Affordable IFA advice

gadgetmind

grizzly1911 wrote: »

Estate agents aren't needed either.

Blimey, that's worth knowing.

We were lucky enough to be able to buy our "forever house" at age 30, which was, errr, a while ago, but I'm sure we'll be moving again in a few decades.

dunstonh

you made some good points, but I think historically IFAs have failed to recommend Investment Trusts because they never paid commission while Unit Trusts did.

Your misconception has already being answered on this thread. Yet you choose to ignore it. Historically, IFAs failed to recommend investment trusts normally because they did not have stockbroker permissions. The FSA altered the control functions in the lead up to RDR and IFAs can now consider them. Early figures show IFAs taking advantage of that post RDR but still not using them in volume and with good reason. They are generally regarded as being higher risk than the equivalent unit trust. Plus, with unbundled pricing, they are often more expensive than the UT/OEIC.

The three professions that I can think of where employees get a large part of their income from commission are: estate agents, used car salesmen and IFAs.....

IFAs are paid fees. Not commission since RDR.

Estate agents and car salesmen are hardly famous for their straight dealing.

Yet IFAs are just 1% of complaints and the FOS has commended IFAs in general for quality files showing that they know their clients.

No-one has to use an IFA if they dont want to. However, we frequently see posts on this board where people would clearly be better off using an IFA than DIY. To suggest otherwise is childish and silly. If you applied that approach to other occupations, then there would be plenty you could say the same about.

JuicyJesus

Always worth pointing out that an IFA or other adviser bears a lifelong responsibility for the suitability of the advice they give, while someone who baselessly slags off advisers and convinces people to avoid them and DIY bears no responsibility at all for the mess you might make from DIYing.

If you don't want to use an IFA then don't use an IFA. But you don't get the same protection and you should also do your own research.

grizzly1911

JuicyJesus wrote: »

Always worth pointing out that an IFA or other adviser bears a lifelong responsibility for the suitability of the advice they give, while someone who baselessly slags off advisers and convinces people to avoid them and DIY bears no responsibility at all for the mess you might make from DIYing.

If you don't want to use an IFA then don't use an IFA. But you don't get the same protection and you should also do your own research.

By talking you down on the ATR and providing relatively low risk authorised investments the chance of claiming negligence is low.

The advisor takes the same fee and the punter wonders why they bothered.

dunstonh

grizzly1911 wrote: »

By talking you down on the ATR and providing relatively low risk authorised investments the chance of claiming negligence is low.

The advisor takes the same fee and the punter wonders why they bothered.

Seeing as the average consumer is cautious in nature and a very common DIY error is to invest above the risk profile and capacity for loss, perhaps that same punter would be wise to follow the advice.

JuicyJesus

grizzly1911 wrote: »

By talking you down on the ATR and providing relatively low risk authorised investments the chance of claiming negligence is low.

The advisor takes the same fee and the punter wonders why they bothered.

If the punter thinks they have a greater attitude to risk than the advisor says they do then they can always stick two fingers up at the advisor and DIY with whatever they choose. And if that comes a-cropper then you're !!!!!!ed.

If you have enough knowledge to DIY then DIYing is a very viable option. Most people don't and are not inclined to learn.

doughnutmachine

JuicyJesus wrote: »

If the punter thinks they have a greater attitude to risk than the advisor says they do then they can always stick two fingers up at the advisor and DIY with whatever they choose. And if that comes a-cropper then you're !!!!!!ed.

If you have enough knowledge to DIY then DIYing is a very viable option. Most people don't and are not inclined to learn.

I honestly think that an averagely intelligent person could get the hang of investment fairly easily. It's not some massively complex skill like brain surgery or flying a 747.

Of course some people just want their hand held when it comes to investments. But at the same time I thinks it's a disservice to readers to suggest that it's likely that a reasonably competent amateur investor will come "a-cropper".

It does seem that more people come on this forum with tales of bad IFAs than tales of individuals making bad investments....

magpiecottage

[QUOTE=dunstonh;63994092___It_was_the_PIA_that_brought_that_requirement_in_back_in_1994_I_believe.[/quote]Actually it was 1 January 1995

So about 19 years ago.

26 days to the 19th anniversary - close enough!

doughnutmachine wrote: »

Historically, directly held shares/ property/ Investment Trusts never paid commission to IFAs. Strangely enough IFAs historically never advised their customers to buy these products. Is that not fairly overwhelming evidence that the IFAs steer customers towards products that pay commission?

Directly held shares is a good option if you have a VERY large amount to invest (I was told a minimum of £50,000 to make it worthwhile in about 1992).

Less than that and it is difficult to achieve a sensible level of diversification (not putting all your eggs in one basket).

This applies even more to property.

Investment trusts can provide some diversification but there are less controls on what they invest in and this can also involve gearing (borrowing to invest). In addition, they amount to unregulated collective investment schemes which cannot be legally marketed to most investors at all and certainly not by unauthorised advisers.

In any case, these types of investment do not provide protection from the Financial Ombudsman Service or the Financial Services Compensation Scheme. The OP's fund is within the limits of both.

doughnutmachine wrote: »

In my profession, I'm expected to make decisions that are in the best interest of my client,

I have never thought of doughnut making as a profession, I'm afraid - and I can decide for myself between ring and jam and whether I want sugar or hundreds and thousands on mine.

and not to advise them to buy products that pay me secret commission.

As I say, the commission on investments was disclosed between 1995 and 2012 when it stopped being an option. Even before then it was disclosed that commission was paid and the amount would be disclosed on request.

doughnutmachine wrote: »

I just wish we could all acknowledge that salesmen will prefer to sell products that pay commission ahead of products that don't pay commission.

No doubt, but as I say, for the last year (okay - the last 11 months and 5 days) no adviser has received commission on any new investment business.

Contrast that to the two carrots I purchased today. Twenty pence each. I have no idea how much they cost the retailer. Does that mean he took a secret commission?

doughnutmachine

magpiecottage wrote: »

No doubt, but as I say, for the last year (okay - the last 11 months and 5 days) no adviser has received commission on any new investment business.

Contrast that to the two carrots I purchased today. Twenty pence each. I have no idea how much they cost the retailer. Does that mean he took a secret commission?

Lol, I sense a lot of anger in this post. It wasn't me that forced IFAs to stop taking commission. I think the Financial Authorities have done the IFA profession a favour by stopping them acting like salesmen..... We all know IFAs loved giving "free" advice and then getting huge commission from the companies you invested the punters money with.

Who knows, maybe one day IFAs will charge by the hour like most true professionals..... I wouldn't be too happy if I went to a doctor and he prescribed the medicines that just so happened to give him commission.....

dunstonh

It does seem that more people come on this forum with tales of bad IFAs than tales of individuals making bad investments....

With millions of transactions being done a year it is inevitable some wont go right. The nature of the internet is that you read bad things. Especially on consumer forums. We actually see very few complaints on this board about advice. The most common issue appears to be some greedy ones with high charges.

The FOS stats show that on average, 33% of the 714 complaints against advisers handled by the FOS in the six months from 1 January 2013 were found in favour of the complainant, against an average of 64% across all businesses.

Did you catch that figure. Just 714. Out of over 327,000 complaints. Of those 714, the biggest IFA network had 292 of them and the FOS only upheld 1 in 5 of those. Millions of transactions a year but just 714 complaints at the FOS in the first 6 months.

Who knows, maybe one day IFAs will charge by the hour like most true professionals.

Most IFAs have an hourly rate but most consumers dont want an hourly rate. Other professions are moving away from hourly rates as well. it is increasingly common to see solicitors and accountants charging block rates for jobs done and fixed charge for charges for advice is one of the most common methods used for advisers. Of course, you havent used an adviser. So, you wouldnt know this.

I wouldn't be too happy if I went to a doctor and he prescribed the medicines that just so happened to give him commission.....

Yet it happens. http://www.theguardian.com/society/2013/apr/05/drug-companies-pay-doctors-40m