Initial Costs for IFA....

Aegis

bigfreddiel wrote: »

I have never understood why IFAs don't just charge a flat rate, then you would know exactly where you stand.

Because there's almost invariably more work involved in larger cases and in addition the increased case size represents higher risk to the firm. Two pretty good reasons for a variable fee of some sort.

masonic

bigfreddiel wrote: »

I have never understood why IFAs don't just charge a flat rate, then you would know exactly where you stand.

I read quite recently an IFA's time was charged out at about £150 per hour, so I'm sure you can get an estimate using a flat hourly rate, like you might get from a plumber for example, if you wanted one. Percentage based fees are probably used for the same reason as execution only platforms use them - they are there to allow a more progressive charging structure in which the wealthy cross-subsidise the less wealthy to some extent.

bowlhead99

bigfreddiel wrote: »

I have never understood why IFAs don't just charge a flat rate, then you would know exactly where you stand.

I expect you have never understood it because you have never really endeavoured to work out how you would run and price a regulated financial advice business, in which you provide a service tailored to the needs of a disparate group of individuals with vastly differing needs, goals, levels of financial comprehension, size of the proposed transactions for which your advice will carry liability, and overall attractiveness of the potential customer in terms of your business model and what else you would rather be doing.

If you were to try to build a business plan for a regulated financial advisory business, and you're smart, you would start to understand why there may be more than one price rather than a flat rate, as the service is not flat.

I can see why you would not have tried to build a business plan for a regulated financial advice business, because most of us haven't. But if you don't understand what it is that IFAs do or how they have built their business models, I guess it is easier to just tell everyone that you meet online that IFAs are a bunch of crooks with opaque pricing models who should be avoided at all costs.

It won't do anything for the credibility of your online persona, but I guess it's easier than having to apply some rational thought.

dunstonh

I have never understood why IFAs don't just charge a flat rate, then you would know exactly where you stand.

For initial many can and do charge a flat rate. However, for ongoing, the problem is that many of our costs increase as the amounts go up. Insurance, the FCA, FSCS, FOS etc all charge percentage basis.

The larger the investment, the greater the liability and the greater the work.

bigadaj

You've got to hand it to Freddie, he does manage to make people bite.

bigfreddiel

Aegis wrote: »

Because there's almost invariably more work involved in larger cases and in addition the increased case size represents higher risk to the firm. Two pretty good reasons for a variable fee of some sort.

Higher risk to the firm means higher risk to the client so surely the fee should be less -sounds a bit unfair to me! fj

masonic

bigfreddiel wrote: »

Higher risk to the firm means higher risk to the client so surely the fee should be less -sounds a bit unfair to me! fj

I wonder how many people have tried that line with their insurance company.

Aegis

bigfreddiel wrote: »

Higher risk to the firm means higher risk to the client so surely the fee should be less -sounds a bit unfair to me! fj

So in your world someone going to an IFA for their first thousand pounds should have the maximum possible fee from that IFA, while someone investing £10 million and requiring a large number of different investment vehicles and strategies should be charged a much reduced fee?

Previously I've generally understood your comments, but this is just bizarre.

Pincher

Hire an old financial advisor about to retire for his license only.

Do an online fact find form so the client does all the work.
The client pays £100, and we send him a document pack that cautions against poverty in retirement, but recommends transfer out the pension pot at age 55. Obviously, the client must sign a form that says he is happy with the recommendation, and will never ever sue or complain.

Five years down the line, the old FA (short for do F**K A*L) retires, and disappears to the Bahamas. The website disappears, too. Tax payers pick up the bill for pension credit and care costs.

Is that any better?

The whole concept of handing control of your money to somebody else to manage is suspect. At the multi-million pound level, there is no need to act fraudulently, as 0.5% is enough to make a living on. On a piddling amount like £50,000, who is going to bother to glance at your petty problems for £100?

bigfreddiel

masonic wrote: »

I wonder how many people have tried that line with their insurance company.

As insurance is based on value I expect to pay more after all it's physical stuff you're insuring.

With a portfolio of investments it's as as easy and just as risky to handle £100,000 as it is to handle £100,000,000 so I would expect to pay a flat rate. I would even go for a percentage fee that maxes out at a portfolio of £500,000. That then would be the fee for portfolios above £500,000

Cheers fj