Finding an IFA.

dunstonh

s 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?

There isnt much advice that is worth £5000 nowadays. Perhaps insistent defined benefit transfers but not much else. That is enough to suggest it is not value for 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.

If I had a client asking the same, I would explain what I do, the methodology used and my past experience. If you didn't accept that then I would be happy to part company and not deal with you.

In reality, you can usually tell in conversation quite quickly if you are going to be a match. A lot of it is common sense. Unless you are particularly gullible and prone to greed overtaking common sense, you should spot the level of quality quite quickly.

The other thing to be aware of is that most decent, long established IFAs are not actively marketing for new clients. They have enough clients and gain business naturally through client family members and friends. So, they don't have to waste money on advertising or gimmicky websites etc. Indeed, playing devils advocate, you could possibly be more on guard if the firm you approached does advertise heavily or attempt to get business that way as it would suggest they do not have enough clients. Although that would be unfair on newer adviser firms who are not established or firms looking to grow. However, they would probably fail your criteria anyway due to lack of track record.

EdGasket

The short answer is probably that the IFA has not provided a better return for his clients than a simple tracker fund would have. Statistically they are hard to beat consistently and most funds/managers/IFA's fail. The best you can hope for is some sensible advice ref. risk and a mix of equities and bonds to suit your risk appetite and position in life but that advice will cost you dearly and if you think about it, you can probably arrive at your own answers.

aajax42

Of the three IFA's I have seen,two advocated for an initial charge, then a percentage fee, stating they are then paid by results as the more money I make the more money I pay them. One IFA (The one who wants £5000 then £1000 per year) said I would be better off with fixed fee's. Ironically he still wanted one percent for for setting up various investments. All three admitted they use sites that use algorithms to help pick the investments. I fully understand it would be foolish to expect a high return, but had hoped that it would be possible to achieve a 4% net return as that would enable me to retire at 63. I don't move in circles within which people appear to have saved, and therefore accrued as much to invest as I have and no one I work with, or have as a friend has been able to recommend an IFA . Therefore, it appears I have to attempt to take on an IFA on the basis of personality as the methodology they advocate appears common to all and no doubt goes with the qualification/training received. Thank you to all of you who have taken the trouble to reply, I do appreciate it, however it has not in any way changed my belief that it is astonishing that I am having to consider putting my trust and financial future ,in the hands of some stranger who can only say' You have to trust me'. Again if any one can recommend an IFA in the West Midland's area, please let me know.

dunstonh

Therefore, it appears I have to attempt to take on an IFA on the basis of personality as the methodology they advocate appears common to all and no doubt goes with the qualification/training received.

IFAs are independent. They can choose which actuarial data they want to buy in along with the software, risk profiling and investment research. There are a number of these on the marketplace. So, it is not common to all.

Qualifications are run by multiple examination boards but to a regulatory standard.

owever it has not in any way changed my belief that it is astonishing that I am having to consider putting my trust and financial future ,in the hands of some stranger who can only say' You have to trust me'.

However, you have the consumer protection of the FOS and the FSCS and the FCA run audits and reviews. IFAs have to report data to the FCA annually (in fact, 8 out of 12 months require returns to the FCA). Most IFAs use external compliance companies to support them with regulatory issues and this will include audits on their business as well as file checking and suitability checks. Some larger firms may do this in house. There are not too many issues with IFAs compared to other sectors. Indeed, many feel it is over regulated and micro managed to a silly level. So, you need not be too concerned. The only area that seems to be of real issue at the moment is the wide pricing range for advice across different firms.

TheTracker

I've a lot of sympathy with the OP.

It's not about finding an IFA with a good return, it's about ensuring you don't have a bad return and the IFA is not some sort of outlier. For me the better analogy is one of the medical profession. All professionals are accredited, trained, have processes to follow, and are regulated. But there is a social safety net and bodies that that look at the data and, through statistical analyses, pull out the doctors or surgeons or hospitals or medical interventions that are outliers.

For many people, the perceived risk of dealing with an IFA is judged to be higher than the perceived risk of an investment portfolio.

Making data open and transparent is key to establishing industry trust, whether you are a doctor, plumber, or IFA. The lack of aggregate, open, transparent data made available by IFAs is one of the reasons I do not deal with them.

Flobberchops

Finding an IFA? Fimply walk into any highftreet bank and open one. You can have a cafh IFA, a ftocks and fhares IFA...

...I'll get my coat.

HappyHarry

An IFA demonstrates value by helping you build a financial plan, and making specific fund and product recommendations that are appropriate for you. An IFA will remove the concern you might have from making financial decisions. An IFA will regularly review your circumstances, objectives and investment strategy to ensure that your plan remains on track, or as close as possible, despite changes in your circumstances and external influences.

An IFA is successful if, over 30 or so years, you have had a calmer financial journey, and are in a stronger financial position than if you had navigated that journey yourself.

IFA Success is not "if I had put all my money in that fund 30 years ago, I would have been better off".

BananaRepublic

TheTracker wrote: »

I've a lot of sympathy with the OP.

It's not about finding an IFA with a good return, it's about ensuring you don't have a bad return and the IFA is not some sort of outlier. For me the better analogy is one of the medical profession. All professionals are accredited, trained, have processes to follow, and are regulated. But there is a social safety net and bodies that that look at the data and, through statistical analyses, pull out the doctors or surgeons or hospitals or medical interventions that are outliers.

For many people, the perceived risk of dealing with an IFA is judged to be higher than the perceived risk of an investment portfolio.

Making data open and transparent is key to establishing industry trust, whether you are a doctor, plumber, or IFA. The lack of aggregate, open, transparent data made available by IFAs is one of the reasons I do not deal with them.

Certainly when you lose £5,000 up front and £1,000 per year, that already makes a big hit on your future growth. My guess is that a lot of the work of an IFA can be automated, and it would not surprise me if some IFAs already use software that allows them to input a customer profile (income, age, risk aversion, pensions, dependents etc), and then generate a report, including a selection of funds, a profile of each and so on. Throw in some IFA specific waffle, headers, that sort of thing, and you're sorted. What struck me about a report from an IFA I had done about 20 years ago was how basic it was. It looked very much like a template, with some figures filled in. And in those days it was not transparent, I still find it shocking that they could sell you a product without letting you know where their cut was coming from i.e. how much you paid them.

bowlhead99

aajax42 wrote: »

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'm not an IFA and don't use one, I just have an idea of what they do and why people use them. I found dunstonh's comments useful as they demonstrated a clear insight into the fact he is operating a non-'one size fits all' service and he is patently correct that a 'review score' is likely to be misleading (which is what I mentioned above - how do you *know* that the review you are getting is from a competent person qualified to judge and free from bias).

The reason I mentioned in my above post that you would need an insight into the personal circumstances of the other customers - to which you said no you didn't want personal details - is illustrated by dunstonh's comments that numbers mean nothing without context. The "evidence" of a particular level of performance is not really useful when it is the suitability of the investments which is the service you're buying, not the performance (which comes, somewhat uncontrollably, from 'the market').

For example if I put all your money in emerging markets at end of 2008 you would be much happier with tripling your money over the next few years to 2011 than if I put you in a mixed portfolio of global equities and bonds which merely doubled over the next five years. Great, thanks for the nice review for getting you that tasty return. But for most readers, for whom the 100% allocation to emerging markets is completely loopy, the "proof of a good performance" wasn't really useful; especially when that market crashed much harder than other stocks and bonds from 2011, after you've read the nice review.

If I get a tailored suit I can tell very quickly if it fits and if I like the quality of the fabric. After wearing it for a bit I can perhaps attest to construction quality too. Getting financial or business advice isn't like that though, as results take time to materialise and even when they appear to have materialized, it may may take experts to recognize whether they are good or not, given the absolute numbers generated aren't the only indicator of whether the advice was good.

aajax42

bowlhead99, I refer you back to my simple three tests.
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?
Despite any market forces these questions would build a reliable indicator over time. Surely that is better than the current state of no indicator whatsoever? Why are you and the IFA's so terrified of 'evidence based practice'? Trust me is not good enough in this day and age.