Ifa

HappyHarry

Thanks for all replies. It's given me lots to think about.
The IFA we are interested in using has told me he is independent (as does his website.)
He has a BSc in maths.
He has the post nominals CFP (CM) and Chartered MCSI.
I understand that this means he is a Certified Financial Planner and is a Chartered Member of the Institute of Securities and Investment.
He has spoken about doing a "lifetime cashflow model"
I realise that qualifications have their limitations when assessing a professional person. However I take it all the above sounds like appropriate pre-selection based on what other have posted?

Out of interest I thought the term "whole of market" basically equated to "independent" but I now thinking this not the case? I was under the impression that asking if an IFA was "whole of market" was a good question.

No alarm bells ringing there at all.

Cash flow modelling is usually a sign of a good financial planner.

Whole of market and independent are different. 'Independent' will also be whole of market by definition. However, 'whole of market' may have restrictions in place which does not allow them to be independent.

payless

As far as qualifications go - These are as good if not better than the others listed.
( I can say that holding various CII, IFS and CISI qualifications - but I'm no longer in the advice giving game).

dunstonh

Out of interest I thought the term "whole of market" basically equated to "independent" but I now thinking this not the case?

Whole of market is not the same as independent.

For example, an FA could say that we use xyz platform to provide investments in unit trusts from the whole of market. In that scenario, the FA is tied to that platform and restricted to unit trusts.

I heard one tied sales rep once say that they have a research department that picks the best from the whole of the market and that they only recommend that as its the best. The phrase whole of market can be spun and included in a range of scenarios that make it sound more grand than it is.

Independent is protected term from a regulatory point of view. Whole of market is not.

I was under the impression that asking if an IFA was "whole of market" was a good question.

It's not a good question as there is only one answer to it and that is yes. By definition, an IFA is whole of market. I would position the question differently though to make sure you avoid the single platform/DFM investment types. I would ask do you regularly place business with different providers and platforms and different investments. A real IFA would be using Aviva with one client, Royal London with another. Putting some business on a platform with someone else and off a platform with someone different. i.e. they make sure the solution fits you. A single platform/DFM solution means you are fitting the FA and that just isnt what it is about.

Audaxer

jscol wrote: »

In addition I might ask what other think as to his proposed method of charging us.

He would charge a flat fee for a financial review. In addition he said that if we go with his recommendations he would charge a percentage of the money invested.

For a lump sum investment he would change 2% or 3% (depending whether over / under 100k). We not planning a lump sum investment.

For a regular investment plan he would charge 25% of the amount invested in the first year and obviously this could well apply to us. In both cases he would reduce the flat fee charged by the amount collected from whatever investment plan we went with. So if the flat fee was £1000 and we invested £4000 into a pension in year one we would only end up paying £1000.

Is this normal practice? I'm afraid I really don't know what to expect. I realise good financial advice can be expensive which is probably why I have avoided it until this particular issue came up.

Thanks.

If you are going to be paying 25% of what you are investing in fees that does seem very excessive. However I assume if you are making relatively small investments of £4k per year, then he probably has to charge that percentage to be worth his while. From what I have read, most IFAs are not really interested in small investors with under about £50k to invest, as the fees would have to be very high in relation to the amount of the investment.

I would consider if it is really worth going through an IFA if you have relatively small amounts to invest.

jscol

Audaxer,

The figure of 4k pa was only an example to demonstrate how the fee schedule works. I would imagine we would contribute more into what will be a tax efficient means of saving.

Given the tax / pension situation I describe at the start of my thread I suspect we'd benefit from tailored financial advice.

I have no issues paying an upfront fee for this advice. However paying a percentage of our investment to an IFA does concern me a bit. If we invested 10k into a pension it looks like we'd owe 2.5k which sounds a lot.

Audaxer

jscol wrote: »

Audaxer,

The figure of 4k pa was only an example to demonstrate how the fee schedule works. I would imagine we would contribute more into what will be a tax efficient means of saving.

Given the tax / pension situation I describe at the start of my thread I suspect we'd benefit from tailored financial advice.

I have no issues paying an upfront fee for this advice. However paying a percentage of our investment to an IFA does concern me a bit. If we invested 10k into a pension it looks like we'd owe 2.5k which sounds a lot.

If you need specific financial advice about your pension/tax situation I would agree a flat fee for the tailored financial advice. There is no way I would also agree to pay 25% in fees of what I was investing. As an illustration of how high these fees are - most investors would not expect to pay much more than 1% in fees of what they are investing, even if going through an IFA.

Malthusian

Audaxer wrote: »

As an illustration of how high these fees are - most investors would not expect to pay much more than 1% in fees of what they are investing, even if going through an IFA.

But that is because most investors who approach an IFA have a lump sum to invest - if not out of their own bank account, they usually have an existing pension or investment portfolio they want advice on.

I agree that I wouldn't pay X% of the first year's contributions. What if your circumstances change and you have to stop paying in? It's too much like those pension plans people took out in the 80s and 90s which are now widely regarded as a rip-off. If you don't have a lump sum to invest but nonetheless need tailored financial/tax advice then a flat fee for that advice is IMO the way to go.

If you want to make regular savings and don't have a complex tax situation, it would make more sense to use a simple DIY solution until you had a big enough fund to make it worth using an IFA.

jscol

Thanks everyone. I've emailed our potential IFA asking for a bit more detail as to his charging strategies. I'm waiting to hear back.

I think what he is offering / suggesting is that he takes control of any investments that we make as per his suggestions (and deals with the ongoing management of these) and that we invest via him rather than directly.

I'm hoping that we can just get his advice / perspective on our pension / tax situation, pay the one off fee and then DIY things from there. I don't know if IFA's let you do this. I'm certainly hesitant to enter into a longer term relationship at this stage - there is mention of further fees for yearly reviews etc. I just don't quite know what is normal / expected etc having never dealt with IFA before.

dunstonh

I think what he is offering / suggesting is that he takes control of any investments that we make as per his suggestions (and deals with the ongoing management of these) and that we invest via him rather than directly.

That is what you employ an IFA to do. If you want to DIY your investments then you would not use an IFA.

I'm hoping that we can just get his advice / perspective on our pension / tax situation, pay the one off fee and then DIY things from there. I don't know if IFA's let you do this.

I'm cant see any reason why you cant pay for guidence rather than advice.

I just don't quite know what is normal / expected etc having never dealt with IFA before.

You can employ an IFA on a transactional basis (ad-hoc or one off) or ongoing basis. Most people go with ongoing as that is the sort of relationship they want and most investors with IFAs are looking in the hundreds of thousands of pounds. So, there is more ongoing work involved. However, one off is fine.