Affordable IFA advice

Linton

bigadaj wrote: »

People's opinions vary but the big factor is always cost. IFAs will no doubt work for a fixed fee, but it always work back to an hourly rate and the commonly quoted figure of £150-£200 an hour is just excessively high in my opinion.

Doesnt seem remarkably high for one-off work done by a qualified professional. Looking around the net out of interest I find that this is similar to the fee charged by a solicitor with 4 years experience. Perhaps not an unreasonable comparison.

jimjames

grizzly1911 wrote: »

Positive for who?

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?

Surely positive for the consumer - if there is no bias that you seem to believe there is/was (I'm sure it did exist too from my last experience 20 years ago) - then being paid for work done regardless of the investments chosen is a preferable situation. I can also well imagine that in some circumstances the initial free fact find is enough to suggest no change is needed.

bigadaj

Linton wrote: »

Doesnt seem remarkably high for one-off work done by a qualified professional. Looking around the net out of interest I find that this is similar to the fee charged by a solicitor with 4 years experience. Perhaps not an unreasonable comparison.

It's down to perceived value I suppose, and personally prefer to do my own research, with the saving grace that I can do relatively worse but potentially come out better in the end because of the saving in fees.

It would be interesting to see if there is some saving that the ifa can achieve through their own platform as opposed to what can be accessed diying. Also whether added value can be substantiated to any degree by the work the ifa does, that is looking at things from their customers perspective and justifying the value in the work done.

gadgetmind

jimjames wrote: »

As an example wedding photographers can charge around £1000 to £2000 and beyond with even the cheapest around the £500-750 level..

That little? Imagine how much more they'd get if they charged 3% of your joint income in the year you got married and the 0.5 for *every* subsequent year.

dunstonh

It is interesting to see numbers quoted and the reactions. As an example wedding photographers can charge around £1000 to £2000 and beyond with even the cheapest around the £500-750 level. That involves no qualification or mandatory insurance requirements. It's interesting to see the comparison with the costs of an IFA that need both.

The costs of being an adviser are stupidly high. We carry no stock and transportation is effectively yourself. It should be lower.

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.

You then have a lifetime of liability for the advice you give. That is virtually unique to financial services. After you retire, you need to continue paying liability insurance for as long as you live or take a gamble if you dont. Run off cover is about £1500-£2000 a year. As you are no longer trading, that will not be deductible either. That has to be factored into the earnings whilst working.

Training and compliance and ongoing professional development has always taken a hit but its far more structured nowadays. Knowledge costs money and whilst some here poo poo knowledge, the fact remains the average consumer has nothing near the knowledge of a post RDR IFA. (I say post RDR IFA as the pre-RDR qualification went back to insurance agent days and some who held that qualification knew less than many consumers that post here. One positive of RDR was the pushing out of the low knowledge adviser). Knowledge costs money. Always has done in any profession. Continuing knowledge updates and improvements costs as well.

Lastly, software is a major cost. All IFA software is monthly/annual licence. You can find yourself paying nearly £1000 very easily for back office software, research software, due diligence reports, analytical and comparison software etc. As you have a liability for life, the files in relation to the advice given have to be retained for life. That often means some of the software needs to be continued into retirement.

It is shocking reading posts that say, "how much interest will I get at 4% on £5000?". Imagine how that lack of knowledge would apply if they were looking at investments. There seems to be a big void in financial education but I'm sure on the whole teachers are no better managing money than the rest of the population so would be limited what can be shown unless an outside body was to assist.

That lack of education along with a society that continues to dumb down whilst at the same time giving greater consumer protection impacts on costs as well. Since 2007, an adviser has to take in the ability of the person to understand the advice. This can involve advising an effectively dumbed down investment/solution to what you would personally use or for someone with a greater understanding. So, you could get several people with virtually similar circumstance and risk profile and capacity for loss but end up with different recommendations due to their level of understanding. That sounds quite reasonable until you realise that a person with a more basic option posting on these forums is often told that what they have is basic, wrong or not good enough.

dunstonh

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?

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.

dunstonh

It would be interesting to see if there is some saving that the ifa can achieve through their own platform as opposed to what can be accessed diying.

IFA platforms are cheaper than DIY platforms. However, if you add the cost of advice on to the cost of platform then in many cases, it will become more expensive. I cant say all cases as someone with £100k who is charged say £1000 for advice is then put on to a platform with no ongoing servicing from that IFA is likely to find their annual costs around 0.5% a year lower than a certain major platform we see mentioned on these boards all the time. So, within a couple of years, the initial cost of advice will be recovered.

Most IFAs cannot be cost effective on small amounts any more. The old model of cross subsidy can still exist to some extent but it is in decline. An established firm can still use cross subsidy but a new set up would find it very hard to do. Family IFAs (i.e. those that give advice for whole families) can use cross subsidy to good effect.

in life, you can DIY in many areas or you can pay someone to do the job for you. You can IFA or you can DIY. No different to those other things. If you know what you are doing when you DIY then you can save money. If you dont know what you are doing then DIY could end up being an expensive mess. Just like any other area of DIY. The good thing is you get to choose which you prefer. It does seem that some here dont like choice.

JuicyJesus

Looking at those costs... I never want to be an IFA as long as I live.

Linton

gadgetmind wrote: »

That little? Imagine how much more they'd get if they charged 3% of your joint income in the year you got married and the 0.5 for *every* subsequent year.

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.

grizzly1911

Linton wrote: »

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.

Was the 6% ongoing charge a contractual obligation when you paid to have the boiler fitted or was that an additional choice you made for additional piece of mind?

If the the appropriately specified and fitted boiler fails 3 years down the line then will your 6% pa service fee repair and replace items to restore it's working condition?