Financial Advice

grey_gym_sock

nrsql wrote: »

They will to maximise their benefit for the minimum work.

That could mean finding out as much as possible about their clients and their profession to grow their business or it could mean doing as little as possible and not minding if they don't provide the best service or retain clients (plus there will be the occasional crook).

are you subscribing to the general theory, beloved by many economists, that people always act rationally to maximize their self-interest? or do you think that only applies to IFAs?

in any case, the theory is complete nonsense. people (and IFAs) are motivated by many things (including self-interest). and most of the time people simply don't have the information necessary to calculate what would maximize their self-interest, not even approximately and probabilistically. and self-interest is not clearly defined in general - i mean: you can compare money to money, but it's not clear how you should compare more money to e.g. a richer family life.

if IFAs couldn't run a sustainable business by giving their customers good advice, then they probably wouldn't. either they'd give bad advice, or they'd already have gone out of business. so, in a sense, they only give good advice because it is in - or at least: not diametrically opposed to - their own interests. so self-interest does come in to it to that extent. but that is very different from asserting that it is maximized.

perhaps this is getting too philosophical ...

fred246

Just looking at the last product an IFA sold me. Massive commission and then ongoing trail commission for 12 years. No reviews during that period. Sold to someone in their twenties. Invested in Standard Life Money Market Pension fund. Surely one of the most abysmal funds available. In those days you had no knowledge and the all knowing IFA invested it for you. So when trail commission was banned they invented annual reviews where they can charge a massive amount for 'reviewing' your investments. There are thousands of IFAs and they target people who they think are earning good money so they did keep phoning me and they were very hard to get rid of. Even when you told them you didn't want their services they would phone you again asking if you'd had a rethink.

nrsql

grey_gym_sock wrote: »

are you subscribing to the general theory, beloved by many economists, that people always act rationally to maximize their self-interest? or do you think that only applies to IFAs?

in any case, the theory is complete nonsense. people (and IFAs) are motivated by many things (including self-interest). and most of the time people simply don't have the information necessary to calculate what would maximize their self-interest, not even approximately and probabilistically. and self-interest is not clearly defined in general - i mean: you can compare money to money, but it's not clear how you should compare more money to e.g. a richer family life.

if IFAs couldn't run a sustainable business by giving their customers good advice, then they probably wouldn't. either they'd give bad advice, or they'd already have gone out of business. so, in a sense, they only give good advice because it is in - or at least: not diametrically opposed to - their own interests. so self-interest does come in to it to that extent. but that is very different from asserting that it is maximized.

perhaps this is getting too philosophical ...

Getting off topic but think you are assuming I'm basing on Maslow et al. Not true, think that sort of attempt at categorisation is doomed to failure. It's also not as binary as you're trying to argue. I'm coming from a very different basis but that should be another thread and probably not on this site.

justme111

nrsql wrote: »

Getting off topic but think you are assuming I'm basing on Maslow et al. Not true, think that sort of attempt at categorisation is doomed to failure. It's also not as binary as you're trying to argue. I'm coming from a very different basis but that should be another thread and probably not on this site.

what he /she has done is to point out flaws in your statement that IFAs are motivated by self interest

dunstonh

Just looking at the last product an IFA sold me. Massive commission and then ongoing trail commission for 12 years. No reviews during that period.

Trail commission was paid even if you went direct. It was part and parcel of UT/OEICS.
Did you employ the adviser to provide ongoing servicing? if not, then you got transactional.

Sold to someone in their twenties. Invested in Standard Life Money Market Pension fund.

That didnt pay trail commission.

So when trail commission was banned they invented annual reviews where they can charge a massive amount for 'reviewing' your investments.

Reviews have existed for decades.

There are thousands of IFAs and they target people who they think are earning good money so they did keep phoning me and they were very hard to get rid of. Even when you told them you didn't want their services they would phone you again asking if you'd had a rethink.

I still doubt that. I can imagine a salesforce may have kept calling you back then. However, the vast majority of IFA firms are small 1-4 advisers. They dont have the resources or inclination to call like that.

Aegis

dunstonh wrote: »

Trail commission was paid even if you went direct. It was part and parcel of UT/OEICS.
Did you employ the adviser to provide ongoing servicing? if not, then you got transactional.


That didnt pay trail commission.



Reviews have existed for decades.



I still doubt that. I can imagine a salesforce may have kept calling you back then. However, the vast majority of IFA firms are small 1-4 advisers. They dont have the resources or inclination to call like that.

I can agree - I've never cold called a prospective client. My entire business model is based on referrals from various sources (not lead-generating companies either, before anyone accuses me of cold-calling by proxy).

gf1966

You can use an IFA if you want. try the unbiased website, but personally I've always preferred the DIY approach. It's worked for me and I've not found it difficult. I'd use an IFA if I consider I need advice on a more specific or technical matter. Smarter Investing by Tim Hale is a good book to get you started. It may be the only book you need. Consider maximising your work pension if you have one for the tax relief and employer contributions and paying every month into an ISA. You could have a look for low-cost global diversified fund like a tracker or the large global equity investment trusts which are also pretty low cost.

dunstonh

Smarter Investing by Tim Hale is a good book to get you started.

Although it has a bias towards passive.

You could have a look for low-cost global diversified fund like a tracker or the large global equity investment trusts which are also pretty low cost.

But also higher risk than the average UK consumer. Plus, not always cost-effective for small regular contributions. A common new DIY investor error is to invest way above their risk profile.

fred246

Or you could pay a fortune to an IFA to have it invested in the Standard Life money market pension fund as I did. Actually I think they have closed it because it was too bad.

HappyHarry

fred246 wrote: »

Or you could pay a fortune to an IFA to have it invested in the Standard Life money market pension fund as I did. Actually I think they have closed it because it was too bad.

Standard Life money market pension fund? You do know that money market funds are cash deposits with no real prospect of growth?

Did you, by any chance, tell your IFA (if that's what they really were) that you wanted to take no risk with your capital? I can't see any other reason why an IFA would put you in a fund with no growth prospects. And please don't say they did it for commission, because it's been pointed out that cash type funds didn't pay ongoing commission.