Finding an IFA.

aajax42

Following a couple of previous posts made, I have come to the conclusion I need an IFA. However, having now met with three of them I have discovered they will not share any information in respect of results they have achieved on behalf of their clients. They have each said I would have to trust them!. I have of course looked on sites like 'Vouched for' but am not sure how much faith I should put into random comments/reviews made by people I have no way of checking with. I have over 300k that I want help with, which represents our life savings and 45 years of hard work and frugality. I find it unbelievable that IFA's are not compelled to provide evidence that demonstrates they can do a good job given the risk we take putting our financial lives in their hands, particularly considering they demand a significant payment regardless of being able to make any statements regarding future results. If I want to buy a car I can look at the reliability results of the manufacturer, likely depreciation etc, and make an informed choice. With an IFA, they genuinely come as a stranger into your house and say " You will have to trust me" !:eek:
I live in South Staffs, so if anyone can make a recommendation that is evidence based, I would really appreciate the help.

BananaRepublic

Solicitors are the same. You trust them because they are qualified hence they must be good. They too charge a fortune. Do you have friends or acquantances whose opinions you trust, who have used an IFA?

As an aside, what do you want in the way of advice? And how much did each propose as their fee?

bowlhead99

An observation: if you went to see another professional like an accountant, you wouldn't expect to see all their other clients' receipts and confidential records with a "here's how I turned those records into financial reports and these are the capital allowances we claimed which the client might not have been aware of himself".

If you went to see a lawyer you wouldn't expect to delve into the sensitive details of a client's personal or business affairs and explain exactly how screwed that client was and what exactly was done to address and remedy the specific risks.

So, how would you expect an IFA to say, "OK these are the financial affairs of Bowlhead99's father who had assets ABC, liabilities DEF, ability to use tax wrappers RST, personal circumstances JKL, a specific need for XYZ and may or may not have similar needs, goals, capacity for loss, risk tolerance and financial comprehension as you, which i can't assess because you haven't paid me to assess anything about your affairs or needs yet, but anyway, we turned his A into B over a particular cherry picked timescale which may bear no relation to the result we would get for you with probably different needs, goals, risk preferences and economic conditions."

Would that be useful "evidence" that you could put up in a league table against a second prospective IFA with data from his AnonymousClient #2 -which might have different needs and circumstances and time period) and decide who was "best" from the shape of a graph?

I doubt it.

I don't have any personalised recommendations in your area but potentially you are looking at it wrong. As clients' needs differ (which is the whole reason they consult with an IFA rather than buy an off-shelf packaged DIY solution) you can't easily compare "track record". Speak to any teacher if you want an inside opinion on the value of league tables. And with personal financial services the quality of the solution may not be evident for years or decades. This can make choosing an IFA a complex process and a bit of a leap of faith.

Surely they can explain to you their process for understanding your needs, educating you on your options, their process for asset allocation, tax efficiency and investment due diligence, what their qualifications mean for you in practice, and, basically, why you should want them as a trusted partner (presuming they want you as a client).

aajax42

Please read my post and you will see I am not asking for individual personal details. I am asking for any EVIDENCE that the IFA has a proven track record of successfully achieving results that have been to the clients satisfaction. In my opinion, the IFA should at least have to provide feedback from their clients that can be ratified by an independent body. It does not have to be complicated. A couple of simple questions, i.e. on a scale of 1 to 5 has your IFA achieved the goals agreed? On a scale of 1 to 5 do you feel your IFA has provided value for money? On a scale of 1 to 5 would you recommend your IFA to Family and friends?
It would be very easy for IFA's to set up a body to independently conduct such a survey and publish the ongoing results. My work is constantly reviewed through appraisal and performance review, my employers won't accept 'Trust me' or 'Have faith' as they to have to provide evidence that I provide value for money.

aajax42

I worked in the criminal court arena for many years and believe me qualification is no indicator of performance or competence. This is the same with all professions as there are so many other variables, i.e. work ethic, integrity, continued professional development to name just a few.

dunstonh

I have of course looked on sites like 'Vouched for' but am not sure how much faith I should put into random comments/reviews made by people I have no way of checking with.

I wouldnt either. Those sites are paid for entries where people are encouraged to write positive responses. Its just marketing.

I find it unbelievable that IFA's are not compelled to provide evidence that demonstrates they can do a good job given the risk we take putting our financial lives in their hands, particularly considering they demand a significant payment regardless of being able to make any statements regarding future results.

You seem to be mixing up returns, which no adviser has any influence over and advice. The best advice will result in you not getting the highest return. To get the highest returns would require bad advice and unsuitable investing methods and hindsight.

Lets look at your league table suggestion. How would you account for the different risk profiles? How would you account for experienced high net worth investors being compared with low net worth, low knowledge consumers who would use totally different investment options? How would you account for different investment strategies which may result in one portfolio style being best in period 1 but not as good in period 2 (as all investment strategies have pros and cons). How would you account for that fact that an IFA would use products and investments from across the market place and rarely have two portfolios that are exactly the same?

Client A has a risk profile of 5 but adviser feels it warrants the asset mix of 5 but using investment funds with lower volatility as whilst the client is making all the right noises about accepting risk, they have never been through a crash and their knowledge is not strong on investing and is the type of client that always rings up when there is a minor drop.

Client B has a risk profile of 5 but needs an income and the portfolio is built to provide de-cumulation by utilising a cash account which is fed by natural income from high yielding investments.

Client C has a risk profile of 5 but uses capital gains to make capital withdrawals tax free under their CGT allowance. Low yielding investments used.

Client D has a risk profile of 5 but is inexperienced and needs a simple solution.

Client E has a risk profile of 5 but wants socially responsible investments

Client F has a risk profile of 5 but insists on index trackers being used for all areas.

Client G has a risk profile of 5 but is investing over a 30 year period.

Client H has a risk profile of 5 but is only has 5 years to go until a full withdrawal is going to be made.

I can go on with many more. So, you have lots of investors in the same risk profile but different investment styles used with all of them. How do you cater for all those in a single league table. The returns will be different with all of them. However, the IFA is not responsible for the returns as they will be what they will be. The IFA is responsible for making sure that the solution is suitable for the needs and objectives. There is inevitably some thought about returns and which investments to pick to fit the needs. However, suitability is the key objective.

dunstonh

In my opinion, the IFA should at least have to provide feedback from their clients that can be ratified by an independent body. It does not have to be complicated. A couple of simple questions, i.e. on a scale of 1 to 5 has your IFA achieved the goals agreed? On a scale of 1 to 5 do you feel your IFA has provided value for money? On a scale of 1 to 5 would you recommend your IFA to Family and friends?

Advice outcomes can take decades to be realised. So, what help is a measure of scoring done after a 30 minute meeting in year one?

I am asking for any EVIDENCE that the IFA has a proven track record of successfully achieving results that have been to the clients satisfaction.

The inevitable would happen there. Every time the markets fall, scoring would go down. Every time the markets go up, the scoring would increase. That tells you nothing.

I recall being told by someone that they cashed their rubbish investment in and bought a different investment that had performed so much better. Yet when they told me what they had before and now, the original investment was more suitable. The main difference was that the original one went through a stockmarket crash. The new one went through the recovery. Do, you really want someone like that providing scores?

aajax42

Hi dunstonh, that is exactly the kind of response that I have been getting from IFA's. It feels like a cop out to me and a way of compounding the confusion for non financially savvy people like myself. Is it too much to ask of someone who wants £5000 and an ongoing £1000 annual fee that they can demonstrate evidence that shows they are worth that kind of money?
I can see you are an IFA, so it would be very helpful if you could use your experience to help find a way to reassure prospective clients instead of presenting what appear to be excuses for IFA's getting away with no evidence of value for money.

coyrls

I sympathise with your dilemma. Unfortunately, it will ultimately come down to trust but an IFA should be able to provide reasons for trusting them by describing their approach and methods and giving an outline of what process they will go through with you, what the options are for charging etc. In my case however, after some initial meetings with IFAs, I decided to DIY as I think it suits me better and I would have been a nightmare client, as I like to be in control.

Linton

aajax42 wrote: »

Hi dunstonh, that is exactly the kind of response that I have been getting from IFA's. It feels like a cop out to me and a way of compounding the confusion for non financially savvy people like myself. Is it too much to ask of someone who wants £5000 and an ongoing £1000 annual fee that they can demonstrate evidence that shows they are worth that kind of money?
I can see you are an IFA, so it would be very helpful if you could use your experience to help find a way to reassure prospective clients instead of presenting what appear to be excuses for IFA's getting away with no evidence of value for money.

I think you may misunderstand the role of an IFA. It isnt to get the maximum possible return. No-one can guarantee that. The major role is to choose a broad portfolio of investments that match the customer's attitudes, circumstances and objectives. By using an IFA you are mitigating the possibility that if you chose the investments yourself lack of experience could lead you to inadvertantly taking major risks or missing out on major opportunities.

A good IFA may produce poorer returns than an incompetant one, at least in the good times. However with a good IFA the chance of you achieving what you want should be higher.

Its impossible to measure an IFA's effectiveness by simple performance measurements as each customer has different attitudes, circumstances and objectives. Perhaps one measure is the extent to which customers are able to understand the IFAs choices and why they were made. Another measure could be justifiable complaints due to inappropriate choice of investments. These soft judgements are probably best made from personal recommendations.

xylophone

it was suddenly feeling bombarded with " questions about age, existing pensions, state pension eligibility, ISA allowances etc" that I don't see the relevance of. For what it is worth I am almost 63, working part time, in receipt of a small occupational pension and will not get my state pension for over 2 years, whatever that might turn out to be. Therefore, as stated I am looking for guidance on maximising income from my savings. I have tried to maximise ISA's and will have just over 100k invested in them with this years allowance. Most though is once again in cash ISA's because of the fear of losing at gambling on stocks and shares.

The questions were put because they do have relevance to your situation and any IFA worth his salt will want to know the answers.

Incidentally, it would be a good idea to obtain a state pension statement after 6 April to help with planning.
https://www.gov.uk/check-state-pension

http://www.telegraph.co.uk/finance/personalfinance/expat-money/11049339/How-to-choose-an-independent-financial-adviser.html

http://www.thepfs.org/yourmoney/find-an-adviser/

You will need to decide on the level of qualification you require and then "interview" using the free half hours to decide whether the man or woman can offer what you want.

Otherwise you need to work out how much money you think you will need from your savings in retirement, after taking into account your assured income from your occupational and state pensions.

Most people use the mixture you have already (or so it appears) from investment and deposits - some also draw down capital.

You might also consider contributing to a personal pension until you are 75 in order to obtain whatever tax relief is available.

Does your current employer provide a pension scheme?

You might consider whether you would wish to buy an annuity with some of your savings.

A personal recommendation can be helpful but is no guarantee - it really is a case of doing your research and making your choice.