than rates reducing which is an interesting outcome.

There has been an increase in adviser numbers from 31,132 at the end of December 2012 to 32,690 in July. (source: FCA).

The split between IFA and restricted is not known. Whilst some say IFA numbers may have dropped a little as some chose to go restricted with RDR, others say they may have increased as the banks pulled out of advice and some of those advisers would have moved to IFA status. So, the figure is probably relatively stable. Especially given the FCA figures. Surprisingly, there is only estimates on numbers prior to that. The number of IFAs and restricted advisers operating on the first day of the RDR was 20 per cent lower than the number estimated by the FSA to be operating the previous year, from 25,616 to 21,696. The number of bank advisers fell by 44 per cent in the same period, from 8,658 to 4,809. FSA head of investment intermediaries Linda Woodall said the regulator’s estimates for 2011 adviser numbers may include some double counting.

Freecall

dunstonh wrote: »

FSA head of investment intermediaries Linda Woodall said the regulator’s estimates for 2011 adviser numbers may include some double counting.

The regulator unable to count the number of people it regulates........


Now, could that be part of the financial industry's problems?