Financial Advisors are useless

bostonerimus

FA/IFAs can always be used as paperweights. Serious though, good ones are useful for people without the inclination to DIY and specialized ones will always find work in really complex situations. But it seems to me that many charge a lot if money for doing not much at all. Those are the ones that are useless IMHO.

jimjames

You only need to see posts here to realise the benefits that an IFA can bring for some people. Many people would just leave their pension in cash because they think it's the "safe" option if they didn't get advice.

Alice_Holt

jimjames wrote: »

You only need to see posts here to realise the benefits that an IFA can bring. Many people would just leave their pension in cash because they think it's the "safe" option if they didn't get advice.

Or in the much riskier business of BTL.

BananaRepublic

jimjames wrote: »

You only need to see posts here to realise the benefits that an IFA can bring for some people. Many people would just leave their pension in cash because they think it's the "safe" option if they didn't get advice.

Exactly. Many people have poor performing pensions sold to them as a company pension scheme. An IFA can bring together the funds, and move them into lower charging and higher performing investments. And an IFA can advise clients to keep money invested during a crash.

It is certainly true that the finance industry is suspect with plenty of mis-selling scandals. But the IFA trade is now highly regulated. Whilst I am no fan of the trade, they do provide value to many people.

I don’t believe Dunstonh’s post about having a chat and charging a nominal fee in days gone by. The finance industry has never ever operated in that manner. In the past the modus operandi was to pretend the advice was free, but make money from hidden commission. The client would be charged 5% for a fund, the FA would get 3-4% of that. Hence the FA would benefit from recommending expensive funds. I bought my first funds from brokers that refunded the entire 5% fee. However, they went on to claim a 1% recurring fee which was fairly well hidden from the client. In my view the current model is much better for the clients.

Tcquins

BananaRepublic wrote: »

However, they went on to claim a 1% recurring fee which was fairly well hidden from the client. In my view the current model is much better for the clients.

Totally agree about the pre-RDR set up. There is a lot more clarity now, and it exposes the FAs/IFA who were less than clear with the fees they were creaming off.

It’s a far more transparent environment for clients as to the fees they pay. (The exposure of the level of transactions costs on funds has also created an interesting dialogue, that can only be in investor’s interests)

I am concerned about MiFIID II though, to some extent it’s well intentioned, but like most far reaching regulation its actual application is totally impractical. The amount of paperwork for a single ISA subscription of say, £10k is mind boggling, even from just the provider. All it’s going to do is drive up regulatory costs.

EachPenny

dunstonh wrote: »

The directives seem to be based on the assumption that everyone lives in cities and has very formal meetings specifically about investments. Yet the real world is not like that.

Like the 'man from the Pru' who toured the villages I grew up in having cups of tea and renewing people's car insurance. And while he was eating a biscuit would say "Have you thought about...."

We knew we could trust him because he lived amongst us, and one bad bit of advice would have ruined his reputation across his whole client base quicker than you can say "FCA".

The real shame is the regulation necessary to control the sharks means people who could really do with a bit of informal advice can no longer get it so easily.

So thank goodness for sites like MSE and the wisdom of people like yourself dunstonh

dunstonh

don’t believe Dunstonh’s post about having a chat and charging a nominal fee in days gone by.

We (as a firm) have had to cull ongoing servicing to around 50 clients because of MiFIDII. I aim to reduce it by another 30 or so over the next year. And probably another 30 the year after. These are people with 20-30 years ongoing servicing with a style and method that suited them and it suited us. It could be offered cost effectively. A lot of the time it was the cup of tea and a chat and pointer here and there with the odd phone call in between. Comfort meetings where they would pop in and have a chat about things. Usually older clients too.

Like the 'man from the Pru' who toured the villages I grew up in having cups of tea and renewing people's car insurance. And while he was eating a biscuit would say "Have you thought about...."

We knew we could trust him because he lived amongst us, and one bad bit of advice would have ruined his reputation across his whole client base quicker than you can say "FCA".

The old insurance agent products were expensive by modern standards and fairly basic. Agents generally did a good job until the late 80s to mid 90s when the sales pressure put on them was very hard. The good ones could do the job without pressure sales but the bad ones let the industry down. One thing they did very well as getting young people to set up savings plans and start pensions early. Something that has gone today.

ValiantSon

EachPenny wrote: »

Like the 'man from the Pru' who toured the villages I grew up in having cups of tea and renewing people's car insurance. And while he was eating a biscuit would say "Have you thought about...."

We knew we could trust him because he lived amongst us, and one bad bit of advice would have ruined his reputation across his whole client base quicker than you can say "FCA".

The real shame is the regulation necessary to control the sharks means people who could really do with a bit of informal advice can no longer get it so easily.

So thank goodness for sites like MSE and the wisdom of people like yourself dunstonh

Would that be the same Pru who are guilty of massive pension mis-selling?

http://www.telegraph.co.uk/pensions-retirement/annuities/200000-pensioners-line-payouts-short-changed-annuities/

http://news.bbc.co.uk/1/hi/business/124755.stm

dunstonh

ValiantSon wrote: »

Would that be the same Pru who are guilty of massive pension mis-selling?

http://www.telegraph.co.uk/pensions-retirement/annuities/200000-pensioners-line-payouts-short-changed-annuities/

http://news.bbc.co.uk/1/hi/business/124755.stm

Ironically, that was not the result of agents/advisers. It was trying to get people to bypass them and buy an in-house annuity. Pure greed by the insurer as they could offer naff rates and not pay an adviser/agent who would almost certainly tell them to buy from another provider.

ValiantSon

dunstonh wrote: »

Ironically, that was not the result of agents/advisers. It was trying to get people to bypass them and buy an in-house annuity. Pure greed by the insurer as they could offer naff rates and not pay an adviser/agent who would almost certainly tell them to buy from another provider.

Maybe so, but "the man from the Pru" was tied to Prudential. In the 80s they got a lot of people to transfer out of DB schemes and take their rubbish pension schemes instead. This was happening with Prudential advisers making that recommendation. Those advisers not tied to Prudential may well have given different advice, but "the man from the Pru" did.