Financial advice - flat fee versus percentage

br1anstorm

eskbanker wrote: »

They could perhaps publish an article like https://www.moneysavingexpert.com/savings/best-financial-advisers/

Fair call, eskbanker - I hadn't seen that!

Having said that, the article doesn't quite deliver. It has all the familiar generic advice about the ways in which advisers charge (flat fee, hourly rate, percentage) and the encouragement to ask pertinent questions. I note it mentions VouchedFor and Unbiased.com, which - as dunstonh has pointed out - are essentially paid-listings and neither objective or comprehensive.

But the article doesn't address the key point which I am trying to clarify. It says for example "hourly charges can be anything from £50 to £250 per hour"; and "percentage fees can range from 0.5% to 5%". Saying that the most expensive advisers charge 5 or 10 times more than the cheapest ones is not hugely useful - in fact it's hopeless.

If you were paying 5 or 10 times more for a unit of electricity than your neighbour, you'd want to know and compare tariffs. If you bought a car that cost 10 times more than your mate's, you'd at least want to know how much bigger and better it was.

In the case of investment platforms (which offer services in the same arena as IFAs), their tariffs are clear and comparison is possible, as the tables produced by snowman and the Telegraph show. At present, looking for a financial adviser seems a bit like looking at restaurants where there's no menu in the window and no prices on the menu, and you only find out whether you're paying Big Mac or Michelin-star prices after you've sat down and ordered the food!

Seems as if transparency and consumer-information still has some way to go, at least in this area.

dunstonh

It says for example "hourly charges can be anything from £50 to £250 per hour"; and "percentage fees can range from 0.5% to 5%". Saying that the most expensive advisers charge 5 or 10 times more than the cheapest ones is not hugely useful - in fact it's hopeless.

Isnt that the same for many professions. years back, I needed some work and the quotes ranged from £1500 to £20,000. Recently, I was getting quotes on something and the person said rather than charge be for the job, they would charge me the day rate as it would be repeat business.

In the case of investment platforms (which offer services in the same arena as IFAs), their tariffs are clear and comparison is possible, as the tables produced by snowman and the Telegraph show.

Not necessarily true. With three platforms, we have special terms over their published tariff. One of them goes even further and will price bespoke terms if we ask for them and the value is high enough.

At present, looking for a financial adviser seems a bit like looking at restaurants where there's no menu in the window and no prices on the menu, and you only find out whether you're paying Big Mac or Michelin-star prices after you've sat down and ordered the food!

I would disagree on that as the adviser is not allowed to charge until the fee has been agreed and a chance to exit at no cost given (usually stated as if we go beyond this point, you will incur charges). So. nothing is charged until it is agreed.

br1anstorm

Thanks, dunstonh.... and believe me, I'm not suggesting that IFAs are unique in being 'elastic' over charges, as anyone who has sought a quote from a builder will know: "Well, guv, it all depends on what you want....".

But just to pick up on the point about platforms - of course certain IFAs may be able to get special deals with particular platforms. But it remains the case that platforms have a published set of charges which everyone can see, and which allows anyone to work out how much their individual investment-management needs might end up costing.

To continue the restaurant analogy, it allows you to look at the cost of a meal in the kebab shop, at the pizza restaurant, or in Michel Roux' place, before you book a table. Having the option to walk out later, once you've sat down and the menu-prices are revealed, isn't quite the same thing!

masonic

br1anstorm wrote: »

To continue the restaurant analogy, it allows you to look at the cost of a meal in the kebab shop, at the pizza restaurant, or in Michel Roux' place, before you book a table. Having the option to walk out later, once you've sat down and the menu-prices are revealed, isn't quite the same thing!

To continue the analogy even further, if you walk into a kebab shop or pizza restaurant and order something that is not on the menu, but expect to pay the price of something that is on the menu, then you will likely end up disappointed.

If you can walk into a kebab shop or pizza restaurant and order exactly what you want from the menu, then why would you instead visit a swanky restaurant where the chef will prepare you something tailored to your personal preferences, for a price? It would be crazy to go somewhere like that and order fast food.

dmelife

Op, is there a price comparison site for IFAs? No.
Is there a price comparison site for Solicitors? No.
Is there a price comparison site for your profession? I doubt it.

dmelife

Oh, and to use your restaurant analogy, a pizza is a pizza, thus price pretty much same ballpark wherever you go. Financial planning not a pizza. Lots of variables.
Plus, you are likely to get a pretty tasty starter for FREE from most IFAs.

short_butt_sweet

what you could do is go to an IFA for an initial free chat, find out how much they propose to charge, say you'll go away to think about it, and then post about it on here so people can say whether the charges look fair or greedy.

the point of the initial chat is also to see whether you get on with the IFA.

though i'm not sure what the restaurant equivalent is for this approach

newatc

I agree with Brainstorm that finding a good IFA, unless you have a personal recommendation, seems a daunting prospect. Do IFA's provide a choice of a references that can be contacted as standard or request?

dunstonh

It should be remembered that IFAs, despite handling millions of transactions a year, only accounted for 1678 complaints at the FOS in 17/18. Quality is not really an issue. IFAs are not seen as a problem area.

The areas to look at are:
1 - cost. There are a lot of differences.
2 - Are they really IFAs. A lot of FAs try to make out there are independent by using similar words but not the protected words.
3 - A small number of IFAs run a rigid model that only uses one platform and they put everything with the same DFM. Many of these are now ex IFAs but some are holding on to their IFA label as long as they can. A true IFA will be placing products/investments in various places. So, question on who they use as providers/products. A proper IFA would likely be vague on that response as they wont commit until research. They may have an idea but that is all. If they come out saying which platform and what investments or DFM they are using then they are not likely to be real IFAs.

Avoid factory line advice services. These have a poor reputation and time and again the FCA seem to find issue with them (most recently on DB pension transfers).

Apart from that, its best not to overthink it because generally, the vast majority will do a perfectly good job. Cost and personality are the key things and only meeting them will tell you that.

Aegis

newatc wrote: »

I agree with Brainstorm that finding a good IFA, unless you have a personal recommendation, seems a daunting prospect. Do IFA's provide a choice of a references that can be contacted as standard or request?

Some will, yes. I have a few clients I wouldn't mind acting as references. Bear in mind that I'm only going to pick my happiest clients when I do that though!