Basic Chat with an IFA

bowlhead99

ZingPowZing wrote: »

The whole positioning on financial advisers in the financial services industry gives rise to a handful of doubts/concerns.

More to follow...

Are any of those concerns anything to do with your complaint against Hargreaves Lansdown that didn't get upheld?

Most people go their lives without appointing a financial adviser as they figure things out for themselves from the media or friends or government information or from corporate advertisements for services made available to them (often online these days), rather than spending money buying advice. A substantial number don't have enough savings to pay tax on interest they earn, or to keep them going more than a couple of months without pay or benefits.

So the position of financial advisers as regulated professionals (whether independent or acting in relation to a particular set of products) will to many people be as irrelevant to them as a Feng Shui consultant feels to me, even though they can see why the services might be of interest to someone else.

The only time one is really needed stems from regulation - if for example you have agreed with an employer to work for them in exchange for a set of significant defined benefits or guaranteed payments in retirement, but then later decide you would rather not take those benefits and guarantees and instead move a 'cash equivalent transfer value' into some other type of pension arrangement, this can only be sanctioned after you have received proper 'financial advice' from someone with the relevant regulatory permissions.

That government intervention in private contracts is part of 'protecting people from their own potentially unwise actions', a bit like how you are supposed to wear a helmet on a motorbike or a seatbelt in a car, and not grow opium poppies to make your own heroin. In order to enforce the protection, the government entrusts qualified professional advisers to provide the tailored personal financial advice so that the government does not have to do it itself. From your posting history I expect you don't agree with it.

I haven't used an IFA, though one might be useful at some point if I wanted to source an annuity quote or a specialist insurance policy or equity release product, or perhaps if I had grown tired of keeping up with personal tax rules or no longer had much any interest in researching investment products, planning my financial affairs or dealing with the paperwork.

At least these days there is lots of information online to allow someone to source their own solution much more effectively, or evaluate what they have bought, than in the old days of print media pre-internet and fully commission-based advice. As with other jobs there will no doubt be some 'rogue traders' among the workforce, but regulatory protections exist.

Sailtheworld

bowlhead99 wrote: »

I suppose the people earning £30k probably don't have anywhere near as much investible income as those earning £150k because more of their money is spent on necessities or cash savings. So they have rather less money that would be available to pay the IFA for his time and knowledge and liability, and even a discounted fee would be large in relation to the figures on which the advice would be given. So unfortunately they're not going to get the advice (at a price that's sensible from their perspective).

You had a job paying you and your colleagues a six figure salary, right? If another company had approached you saying they'd like you to come and work for them for £10k a year because they don't have a lot of revenue to pay you more, and you could probably live on it if you were careful. If you didn't have enough in the bank to give up your existing £100k a year gig to be charitable with the new company, you'd probably tell them to get stuffed - you're not going to give them a 90% discount from your going rate.

That's the same as the IFA who gets enough business income from the high earners to run his business profitably, and doesn't want to drop any of that work to pursue a small client who would need a discount. Similarly the football agent who can't give up a week to work a transfer deal with a non league club for minimal fee when that week would net him £millions from Ronaldo's people. Maybe he could do it in his spare time for free You do find IFAs on here from time to time, giving guidance for free.

Most IFAs can only dream of snagging a Ronaldo. Most IFA's offices are single room dumps. I don't think that's because they're trying to keep their overhead down so their customers have more to spend on yachts. They're seen as being too expensive for the value they add.

AlanP_2

Sailtheworld wrote: »

Most IFAs can only dream of snagging a Ronaldo. Most IFA's offices are single room dumps. I don't think that's because they're trying to keep their overhead down so their customers have more to spend on yachts. They're seen as being too expensive for the value they add.

So they are too expensive i.e. people are paying a lot for the service so they earn lots of money, but they work from single room dumps, presumably in your view, because they can't afford anything more upmarket?


Sounds like weird logic to me.

SonOf

fred246 wrote: »

Where I worked IFAs used to come and see the top earners every few months touting for business. They totally ignored all the people earning £30-£40K who needed financial advice as much as anyone. I used to think surely an IFA could see them and still make enough money. It's a bit like expecting a premier league football agent to deal with non league players. They just seem to want to do a few deals and make a load from each one. They certainly aren't going to get out of bed for £100.

Firms will generally have their target markets. General practitioner firms tend to be the IFAs for all types. However, others will focus on different markets. Some may only be interested in high net worth. Most businesses in all walks of life will have their target markets and similar retailers/professionals will have different target markets.

Sailtheworld

AlanP wrote: »

So they are too expensive i.e. people are paying a lot for the service so they earn lots of money, but they work from single room dumps, presumably in your view, because they can't afford anything more upmarket?

Sounds like weird logic to me.

It's an industry in decline because it doesn't add enough value. Regulation has seen to it that making money by selling old rope isn't as lucrative as it once was. The glory days are (thankfully) over.

I like the OP's idea of using an IFA for a chat but because of the misdeeds of the past this isn't really possible because they now need to spend most of the time covering their behinds.

SonOf

It's an industry in decline because it doesn't add enough value.

Actually its not. IFA numbers have been consistently stable even through the RDR. Its FA numbers that fell off a cliff and have been in decline. (they accounted for over 200,000 at peak. Some suggest over 300,000 in the 80s prior to regulatory stats being collected)

According to the FCA stats the number of investment class advisers (FA & IFA) has increased to 26,677 in 2018. It was around 20,000 in 2013.

Mortgage advisers account for a further 14,052 on top of that. Pre-RDR many of those would have been full advisers.

Most IFA's offices are single room dumps. I don't think that's because they're trying to keep their overhead down so their customers have more to spend on yachts.

The average investment revenue per adviser is lowest with 1 adviser firms (£164,082) and then 2-5 adviser firms (£187,248) compared to 6-50 adviser firms (£194,390). So, lower fee income with smaller firms.

Average pre-tax profit was around half the revenue reflecting the ridiculous costs that exist nowadays.

I like the OP's idea of using an IFA for a chat but because of the misdeeds of the past this isn't really possible because they now need to spend most of the time covering their behinds.

Funny how some people view doing the right thing as covering their behinds.

Sailtheworld

SonOf wrote: »

Actually its not. IFA numbers have been consistently stable even through the RDR. Its FA numbers that fell off a cliff and have been in decline. (they accounted for over 200,000 at peak. Some suggest over 300,000 in the 80s prior to regulatory stats being collected)

According to the FCA stats the number of investment class advisers (FA & IFA) has increased to 26,677 in 2018. It was around 20,000 in 2013.

200,000 to 20,000 and now bumping along the bottom? I know there's a distinction between IFA and FA but come on.

SonOf wrote: »

The average investment revenue per adviser is lowest with 1 adviser firms (£164,082) and then 2-5 adviser firms (£187,248) compared to 6-50 adviser firms (£194,390). So, lower fee income with smaller firms.

Average pre-tax profit was around half the revenue reflecting the ridiculous costs that exist nowadays.

May as well be plumbers - they'd make more money and add more value.

SonOf wrote: »

Funny how some people view doing the right thing as covering their behinds.

The customer pays for them to do the right thing AND for them to cover their behinds. Because of the misdeeds of the past covering an IFA's behind is onerous and expensive and another reason why customer's struggle to see the added value.

AlanP_2

Sailtheworld wrote: »

The customer pays for them to do the right thing AND for them to cover their behinds. Because of the misdeeds of the past covering an IFA's behind is onerous and expensive and another reason why customer's struggle to see the added value.

What evidence do you have that investors using an IFA are struggling to see the added value?

BTW - Half a dozen people on here saying "glad I ditched my IFA" is not evidence, nor is the majority of people on here who don't use IFAs evidence as they, by definition, aren't IFA customers.

Personally I don't use one but my overall non-works pension pot is relatively small so doubt I would get much added value.

If I had a good 6 figure sum the equation would be different.