IFA ongoing fee..Why pay?

[Deleted User]

SonOf wrote: »

That is not what they are saying.

They have, quite rightly, pointed out that some firms are taking the P with their level of charges and that fees of that size are not adding value.

This is nothing new. For years, we have said on this site that some adviser firms are good value and some are poor value and some really charge disgraceful amounts.

That doesnt mean all advisers are bad value. it means the bad value ones are bad value.

No, the FCA are not saying that 0.5% is good value here. To the contrary:
"..a typical ongoing charge of between 0.5% and 0.75% [...] did not usually reflect value for money for consumers after the transfer."

bowlhead99

fred246 wrote: »

As I say they need to negotiate hard. Once you understand investments it only takes a few seconds to glance at a portfolio. You see it on this forum. If someone posts their portfolio an IFA will crticise it in seconds. £200 is more than enough.

While they can criticise the thought process behind a bad portfolio very quickly for free on an anonymous 'discussion' basis, that doesn't mean they will be in a position to offer specific advice on what to buy instead, without all the fact find palaver and risk and liability stuff which the regulators and the professional indemnity cover insurers require.

Re: criticising in seconds not being worth a large fee - It is like if you have a machine break down and someone charges you a fortune to fix it and they very quickly get it going again. You ask why you paid £100 for a minute's work which is prorata £6000 an hour. The reply is that to fix it they needed 50 seconds of assessment time and 10 seconds hitting it in the right place, and twenty years of experience to know where to hit it without breaking it. And they don't get to work a full hour at those rates, and they have an office to maintain, and so they only take home an amount equal to minimum wage, even though you think they're earning £6000ph.

Your choice as the customer is to pay the cash for the work or learn to DIY.

The IFAs won't voluntarily reduce their prices.
The regulators feel they have to 'leave it to the market'. People paying for IFAs need to take the lead and get better value from their investments.

I agree they should leave it to the market. Price discovery for a service means that if some investors don't want to pay £x for ongoing advice, demand will fall short of supply and a new lower price will be discovered (or IFA will give up and find another career). So it is what investors will pay, that drives what can be charged.

SonOf

ZingPowZing wrote: »

No, the FCA are not saying that 0.5% is good value here. To the contrary:
"..a typical ongoing charge of between 0.5% and 0.75% [...] did not usually reflect value for money for consumers after the transfer."

The FCA were looking specifically at DB transfers and the work carried out by 18 firms, who did large volumes of transfers. Most of these firms use DFMs (where the investments are outsourced and the DFM has a charge on top of the adviser charge). So, if the IFA is outsourcing the investment decisions and the person has no real ongoing needs, then an ongoing adviser charge for doing very little doesn't really reflect value for money.

Again, that is nothing particularly new and the advisers here have often said that use of a DFM often adds a layer of extra charges and is of little benefit. However, there are several DFMs that are low cost and have had a consistent performance that exceeds the low-cost multi-asset funds after charges so often mentioned on this site. If the adviser uses one of those and is charging 0.50% (instead of,say, 0.75% ) and they are providing ongoing services that are of use then that is not a problem.

There are some firms where the ongoing service is little more than a statement being issued that more or less mirrors the provider statement and a periodic publication that is rarely read. That is not good value ongoing service in my opinion and that is the sort of thing I suspect the FCA was seeing. My anecdotal view is that the larger the firm, the less likely ongoing advice is going to be personalised but more of a computerised output.

[Deleted User]

SonOf wrote: »

The FCA were looking specifically at DB transfers and the work carried out by 18 firms, who did large volumes of transfers. Most of these firms use DFMs (where the investments are outsourced and the DFM has a charge on top of the adviser charge). So, if the IFA is outsourcing the investment decisions and the person has no real ongoing needs, then an ongoing adviser charge for doing very little doesn't really reflect value for money.

Again, that is nothing particularly new and the advisers here have often said that use of a DFM often adds a layer of extra charges and is of little benefit. However, there are several DFMs that are low cost and have had a consistent performance that exceeds the low-cost multi-asset funds after charges so often mentioned on this site. If the adviser uses one of those and is charging 0.50% (instead of,say, 0.75% ) and they are providing ongoing services that are of use then that is not a problem.

There are some firms where the ongoing service is little more than a statement being issued that more or less mirrors the provider statement and a periodic publication that is rarely read. That is not good value ongoing service in my opinion and that is the sort of thing I suspect the FCA was seeing. My anecdotal view is that the larger the firm, the less likely ongoing advice is going to be personalised but more of a computerised output.

Subtext of above: they don't mean me.

AlanP_2

ZingPowZing wrote: »

Subtext of above: they don't mean me.

I took it mean: not all IFAs.


You, and Fred, seem to lump them all together as leeches on your wealth.

Some are, some aren't same as some Doctors are good and some aren't.

Why don't you both get over it and move on with your lives?

segovia

When I was in discussion with an IFA recently he sold me on the idea of a discretionary managed fund as it would be proactively monitored and adjusted to ensure the efficacy of returns. The 0.5% on top that the IFA was proposing to charge was allegedly to monitor my own personal circumstances and check if the investment is still suitable. I could not justify £2,250.00PA for someone to tell me that my circumstances have not changed. J

[Deleted User]

AlanP wrote: »

I took it mean: not all IFAs.
You, and Fred, seem to lump them all together as leeches on your wealth.Some are, some aren't same as some Doctors are good and some aren't.
Why don't you both get over it and move on with your lives?

When you say "get over it" do you mean not cite the FCA report? Or when someone says that "that is not what they are saying", not highlight the text? Or not comment when he then says that wasn't what they meant ?

Fred can speak for himself but I'm pretty sure that after we have both moved on with our lives,
Son Of will still be here. Here is a Financial Adviser. Moreover he is an IFA; and furthermore of that faction who should be considered the "good IFA." The danger of deflecting a general criticism of the industry in this way is that it leads to "not quite that poor" expectations, and normalises standards that just would not be tolerated in other countries.

Also, can we please stop likening financial advisers to doctors?

AlanP_2

ZingPowZing wrote: »

Also, can we please stop likening financial advisers to doctors?

Why not, they get compared to being as bad as Thieves on here sometimes so it helps redress the balance :beer:

fred246

ZingPowZing wrote: »

Also, can we please stop likening financial advisers to doctors?

I have never paid a doctor a penny. I know people who have though and I've never heard one who has gone for say a hip replacement only to be told "sign this form to ongoing care for your hip. Only 0.5% of your wealth every year or else I will have to do a different operation...". It is amazing how you could compare someone with all those years of study and practical experience to an IFA with minimal study who just fills a few forms in.

cloud_dog

ZingPowZing wrote: »

Also, can we please stop likening financial advisers to doctors?

Seriously? I can only assume you really have not had to engage with doctors for anything more serious than a sore throat. The medical profession has virtually zero oversight, what is has is toothless. I would place my trust in IFAs above doctors who are just above estate agents.