Finding an IFA.

TheTracker

The US has an easy to use website to check the credentials and discipline history of financial advisors at http://brokercheck.finra.org/ and http://smartcheck.cftc.gov/check/

I can see disciplinary actions, certifications, employment history, affiliations.

Does the UK have a similar service?

bigadaj

aajax42 wrote: »

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.

Those questions are fine, assuming you don't get a load of people biased to report one way or the other, whether that be justified or not.

However despite this questionnaire being assigned a numerical score it is far more qualitative than quantitative, and totally opinion based, with many people having no clue whether their ifa is good, bad or indifferent.

People use ifas for many reasons, some because they don't understand investing, because they can't or don't want to learn, personal relationship, historical ties etc etc

I've met a few people who just like the idea of having an ifa, though they are the type who boast about 'their ifa' and probably need the guidance.

There's now plenty of information available in books and particularly in the net for most people to become educated enough to plan their own financial life, particularly as ifas can't advise on the whole of your financial life such as savings, housing, buy to let etc etc

dunstonh

Why are you and the IFA's so terrified of 'evidence based practice'? Trust me is not good enough in this day and age.

No demand for it from consumers and no need for it and internal processes cover it in a far more effective way. For example, a file check by an external compliance company will look at the accuracy and quality of advice, research, supporting information. It will grade the case and provide feedback. That is far more important than someone grading an IFA on the internet after an hours meeting. When a goal is 30 odd years away, how can you grade an adviser on whether they met that goal?

Trust me works fine in this day. Plus, internet rating sites are see easy to manipulate.

The US has an easy to use website to check the credentials and discipline history of financial advisors at http://brokercheck.finra.org/ and http://smartcheck.cftc.gov/check/

I can see disciplinary actions, certifications, employment history, affiliations.

Does the UK have a similar service

The FSA register is online and records history back to 2001.

Malthusian

Trust me is not good enough in this day and age.

If you aren't willing to trust an IFA then an IFA is not for you.

The essential job of an IFA is to know more about the tedious world of finance than you do. If an IFA says "I think you should invest X thousand in a pension in such and such funds" then you have two options. Accept his recommendation - in other words, trust that he knows what he's doing, accept that there is a gap between your knowledge and his. Or fill that gap in knowledge by reading up on pension taxation and regulation and investment funds until you are 100% confident that his recommendation is sound. Which renders the IFA completely pointless, as you now know all the relevant information yourself and have no reason to pay him a fee for his advice.

There is nothing wrong with option 2, it's perfectly possible for someone to DIY their finances and you'll find many people here who have done so and can offer useful information. But if you want to DIY it's a waste of time to employ a professional - for both of you.

There are services which rate IFAs in a similar way to how you suggest, and plenty of IFAs who are happy to be listed on such services to attract more clients. Someone has already mentioned VouchedFor. Personally speaking, the business I work for isn't. We get enough clients via personal recommendation and don't feel the need to attract people who think that choosing an IFA based on an arbitrary ranking system means they will get superior returns.

aajax42

Hi Malthusian, the problem for me is that it is more than just a leap of faith given the charges involved. Following a free initial meeting, the second visit would cost £1,800 - regardless of whether we accepted his recommendations or not.
But if we did decide to accept his ideas and let him invest the money we'd have to fork out a further £3000 or so as a percentage of the total invested.
Followed by another £2000+ a year afterwards.
If his advice was not successful we could lose the whole lot and he'd still have his £5000 charges.
I can only begin to imagine the costs that would be incurred by employing the next level of professionals who I would have to 'trust' to help me get some form of compensation.

dunstonh

If his advice was not successful we could lose the whole lot and he'd still have his £5000 charges.

If his advice was not correct, you have consumer protection. I guess you are not serious when you say you could lose the whole lot as clearly that wouldnt happen.

I have already said that this one seems very expensive.

BananaRepublic

My own experience of working in companies that are audited, usually ISO9001, is that you must understand what the audit means, that a company can effectively subvert the audit, and that the auditor may be paid by the company. Thus ISO9001 simply checks that a company has processes, and follows them, not that they are any good. Most companies in my experience make sure the auditor only sees what the company wants them to see, and more often than not the processes are not really followed anyway. I have no knowledge of auditing in the IFA world, but I would be surprised if it was that useful as a guide i.e. you avoid companies that fail the audit, but a pass does not mean that much.

As for consumer protection, you are unlikely to lose all of the money, and for consumer protection to work you would have to demonstrate gross dishonesty or malpractice, rather than "Well it turned out a bad decision but seemed good at the time". The chances are that a bad IFA might result in not getting the gain you could reasonably hope for, but getting compensation would be nigh on impossible.

It does sound as if you are not the kind of person suited to using an IFA, which means you must do some leg work and DIY your investing. I tend to think an IFA suits people who are not numerate, or for various reasons do not want to make decisions i.e. too busy, not interested or rich enough to let others do the work. Some people have the attitude that for quality results you employ a professional, others have a less trusting nature. I would not be happy to pay large sums of money to a stranger, without some form of reassurance that her track record was good.

dunstonh

As for consumer protection, you are unlikely to lose all of the money, and for consumer protection to work you would have to demonstrate gross dishonesty or malpractice, rather than "Well it turned out a bad decision but seemed good at the time".

That is not correct. The advice to suitable. It is not limited to dishonesty or malpractice. It could range from unsuitable assessment of risk (where there are upheld complaints, that is a common one). Failure to take into account capacity for loss (the DIY world is actually prone to that one more but some advisers have fallen foul of that). A suitable recommendation that goes on to fail expectation would not be an upheld complaint. An unsuitable recommendation that goes on to exceed expectation would be an upheld complaint. Although, no redress would be payable as it exceeded what it should have been in.

The chances are that a bad IFA might result in not getting the gain you could reasonably hope for, but getting compensation would be nigh on impossible.

i suggest you read FOS decisions and compliance outcomes that detail complaints. You would realise you are wrong.

My own experience of working in companies that are audited, usually ISO9001, is that you must understand what the audit means, that a company can effectively subvert the audit, and that the auditor may be paid by the company. Thus ISO9001 simply checks that a company has processes, and follows them, not that they are any good. Most companies in my experience make sure the auditor only sees what the company wants them to see, and more often than not the processes are not really followed anyway. I have no knowledge of auditing in the IFA world, but I would be surprised if it was that useful as a guide i.e. you avoid companies that fail the audit, but a pass does not mean that much.

Typically, the auditing process is risk based. The highest risk areas will be 100% audited. The lowest risk areas may never be checked. Then you have those in between which get sample checked. You then factor in past file checks. Someone that had a lot of feedback and areas to improve on will likely see more of their cases selected for checking to see if there are improvements. The feedback also forms part of their training and compliance monitoring. An adviser getting consistent good feedback on file reviews will likely see fewer cases checked over time in the lower risk areas.

You say you would be surprised if it was a useful guide. I would say it is amongst one of the most useful things a compliance company can provide an IFA firm. Having an independent third party review cases giving feedback that you can implement into future cases is vital for risk control and providing ongoing suitable advice.

Nick0101

Personal recommendation is the best route you can go down. And then interviewing the IFA is absolutely key. £300K is a large sum, but are you certain you actually need an IFA? There's a huge amount of value in experimenting and investing in a number of markets yourself with small figures and building things from there. Some people take a lot of enjoyment in doing that.

There is every chance that an IFA simply sticks cash into a tracker fund, property and maybe a couple of higher risk/return asset classes. IFAs are qualified for a reason, but there is probably a lot of value to be had from low sum/low risk investments done privately.

BananaRepublic

dunstonh wrote: »

That is not correct. The advice to suitable. It is not limited to dishonesty or malpractice. It could range from unsuitable assessment of risk (where there are upheld complaints, that is a common one). Failure to take into account capacity for loss (the DIY world is actually prone to that one more but some advisers have fallen foul of that). A suitable recommendation that goes on to fail expectation would not be an upheld complaint. An unsuitable recommendation that goes on to exceed expectation would be an upheld complaint. Although, no redress would be payable as it exceeded what it should have been in.

I was assuming that malpractice would include bad advice such as recommending high risk investments to someone with a low risk tolerance, or with a short investment time frame.

dunstonh wrote: »

i suggest you read FOS decisions and compliance outcomes that detail complaints. You would realise you are wrong.

I suspect that the issue is your misinterpretation of my post.

dunstonh wrote: »

Typically, the auditing process is risk based. The highest risk areas will be 100% audited. The lowest risk areas may never be checked. Then you have those in between which get sample checked. You then factor in past file checks. Someone that had a lot of feedback and areas to improve on will likely see more of their cases selected for checking to see if there are improvements. The feedback also forms part of their training and compliance monitoring. An adviser getting consistent good feedback on file reviews will likely see fewer cases checked over time in the lower risk areas.

You say you would be surprised if it was a useful guide. I would say it is amongst one of the most useful things a compliance company can provide an IFA firm. Having an independent third party review cases giving feedback that you can implement into future cases is vital for risk control and providing ongoing suitable advice.

Regarding the last point, I have worked in many many companies with ISO 9001 accreditation. The claimed benefits are not dissimilar from those you list. In reality it is done because it helps get clients. In other words, the company wants to get bigger companies to buy their products, and many large companies will only buy from suppliers who have ISO 9001 accreditation. Regarding IFAs, without speaking to someone from the profession who is willing to speak openly, it's impossible to know the truth about IFA auditing. You are clearly out to sell the trade, given your past posts, and hence you are not an impartial actor. Much of what you post in this forum comes across as a sales pitch.

In general you present a view where the IFA comes out as an honourable chap/lass with a marvelous regulatory authority to catch the rare rogue. In truth when proving bad practice, what matters is what can be proven i.e. the paper trail. But being a good IFA is more than the paper trail, which can often serve to protect the profession.

As an example, I dealt with an IFA who did not listen to me, and who tried to pursuade me to follow his preferences. He'd pretend to listen, then say "So we are agreed then that what you want is " and go on to say something quite different from what I had said about my investment preferences. My reaction (not expressed aloud) was "Get lost". Had I been easily swayed, or less critical, and gone on to be a client of his, I'm sure he'd have created a nice paper trail, in IFA jargon, ascribing his views of my preferences, and he would have recommended investments on that basis. So to the outside world he would have been acting correctly. I can imagine people who were not knowledgeable about investing, or more easily influenced, who could easily get led into unsuitable investments, or investments where they were not aware of the risks, or perhaps the lack of risks and hence potential growth.

Equally Mr A and Ms B could have separate IFAs. Each expresses a high risk tolerance, and a wish for long term growth. The first IFA invests in China and Japan say, as well as other markets, the second avoids China and Japan. Then China and Japan tank. Has the first done anything wrong? No, not assuming the risk profiles of the investments including diversification were 'acceptable'. This is perhaps a scenario that concerns the OP. Your view seems to be that the IFA has no judgement, they just analyse risk, and make decisions.

A quick search online of IFA web sites throws up some nice rosy descriptions of what an IFA does, with one mentioning a meeting lasting 1-2 hours. One IFA I dealt with, many years ago in the commission days, certainly did not spend much time trying to understand my personal situation, fnances and goals. But that did not stop him writing a report, with recommended funds to buy. The report looked like a boiler plate template with my name inserted, and a few details changed to suit my background. I did not purchase the funds recommended.

Incidentally, you throw up a glowing description of the IFA profession, and yet until recently the IFA trade was surely one of the least transparent professions in the UK. I was given absolutely no information about how the IFA I dealt with would receive payment. No mention of commission on purchase, no mention of ongoing commission. It hardly inspires confidence does it?