IFA ongoing fee..Why pay?

NottinghamKnight

Advisers are probably more variable in approach than most employments just in terms of age. As an engineer I followed a path of degree, masters then work training to a point of chartership, fairly normal, though I work in an area where the requirement for post graduate qualifications came in earlier than many others. Older financial advisers will have originally come from sales forces of banks or insurers, driven by commission, and have transformed into charging consumers for the advice, though that is a process that has taken decades. Younger advisers seem to see themselves as life coaches selling a dream whereby the actual investment advice is seen as a minor side issue and so may more easily be farmed out, as in a wealth management approach. The problem with that is more mouths to feed rapidly becomes more expensive for the client.  Transactional advice may be sensible for many people, after all that is how people might transact with their local solicitor or maybe accountant which is potentially the closest match, it's the ongoing fees that can be expensive for many, especially when we hear examples where the client is barely contacted for years, caveat emptor though. 

dunstonh

I’m guessing it’s more like one year full time equivalent. 

About 13 exams with around 50 hours on the shorter modules to 300 hours on the more complex ones.    I don't believe anyone starting from scratch could get to level 6 in one year.   Level 6 qualifications are degree apprenticeship, degree with honours - for example bachelor of the arts (BA) hons, bachelor of science (BSc) hons amongst others.   I have seen people get to level 4 within the year.    

 So not trivial by any means, but not at all comparable to a medical degree.

having had a quick look at medical qualifications, they have the same level 4 minimum but go up to level 7 depending on the area of speciality.  So, they share the same base level but can rise to one level higher.       For the general public, there isn't a need to for financial to go to level 6 or higher.    A lot of advisers nowadays have modules from level 6 that compliment their business rather than getting all the modules from level 6.  

dunstonh

 it's the ongoing fees that can be expensive for many, especially when we hear examples where the client is barely contacted for years, caveat emptor though. 

For business arranged after 2013, advisers cannot take on new business with ongoing servicing without that servicing taking place.  That could be 1-3 years typically (very small stuff was often retained with a 2-3 year review period).   2018 with MiFIDII changed it that it had to be at least annually.    So, unless its a pre-2013 product, there should be pro-active ongoing servicing.

NottinghamKnight

dunstonh said:

 it's the ongoing fees that can be expensive for many, especially when we hear examples where the client is barely contacted for years, caveat emptor though. 

For business arranged after 2013, advisers cannot take on new business with ongoing servicing without that servicing taking place.  That could be 1-3 years typically (very small stuff was often retained with a 2-3 year review period).   2018 with MiFIDII changed it that it had to be at least annually.    So, unless its a pre-2013 product, there should be pro-active ongoing servicing.

Yes that has historically been the problem, and a hell of a get out if advisers are charging for a service not provided more than seven years old on what may well be multi decade products like pensions. People on older contracts who haven't been pro active have been at risk of paying for something that doesn't happen and we still hear of posters frequently relating that they are not being contacted by their advisers on servicing contracts where they are paying fees. It may well be a minority of advisers that are failing to fulfill their obligations but we get posts on this forum on a weekly basis I would say relating this.  

dunstonh

Yes that has historically been the problem, and a hell of a get out if advisers are charging for a service not provided more than seven years old on what may well be multi decade products like pensions.

Potentially but not very often.  And those contracts were not fee basis but commission.  The commission was very rarely explicit i.e. 0.5% p.a. didn't mean 0.5% was being charged to the investor.    For example, it was commonplace for a product to have a 4 or 5% initial commission with 0% ongoing or 2% initial with 0.5% pa ongoing.  The charges to the investor were identical.

The salesforces typically did everything on initial only basis. So, old plans of theirs taken over by an IFA pay nothing.

we still hear of posters frequently relating that they are not being contacted by their advisers on servicing contracts where they are paying fees. It may well be a minority of advisers that are failing to fulfill their obligations but we get posts on this forum on a weekly basis I would say relating this.  

I have seen the odd post now and then but I cant say those threads have been weekly.  Some of those threads relate to pre 2013 stuff. Some post 2013 stuff.  For post 2013 stuff, its a very easy complaint to make and get resolved as the adviser firm doesn't have a leg to stand on. 

BananaRepublic

dunstonh said:

I’m guessing it’s more like one year full time equivalent. 

About 13 exams with around 50 hours on the shorter modules to 300 hours on the more complex ones.    I don't believe anyone starting from scratch could get to level 6 in one year.   Level 6 qualifications are degree apprenticeship, degree with honours - for example bachelor of the arts (BA) hons, bachelor of science (BSc) hons amongst others.   I have seen people get to level 4 within the year.    

 So not trivial by any means, but not at all comparable to a medical degree.

having had a quick look at medical qualifications, they have the same level 4 minimum but go up to level 7 depending on the area of speciality.  So, they share the same base level but can rise to one level higher.       For the general public, there isn't a need to for financial to go to level 6 or higher.    A lot of advisers nowadays have modules from level 6 that compliment their business rather than getting all the modules from level 6.  

Comparing an IFA to a medical doctor is absurd. It’s a six year degree followed by many years as a junior doctor (JHO, HO, registrar, senior registrar). 

I checked salaries and they are ridiculous when you compare them to experienced engineers and university staff. Then again, that’s the nature of the finance industry. The people who create the wealth get paid far less than finance wonks. 

Prism

BananaRepublic said:

dunstonh said:

I’m guessing it’s more like one year full time equivalent. 

About 13 exams with around 50 hours on the shorter modules to 300 hours on the more complex ones.    I don't believe anyone starting from scratch could get to level 6 in one year.   Level 6 qualifications are degree apprenticeship, degree with honours - for example bachelor of the arts (BA) hons, bachelor of science (BSc) hons amongst others.   I have seen people get to level 4 within the year.    

 So not trivial by any means, but not at all comparable to a medical degree.

having had a quick look at medical qualifications, they have the same level 4 minimum but go up to level 7 depending on the area of speciality.  So, they share the same base level but can rise to one level higher.       For the general public, there isn't a need to for financial to go to level 6 or higher.    A lot of advisers nowadays have modules from level 6 that compliment their business rather than getting all the modules from level 6.  

Comparing an IFA to a medical doctor is absurd. It’s a six year degree followed by many years as a junior doctor (JHO, HO, registrar, senior registrar). 

I checked salaries and they are ridiculous when you compare them to experienced engineers and university staff. Then again, that’s the nature of the finance industry. The people who create the wealth get paid far less than finance wonks. 

I always thought employed IFAs are not that well paid. Like many things I assumed the real money is in running your own IFA business.

Mothman

I don't have a downer on IFA's perse, and no doubt my wife will need to use one should I decide to depart this mortal coil before her. However I do feel that the IFA's which regularly post on this forum are a 'cut above' those that I have so far have come into contact with. For instance my Mum's IFA has done nothing with her investments despite collecting at least £25k in fees over the last 21yrs. I guess it's easier to just collect the trail commissions\ongoing servicing fees rather than actually doing something for it.
Like all professions there will be good,bad or just plain lazy IFA's like my Mum's, the hard part seems to be finding the good ones.

BananaRepublic

Prism said:

I always thought employed IFAs are not that well paid. Like many things I assumed the real money is in running your own IFA business.

Apparently an experienced one can earn £90,000 per year. Ridiculous in my view. 

BananaRepublic

Mothman said:

I don't have a downer on IFA's perse, and no doubt my wife will need to use one should I decide to depart this mortal coil before her. However I do feel that the IFA's which regularly post on this forum are a 'cut above' those that I have so far have come into contact with. For instance my Mum's IFA has done nothing with her investments despite collecting at least £25k in fees over the last 21yrs. I guess it's easier to just collect the trail commissions\ongoing servicing fees rather than actually doing something for it.
Like all professions there will be good,bad & just plain lazy IFA's like my Mum's, the hard part seems to be finding the good ones.

How well did your mum’s investments do? I’m sure you are right, some will be good, some not.