IFA Fees

choi

Are there any IFAs prepared to work on a payment by results basis

In other words

If they say you will get 4% return and you do get this then they get their fee
If it underperforms they get less

Obviously there would need to be a pre arranged fee arrangement

I would even be prepared to share of a higher return than predicted or offered

Most other professionals work in this way
They provide a service
They get paid
If service is not up to the mark
They dont

Thrugelmir

choi wrote: »

Most other professionals work in this way

Care to name professions that do?

If service is not up to the mark

Relating performance to service is erroneous. Performance is not something which can be controlled.

Prism

The thing is no IFA should ever say that you should get a certain return because it is out of their control. They surely wouldn't want to commit to a payment option where they only get paid if they are lucky. Also, return isn't the primary goal - it could be a return based upon a certain level of risk - or some other criteria. So you would be encouraging them to take more risk than required just to get paid.

How do you judge an IFA. Its often very subjective and takes a number of years before you can tell. I can't see anyone wanting to work on that basis.

choi

Thrugelmir wrote: »

Care to name professions that do?

Yes
Me
Before I retired
I provided an agreed service for a client
When I had completed the work I was paid

I never expected payment until I completed agreed work



Relating performance to service is erroneous. Performance is not something which can be controlled.

I just think we should try it my way
Too many IFAs get away with making projections for what look like unsubstantiated returns
With the magic words
Can go up as well as down

kangoora

choi wrote: »

I just think we should try it my way
Too many IFAs get away with making projections for what look like unsubstantiated returns
With the magic words
Can go up as well as down

So you could end up with the situation where the IFA recommends a lot of high risk/high reward recommendations to maximise his (and your) income returns.

Then they all crash and burn, he loses a bit of income and you could have lost 50% of your pension. He just points at the 'investments can go up as well as down' statement and shrugs his shoulders.

No thanks

choi

kangoora wrote: »

So you could end up with the situation where the IFA recommends a lot of high risk/high reward recommendations to maximise his (and your) income returns.

Then they all crash and burn, he loses a bit of income and you could have lost 50% of your pension. He just points at the 'investments can go up as well as down' statement and shrugs his shoulders.

No thanks

In my situation that would not happen
Nor should it happen in any other situation

IFAs should listen and propose
Their proposal should be aimed at the clients best interest
The client should confirm acceptance

The client provides the fund
The IFA should not have a no risk path to payment of fees

choi

I am sure there are lots of great IFAs

Unfortunately the ones I have met all seem to be the same

Invest your cash with me over ten years and you will get 4% return

If all goes well
You might get more
You might get less

Meanwhile

Pay me 1.5% to set this up

And 1.4% pa for ten years

Come what may

Comments

Why so much to set up a plan
For me it looked like they were dusting off a ready made plan

The pa fee looks very high for tweaking a preset plan

On my investment fund of £250k the costs seem very high and must be paid

But the returns may or may not be acheived

AnotherJoe

Well, i can tell you one investment manager whose IT does indeed charge by results (and as a result, isn't charging)



So, perhaps not a winning strategy?

Its also more than crude to judge by results as simply as you put it. 4% (for example) would be in the context of long term results, it cant possibly be on a per year basis.
It must also be matched to risk level eg the investments should outperform or match a benchmark.
So if investments at your risk level fell say 20% then a 4% performance would equate to your investments only dropping 16%. Or if they rose 10% then you'd want 14% not 4%.

If you have got to the stage of realisation that IFAs do indeed know no more than what you or my cat know about next years market performance, then either use them on the basis they will stop you doing soemthing stupid, or see if you can do better.

I pay my IFA what he deserves, and if he's been inept, he gets nothing..... but i do DIY

choi

AnotherJoe wrote: »

Well, i can tell you one investment manager whose IT does indeed charge by results (and as a result, isn't charging)



So, perhaps not a winning strategy?

Its also more than crude to judge by results as simply as you put it. 4% (for example) would be in the context of long term results, it cant possibly be on a per year basis.
It must also be matched to risk level eg the investments should outperform or match a benchmark.
So if investments at your risk level fell say 20% then a 4% performance would equate to your investments only dropping 16%. Or if they rose 10% then you'd want 14% not 4%.

If you have got to the stage of realisation that IFAs do indeed know no more than what you or my cat know about next years market performance, then either use them on the basis they will stop you doing soemthing stupid, or see if you can do better.

I pay my IFA what he deserves, and if he's been inept, he gets nothing..... but i do DIY

Great reply clearly outlining the issue

It is obviously a complex issue and there are no easy solutions

bostonerimus

Many times the argument is made that when you need a particular service you should employ a professional; so for a leaky pipe you get a plumber and for money issues you employ an IFA. You expect the plumber to fix your pipe before they get paid, but the IFA wants to be paid even if they fail to get the return they project. You are in fact paying the IFA for advice, which should meet some professional standard, not for a guarantee that you will make money. The thing is that the advice and the services are usually pretty simple and the "specialised knowledge" is easy to attain and understand once all the jargon is removed.

Malthusian

Do you refuse to pay your car mechanic because the traffic's been bad, therefore you shouldn't have to pay him because he's failed to make your car go fast?