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Affordable IFA advice
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The regulatory costs are very heavy. The levies to the regulator, ombudsman, money advice service, FSCS along with PI cover and the requirement to hold £40,000 in a bank account all take a hit. Then you have the employment of a compliance officer or the use of a compliance company comes out around £30,000 a year for 1-2 man firm. Add in office costs, rates and staff (many advisers run with behind the scenes staff nowadays) and you are running at about £100k a year costs before you get out of bed.
Assuming an IFA bills for 40 hours a week, at £200 an hour for 40 weeks a year means he will have a gross income of £320k a year. Or £220k a year net after your £100k of fixed costs....
As a consumer I really don't care what fees/ PI an IFA has to pay. I'm just interested if an IFA can provide a cost effective service.... At £200 an hour I'm not going to get an IFA to do simple admin tasks like "Re balancing".
PS. You've made about 70,000 posts here, at 5 minutes a post you've spent about 5833 hours on MSE. At £200 an hour you've given over a million pounds of free advice...0 -
The first meeting with an IFA is free. That is to allow some filtering to take place for that sort of thing. However, going beyond that, how would an IFA know the existing plans are suitable if they dont spend time obtaining the "evidence" as you call it and analysing it. Advice is what you are paying for. If the advice is to keep what you have then that advice is actually a liability to the adviser. Advice to keep something is advice.
In a relatively small and simple investment case as posted by the OP (ex pension issues which I acknowledge may be a stumbling block) should the initial "free advice automatically move into advice to roll up the existing cash savings and Cash ISA into 100% S&S ISA (which are likely to be low risk/reward for the OP).
Moving to 100% S&S ISA, and leaving no cash reserves, doesn't seem a logical recommendation other than in some way justifying the fees to be charged - i.e. seen to be doing something."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
doughnutmachine wrote: »Assuming an IFA bills for 40 hours a week, at £200 an hour for 40 weeks a year
Are they likely to be able to bill for 40 hours?doughnutmachine wrote: »
As a consumer I really don't care what fees/ PI an IFA has to pay. I'm just interested if an IFA can provide a cost effective service....
For smaller investment pots is it possible to provide a cost effective service as the overheads appear to be stacked against them? What alternatives are there for the small investor are they being discriminated against by the regulations set up to protect them?
Are the compliance and PI costs high because of the quality of the regulated salespeople?
We are told the level of complaints upheld is low so why are the compliance and PI costs so high?"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »Are they likely to be able to bill for 40 hours?
Are the compliance and PI costs high because of the quality of the regulated salespeople?
We are told the level of complaints upheld is low so why are the compliance and PI costs so high?
most professionals I know will bill for circa 40 hours a week... I assumed that an IFA would only bill for 40 weeks a year which should cover training etc.
but I agree that the PI/ compliance does seem high if IFA complaints are so low....0 -
doughnutmachine wrote: »PS. You've made about 70,000 posts here, at 5 minutes a post you've spent about 5833 hours on MSE. At £200 an hour you've given over a million pounds of free advice...
generous, isn't he?
(though i suspect you've overestimated how long each post takes.)0 -
When I had a central heating boiler installed I was charged setup fees of 50% of the cost of the boiler and I pay 6% ongoing annual maintenance charges.
And what percentage of your gas bill does the installer get PA?
As it happens, gas installation is a "closed shop" as you're not legally allowed to DIY, hence the high costs of such work. We're seeing the thin end of the wedge too in electrical work via the nightmare that is Part P.
How long before managing your own savings and investments isn't legally allowed?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Assuming an IFA bills for 40 hours a week, at £200 an hour for 40 weeks a year means he will have a gross income of £320k a year. Or £220k a year net after your £100k of fixed costs....
IFAs frequently work longer than 40 hours a week but dont bill by the hour. A lot of the tasks and requirements cannot be billed that way.As a consumer I really don't care what fees/ PI an IFA has to pay. I'm just interested if an IFA can provide a cost effective service...
You are not a consumer of an IFA. I doubt you ever will be. It is a shame that you prefer to slag off advisers whilst at the same time remain ignorant of the reasons why.PS. You've made about 70,000 posts here, at 5 minutes a post you've spent about 5833 hours on MSE. At £200 an hour you've given over a million pounds of free advice...
5 minutes a post. How, about a minute a post as an average. Still, exaggerating is something we can see you like doing
Why don't inform us of your job? Or are you scared that your occupation can be taken apart just as easily as you attack advisers.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
We are told the level of complaints upheld is low so why are the compliance and PI costs so high?
One of the main reasons is the lack of consistency with the regulator. A tendency to move goalposts and backdate them. Lots of guidelines which are vague and left open to interpretation and no support when asked. The approach of the FSA was to issue guideline and then tell companies they would see if they interpreted them correctly when they did their visit. If they didnt, they would be fined. Early signs the FCA is a bit more helpful. Insurers do not like inconsistency.
The actual direct costs of the PI and levies is a small part. Compliance is the big part. You would laugh at some of the requirements needed. The FSA was known for micromanagement of the insignificant. Probably why it missed the major issues.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
grizzly1911 wrote: »Where there is limited value that an IFA can add, based on the evidence and information provided, would a fee still be justifiable or should the case be turned aside at the outset?
Arguably validating someone's financial plan and telling them you believe it is a good one is providing value. The person clearly isn't confident it is a good plan, and to evaluate a portfolio against someone's needs and decide if it is fit for purpose would require the same amount of knowledge and investigation as creating one (bar time to apply for accounts etc).
It would be nice to see an IFA offer a partial rebate if they were in this position, if not purely because it would make business sense though.Having a signature removed for mentioning the removal of a previous signature. Blackwhite bellyfeel double plus good...0 -
Arguably validating someone's financial plan and telling them you believe it is a good one is providing value. The person clearly isn't confident it is a good plan, and to evaluate a portfolio against someone's needs and decide if it is fit for purpose would require the same amount of knowledge and investigation as creating one (bar time to apply for accounts etc).
It would be nice to see an IFA offer a partial rebate if they were in this position, if not purely because it would make business sense though.
Or perhaps rather than turn business aside, because it isn't worthwhile to pursue, they just price high as many trades do. Hopefully the punter takes the hint and if not you can at least say they pursued the deal rather than you taking advantage.
I would still like to know why an IFA would suggest moving 100% into S&S ISA for the OP, leaving no cash pot."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0
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