What are considered reasonable IFA charges?

dunstonh

But this might not be the best advice! Thats why its important to look at the whole situation and charge a fee based on the planning rather than advice.

It may not be. However, you know as well as me that you have different types of clients and many are transactional and you are not going to change them.

Some advisers focus on one type of client. Others focus on another. Some are prepared to have both. I am not sure it is fair to criticise a transactional pricing model where a transactional client is involved. As you say, it is the correct presentation that matters.

Brightspark87

dunstonh wrote: »

It may not be. However, you know as well as me that you have different types of clients and many are transactional and you are not going to change them.

Some advisers focus on one type of client. Others focus on another. Some are prepared to have both. I am not sure it is fair to criticise a transactional pricing model where a transactional client is involved. As you say, it is the correct presentation that matters.

honestly not being critical - it works for many IFAs and their clients just in certain situations looking at the overall view rather than just the pension is normally the best practice.

Aegis

Brightspark87 wrote: »

Can I suggest you look for a financial planner rather than just an IFA?

There's no meaningful distinction between these two terms that's useful to a consumer. A regulated CF30 individual on the FCA register can call themselves either an independent financial planner or an individual financial adviser (or another title altogether, which is the way my own firm went with our roles) without requiring any specific exams or business practices. Indeed, the two main qualifications for years were the Certificate (and higher) in Financial Planning and the Certificate (and higher) in Financial Advice, which tested pretty much the exact same syllabus and granted the same abilities to work - this has continued now to Diploma level and beyond.

There are some who draw a major difference between the two titles, but in reality any regulated adviser/planner worth their salt will do both the intermediation and the long term strategy with clients. The specific job title chosen by the individual is probably the least important concern.

TH1878

Aegis wrote: »

There's no meaningful distinction between these two terms that's useful to a consumer. A regulated CF30 individual on the FCA register can call themselves either an independent financial planner or an individual financial adviser (or another title altogether, which is the way my own firm went with our roles) without requiring any specific exams or business practices.

I agree, too many advisers offering product based advice have hijacked the title 'Financial Planner'. There is an important distinction though.... one will tell you how whether you'll outlive your money AND find you the most appropriate tax wrappers, providers and investments. The other will sell you a financial product based around price and product features without really knowing what you want to achieve.

There are some who draw a major difference between the two titles, but in reality any regulated adviser/planner worth their salt will do both the intermediation and the long term strategy with clients. The specific job title chosen by the individual is probably the least important concern.

I disagree. Many people think they're doing it but they're not. Doing financial forecasting doesn't make you a financial planner on its own, but you can't be a financial planner without financial forecasting / cashflow modelling.

If I was searching for a financial planner, I'd be looking for someone with a CFP (Certified Financial Planner) certification. I'm CFP and Chartered but the former was far harder and tests your ability to really provide holistic financial planning. The latter tests your ability to pass exams.

dunstonh

If I was searching for a financial planner, I'd be looking for someone with a CFP (Certified Financial Planner) certification. I'm CFP and Chartered but the former was far harder and tests your ability to really provide holistic financial planning. The latter tests your ability to pass exams.

Most people don't need that and/or don't want it. It is one of those things that some people find very useful and others find a complete waste of time. Modelling goes out of date very quickly and needs frequently updated and reviewing. If you have someone prepared to keep it up-to-date with you then great. However, it should not be imposed on people who dont want/need it. Again, this comes back down to type of client and the service they want. There are many types and no one model is best for all.

TH1878

dunstonh wrote: »

Most people don't need that and/or don't want it.

I disagree with the first comment but not with the second.

However, as advisers, we have a duty to tell clients the truth about their money, i.e. Are they saving enough? How much more do they need to save? How much can they drawdown? None of which can be done without some kind of modelling.

How do you know how much a client should drawdown from a pension fund if you've not assessed what their other current and future income and expenditure will be, in addition to their current net worth? It just doesn't make sense.

Whether Standard Life is better than Old Mutual, or whether passives better than actives, is irrelevant in the grand scheme of things. Yet too many advisers still model their business around this.

It is one of those things that some people find very useful and others find a complete waste of time. Modelling goes out of date very quickly and needs frequently updated and reviewing.

If an adviser is charging for ongoing servicing, they should absolutely be reviewing it.

I'm not talking about having to do full cashflow planning with every client but at least model it in Excel (which is probably the best financial planning tool around) and review it.......and I do believe that, if you're not doing it, you shouldn't be able to call yourself a financial planner.

dunstonh

However, as advisers, we have a duty to tell clients the truth about their money, i.e. Are they saving enough? How much more do they need to save? How much can they drawdown? None of which can be done without some kind of modelling.

Retired person with enough guaranteed income to live on. Doesn't have any income or real capital needs from investments and is just looking for potentially better returns over the long run. How would modelling benefit them?

Future planning needs or income provision do make sense to have some modelling in there. Although whether it is the full works or a summary method will depend on the individual.

Whether Standard Life is better than Old Mutual, or whether passives better than actives, is irrelevant in the grand scheme of things. Yet too many advisers still model their business around this.

So, all go to SJP and pay tens or hundreds of thousands of pounds more in charges then! Provider and investment strategy is just as important as any other stage. It is just one part of the process and is no less or more important than any other stage.

I am not so keen on rubbishing other models which do have a place. Even transactional clients get basic modelling (shortfall analysis). If the only option was modelling then many advisers would no longer be in business.

TH1878

dunstonh wrote: »

Retired person with enough guaranteed income to live on. Doesn't have any income or real capital needs from investments and is just looking for potentially better returns over the long run. How would modelling benefit them?

By showing him how much more he can spend, doing all the things that he wanted to do in life, but didn't think he could afford. Getting that information out of a client isn't easy but it's definitely a worthwhile exercise. Experiences > Money.

He may be worried about estate planning and making sure the right assets fall into the right hands at the right time - you can model that too. IHT....Care Fees....

Money is not the end game, it's a means to an end.

Future planning needs or income provision do make sense to have some modelling in there. Although whether it is the full works or a summary method will depend on the individual.

Agreed but you should at least consider current and future income and expenditure as well as current net worth even if you're not considering the intricacies of tax wrappers and the effect of tax.

So, all go to SJP and pay tens or hundreds of thousands of pounds more in charges then! Provider and investment strategy is just as important as any other stage. It is just one part of the process and is no less or more important than any other stage.

If the choice is between:

a) An adviser who is honest with you, encourages you to significantly increase your savings (because you need to) but recommends a more expensive contract.

OR

b) An adviser who acts on your instruction to invest £100pm but invests you in a cheap passive portfolio without telling you the end result (i.e. you'll have a massive shortfall at retirement).

...then the former wins every time for me as the latter will be far more detrimental. Yes, if you can improve the charges whilst advising the client then that's obviously preferable but it really is the least important part of the job.

I am not so keen on rubbishing other models which do have a place. Even transactional clients get basic modelling (shortfall analysis). If the only option was modelling then many advisers would no longer be in business.

I'm not rubbishing it - I used to do it! However, if advisers keep basing their advice on picking products and investments only, they're just setting themselves up for a fall once we have the next market crash. They also shouldn't be able to call themselves Financial Planners because there's no planning going on.

As I've said, modelling doesn't need to be a complex cashflow analysis but almost every piece of advice can / should involve modelling of some sort.

bigadaj

It's a good thing to model elements such as cash flow and someone's wider financial circumstances but as an ifa isn't there a limit to what you can advise on. Someone with a buy to let property portfolio for example, how far would you include this within planning?

Also it sounds as though there is a conflict in that the people who would benefit most from this approach may well be the most risk averse, with lower percentages in equities to try and maintain a lower risk profile and certainly reduction in volatility. Such people may be missing out on maximising returns through the early part of their investment life at least and may not understand the inherent shortfall risk of maximising their spend, enjoying life etc etc

TH1878

bigadaj wrote: »

It's a good thing to model elements such as cash flow and someone's wider financial circumstances but as an ifa isn't there a limit to what you can advise on.

In what way? You can be as detailed or simple as you want to really.

Someone with a buy to let property portfolio for example, how far would you include this within planning?

As an integral part of their plan. It's going to provide future income and/or capital sums. The income will be taxed and the gains will be liable to CGT.

That said, people who are ONLY property investors do not make good financial planning clients because they don't understand the importance of having liquid money available.

Also it sounds as though there is a conflict in that the people who would benefit most from this approach may well be the most risk averse, with lower percentages in equities to try and maintain a lower risk profile and certainly reduction in volatility. Such people may be missing out on maximising returns through the early part of their investment life at least and may not understand the inherent shortfall risk of maximising their spend, enjoying life etc etc

Anyone can benefit. Whether some people would be better just saving the money than they would spend on advice fees is a different matter and I personally would (and have) turned clients away on this basis.

We specialise in advising 1st or 2nd generation business owners who are 3-5 years from selling their business (with £1m of investable assets) because we believe that these people benefit most from our service model. However, these people are not typically risk averse.

The great thing about financial planning (done properly) is that it really helps you to discuss the things that matter to clients, find out what they really want and to educate them a little bit. Plus, if the clients don't feel that they've benefited from the service, I don't charge them any fees - we shake hands and go our separate ways. It's my job to wow them, not for them to take a risky leap into the unknown.

If they do feel they've benefited, then we might then start looking at tax wrappers, providers and investments bit but everything is framed with the clients overarching objectives in mind

Advisers who are still concentrating on choosing providers and investments will be on their last legs once 'Robo-Advice' takes off.

I am not saying that this is what Dunstonh does because, quite clearly, he is a competent adviser and knows his stuff. It just annoys me that the term 'financial planner' has been hijacked by people who wouldn't know financial planning if it hit them in the face.

Anyway, sorry to the OP for hijacking the thread. The answer to your question is it depends on the service you're offered. As you can probably tell from this thread, this varies massively.