IFA Ongoing Charges

Clive_Woody

dunstonh wrote: »

There is no bias. If transactional is most suitable then so be it. If ongoing is more suitable than so be it. Recommendations are required by EU law to be suitable with the knowledge and understanding of the individual.

If the client gives the direction that they want transactional advice then that is no different to an instruction that they want only passive funds or socially responsible or ethical or any other direction given by the client.

The criteria and requirements build up and you recommend on that basis.

You previously stated that if clients did not agree to pay a regular fee it "could impact on the returns" - there is clearly a bias towards clients who pay more.

I appreciate this is how business works, but you cannot claim no bias when clearly customers who pay more get a preferential service.

Linton

Clive_Woody wrote: »

You previously stated that if clients did not agree to pay a regular fee it "could impact on the returns" - there is clearly a bias towards clients who pay more.

I appreciate this is how business works, but you cannot claim no bias when clearly customers who pay more get a preferential service.

I dont think you have got the point...


Go back to the gym instructor. One client may pay for personal instruction - the instructor will monitor the clients health, abilities and needs and use his experience and skill to choose a regime that is safe but effective. Another client simply asks for a list of exercises to use at home. These exercises will be very different because the client will not have the gym equipment and the instructor will err on the side of safety because of the lack of ongoing monitoring.


Is the home client being short-changed or being provided with something that is inferior by a corrupt instructor? No - its simply a matter of different circumstances requiring different solutions.

justme111

I think Clive understands it , he just wrongly chooses to use the word "bias" describing this situation.

nrsql

You need to look at the outcome.
The servicing fee becomes a cost for the portfolio. Does the portfolio do better with the IFA servicing fee or without?
Actually - that shouldn't be limited to the portfolio as IFA servicing might have less tangible benefits as your life matures and your relationship with your IFA becomes more important - if you are lucky enough to get an appropriate IFA.

But I'm a bit concerned about the assumption that a portfolio that isn't serviced by the IFA won't get serviced at all. I would have thought that the client should be able to say what they want rather than be put into a less performing portfolio if they don't continue to pay. Why not put a portion into the funds that don't need servicing and part into the funds that do - presumably the serviced funds are close to trying to time the market so I would be concerned about putting everything into that anyway.

This idea of linking charges to growth keeps cropping up and would be a really bad idea. It would tempt IFAs to split their customer base into different strategies, some would do really well, some really badly but would probably end up more profitable for the IFA.

dunstonh

You previously stated that if clients did not agree to pay a regular fee it "could impact on the returns" - there is clearly a bias towards clients who pay more.

Clearly the returns will differ. The investment strategy will be different. That does not make one method or the other biased.

If someone said they were an ethical investor, would you say that creates an advice bias?

I appreciate this is how business works, but you cannot claim no bias when clearly customers who pay more get a preferential service.

There is no bias. Both types got appropriate advice for their needs. Their needs were different. People are different. Therefore the advice was different.

But I'm a bit concerned about the assumption that a portfolio that isn't serviced by the IFA won't get serviced at all. I would have thought that the client should be able to say what they want rather than be put into a less performing portfolio if they don't continue to pay. Why not put a portion into the funds that don't need servicing and part into the funds that do - presumably the serviced funds are close to trying to time the market so I would be concerned about putting everything into that anyway.

The client can say what they like. However, if they have no history of running a portfolio, dont really understand investments and not going to put any work in then a recommendation for a portfolio style that needs those things would be unsuitable.

Sticking even part of the portfolio in a collection of single sector funds left to their own devices is bad. The weightings would go out of sync over time and normally increase in risk.

If the person overrules the adviser, then that is fine. However, if the person is knowledgeable enough to run a portfolio to a defined strategy then what are they doing seeing an IFA in the first place.

fred246

IFAs used to invest clients money really badly. They obviously had no idea whatsoever. OK times change. Things move on. IFAs now have 'the investment portfolio' as their secret. Unless you pay their ridiculous charges you won't have access to their portfolio. Their portfolio is so good it is worth paying the charges. This must be where robo advisers come in. There can only be a few questions that you ever need to ask before assignment to a specific portfolio. You shouldn't have to pay silly fees to have your money invested in a reasonable selection of funds.

ian16527

On this forum we often hear from people who perhaps are currently aged 50, wish to retire at 55, have one DB pension coming in at 60, another at 65 but could be taken earlier with reduced income, and SP at 67. What do they do now with their £500K of DC pot and how do they manage their portfolio over the years to safely ensure a stable standard of living? They probably havent yet worked out what income they need.

I am in this position but not as well off lol.

Referring back to my original question, which was about the ongoing fees, in my case I do not think it is worth while keeping it up and has been cancelled, as the pension is not actively managed.

In future I have the opportunity to revisit this with the IFA close to retirement who I still have a good relationship and pay ad hoc consultation fee if I so desire. I have never looked into investments before as never had the time, or money to invest but that is changing so will start a bit of research.

Thanks for all your replies again

Clive_Woody

dunstonh wrote: »

Clearly the returns will differ. The investment strategy will be different. That does not make one method or the other biased.

There is no bias. Both types got appropriate advice for their needs. Their needs were different. People are different. Therefore the advice was different.

I disagree, you stated that those who pay more can expect better returns. That is a definite bias. The clients paying more money get a preferential treatment.

I am not questioning the appropriateness of the advice given, I have no data to support that claim one way or the other. I am sure that you feel the advice you give is considered and appropriate. I have no reason to challenge that claim.

Linton

Clive_Woody wrote: »

I disagree, you stated that those who pay more can expect better returns. That is a definite bias. The clients paying more money get a preferential treatment.

....

The key characteristic of "advice" is that it is appropriate for the particular customer in his particular situation - that is what the regulators seem to focus on. As long as that criterion is met with equal diligence I would find it difficult to use the word "bias".

Clive_Woody

Linton wrote: »

I dont think you have got the point...


Go back to the gym instructor. One client may pay for personal instruction - the instructor will monitor the clients health, abilities and needs and use his experience and skill to choose a regime that is safe but effective. Another client simply asks for a list of exercises to use at home. These exercises will be very different because the client will not have the gym equipment and the instructor will err on the side of safety because of the lack of ongoing monitoring.


Is the home client being short-changed or being provided with something that is inferior by a corrupt instructor? No - its simply a matter of different circumstances requiring different solutions.

I think you are trying to discuss an entirely different point or misunderstand bias.

I am not for one minute suggesting corruption, foul play or discussing fairness. Neither am I questioning appropriateness. Those are quite different factors which seem to be confusing some people.

I am discussing that it has been stated that those who pay more can expect a better outcome, therefore there is most definitely a bias here. The more you pay, the better the outcome one can expect.

I'm not saying this is wrong, unfair, immoral, etc...but to claim no bias is disingenuous.