Investing without FA

bigadaj

Malthusian wrote: »

Which is pretty much the same in every industry. I think £3 for a coffee is grossly overpriced but if I walk into Starbucks, see the price list at the back and hand over my money I have no cause for complaint. Only in financial services is there this idea that overcharging someone is a crime.

No, overcharging is poor practice in any scenario.

There are two issues that I can see.

The ifa charges are effectively built up on an estimated time charge basis but many ifas aren't keen on making these clear, it's buried within the paperwork which the client signs at the end, but they may be overridden by the potential returns; you can argue whether this is a problem or not but by definition many people using advisers are those that aren't familiar with investments, if they were they may well diy.

Many people wouldn't think they would be Overcharged by a professional as they would be by a tradesman, the answer is of course to shop around but that isn't a view that many would think to do. It's no different if you go to a solicitor of course.

Malthusian

bigadaj wrote: »

The ifa charges are effectively built up on an estimated time charge basis but many ifas aren't keen on making these clear, it's buried within the paperwork which the client signs at the end, but they may be overridden by the potential returns; you can argue whether this is a problem or not but by definition many people using advisers are those that aren't familiar with investments, if they were they may well diy.

Everything, in every industry, is built up on a time charge basis. Every product in the world is at the root the cost of some man's time, whether that's time typing on a computer or digging stuff out of the ground. Some actually charge on a time cost basis, some find it easier to charge a fixed price. Starbucks could if they wished charge you on a time cost basis for however long it took to grow the coffee plants, extract the beans and make them into coffee. The fact that they don't (because it would be a monumental waste of time) does not mean they are hiding anything from you. The price to you is right there on the board behind the barista's head. The cost to them is their problem, not yours.

Many people wouldn't think they would be Overcharged by a professional as they would be by a tradesman

If that is true then many people are extremely dim and there is no saving them. I don't believe it is. Everyone knows that some solicitors are extremely expensive, some are cheap, same with accountants and financial advisers.

Rollinghome wrote:

If IFAs openly published a menu of their charges, as do coffee-shops, that could be seen on on their websites for example so that potential clients could compare costs then much of the criticism could be avoided.

IFAs often do not put their charges on their website for three reasons. Firstly because until the initial meeting (usually free of charge) you do not know how much work the client needs doing. Secondly because a website doesn't know whether you will be best suited by taking fees from investments or directly charging them on a time-cost or negotiated basis. And thirdly because the sort of client who goes round websites looking for whichever IFA has the lowest charge, then (usually) rings them up and the first word out of their mouth is an attempt to negotiate a discount, is usually a complaint waiting to happen. Many IFAs prefer to leave them to those who want them.

Fees must be disclosed at the initial meeting and this is the equivalent of the coffee shop having its price list on the wall at the back. Having your fees on your website is the equivalent of a coffee shop having its price list on a board outside on the street. Some shops like to trumpet their prices in that way, some don't. Each to their own.

50Twuncle

Malthusian wrote: »

IFAs often do not put their charges on their website for three reasons. Firstly because until the initial meeting (usually free of charge) you do not know how much work the client needs doing.

Why should IFA's even consider charging for an initial meeting ?
They are no different to any other tradesman - who I might get round for a quote for, for example "a new bathroom" - If you wanted a new bathroom - would you expect to have to pay for quotes ?

Pincher

It's not that much different from paying a plumber.
If you get a bad one, you are losing money endlessly fixing the leaks.

A good plumber is worth good money, it's just that you can't find one. Found a guy once, as it turned out, he paid for leads, so he was down by tens of pounds before he even stepped through the door. He was cutting corners and using cheap parts just to make the job pay. I would much rather to pay him £100 more jus so he can do the job properly.

If you assume the whole chain of people who administer your money need to eat, how much do you want to pay?

On a portfolio like a million pounds, £1,000 is 0.1%.
On a portfolio like £50,000, it's 2%.

We started off on the wrong foot. The whole thing started as a gravy train in the 1980s, with high inflation and so seemingly high return, as well as high levels of tax relief disguising the obscene charges. If we had started by making it illegal for financial services worker to own property, and ideally castrated so they do not have heirs to give money to, we wouldn't be where we are now.

I propose we create a quasi-religious Franciscan order, admitting orphans and disabled people, castrate them as initiation. They will have security of tenure, as long as they serve the public good, and act with due diligence and prudence.
Obviously they need to be drawn and quartered for betraying the public trust.

Low cost financial service, under Emperor Pincher.

bigadaj

Malthusian wrote: »

Everything, in every industry, is built up on a time charge basis. Every product in the world is at the root the cost of some man's time, whether that's time typing on a computer or digging stuff out of the ground. Some actually charge on a time cost basis, some find it easier to charge a fixed price. Starbucks could if they wished charge you on a time cost basis for however long it took to grow the coffee plants, extract the beans and make them into coffee. The fact that they don't (because it would be a monumental waste of time) does not mean they are hiding anything from you. The price to you is right there on the board behind the barista's head. The cost to them is their problem, not yours.

No, there are fundamentally only ever two charging models. One is based on cost plus profit, the other is based on what the market will bear. The first model is fine if transparent and if the nature of any risk is understood and agreed by all parties, it's often the case that this isn't true in many transactions.

If that is true then many people are extremely dim and there is no saving them. I don't believe it is. Everyone knows that some solicitors are extremely expensive, some are cheap, same with accountants and financial advisers.

Depends on how you define dim but many people don't think a s they should for financial services. Look at the misselling scandals the banks have undergone in the last decade or more, much of which would have been avoided if the customer had some modicum of common sense.
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Response in text above.

dunstonh

As we have mentioned costs, it is worth noting a few things as to why charges are high.

In 2015, the retained profits by advisory firms was £61 million. Down from £171 million in 2014. The FSCS levy for firms operating in the life and pensions sector is £90m. That is £10m higher than expected (and doesnt include the FOS and FCA levies) There is now more paid in levies than is retained in profit and the levies are going up each year.

Regulatory cost is a massive burden. It can take an adviser 3-6 hours work to complete the file for a simple transaction that takes 2 minutes to do.

50Twuncle

A consultation rate of £150 per hour has been stated !!
Does that sound excessive ?

dunstonh

50Twuncle wrote: »

A consultation rate of £150 per hour has been stated !!
Does that sound excessive ?

No. However, there are the usual variances between city and rural locations, boutique/prestige firms, chartered, non chartered etc.

TheTracker

dunstonh wrote: »

No. However, there are the usual variances between city and rural locations, boutique/prestige firms, chartered, non chartered etc.

82,500 posts and I don't recall you ever stating your hourly rate. Why is that?

Freecall

TheTracker wrote: »

82,500 posts and I don't recall you ever stating your hourly rate. Why is that?

Say 3 minutes a post on average, that's 3 x 82,500 = 250,000 minutes (or a bit over 4,000 hours).

Payment from MSE = £0.

That works out at roughly £0 per hour.

Good value I would say.

:beer: