IFA ongoing fee..Why pay?

BananaRepublic

bowlhead99 said:

BananaRepublic said:

bowlhead99 said:

BananaRepublic said:

Prism said:
I work in IT and get charged out at an average of about £500 per hour and sometimes more (this week is over £1000 per hour). Like you say there is a whole company of fixed costs, staff, admin and taxes to pay for before I get my bit out of that. Completely different job but £250 an hour doesn't sound that much to me.

You are charged out at a hell of a rate. A typical IT contractor will charge ~£40-80 / hour plus the agents cut, so let’s say up to £100/ hour. 

The IT contractor will provide themselves to a company on a contract for months at a time at that 'low' price per hour, but the company that has got him signed up to that long term contract may charge out the time of their specialists (whether employed or working under contract) to their clients at £500 per hour just like  Prism said.

Eh? £500 / hour might be the London rate, for niche work such as finance with scarce skills and experience. We’re talking about a bog standard IFA here, not some gold plated, diamond encrusted specimen. The bog standard IFA should be compared to a more typical IT contractor. You have to add on overheads of course. 

Prism said:

BananaRepublic said:

Prism said:

BananaRepublic said:

bowlhead99 said:

BananaRepublic said:

Prism said:
I work in IT and get charged out at an average of about £500 per hour and sometimes more (this week is over £1000 per hour). Like you say there is a whole company of fixed costs, staff, admin and taxes to pay for before I get my bit out of that. Completely different job but £250 an hour doesn't sound that much to me.

You are charged out at a hell of a rate. A typical IT contractor will charge ~£40-80 / hour plus the agents cut, so let’s say up to £100/ hour. 

The IT contractor will provide themselves to a company on a contract for months at a time at that 'low' price per hour, but the company that has got him signed up to that long term contract may charge out the time of their specialists (whether employed or working under contract) to their clients at £500 per hour just like  Prism said.

Eh? £500 / hour might be the London rate, for niche work such as finance with scarce skills and experience. We’re talking about a bog standard IFA here, not some gold plated, diamond encrusted specimen. The bog standard IFA should be compared to a more typical IT contractor. You have to add on overheads of course. 

As pointed out earlier in the thread the overheads might be 80% of the value of the fee for an IFA

The actual value per hour or day is not really the important point. This week I am generating around £8500 per day from clients in income. Other weeks it might be zero. More likely its around half that. The back end overheads of running a business can be huge.

I find it hard to believe that overheads are 80% of the fee. Maybe someone with first hand experience can comment. 

I was using this post as an example
https://forums.moneysavingexpert.com/discussion/comment/77970589/#Comment_77970589

I am not trying to argue if the fee for an IFA is worth it or not. I don't pay one. However running a business is an expensive thing to do. From my example in your quoted post I get nothing like that fee taken from clients after all of the overheads.

I assumed BananaRepublic was talking about an experienced contractor with his £40-80hr and then the 'agent' taking their cut of £10-20 for finding them the work or for providing a veneer of legitimacy for the IT worker to be a 'contractor' rather than an 'employee' of the business that they were doing the work for. So the £40-80 plus the £10-20 add-on is the cost of getting the experienced contract worker to work for you as a quasi-employee that you don't have to put on your own payroll and provide with pensions and benefits etc.  

If I had that IT person contracting to work for my business and it was costing me £50-£100/hr to have him there for a few months, I wouldn't engage him in work that would only allow my business to invoice £50-£100/hr to customers, just the same as if I had five to ten production line workers costing me £50-100/hr between them I would hope the factory was invoicing more than £50-100/hr in widget sales.

Perhaps we are at cross purposes but the cost of getting an employee or contractor to do something is only going to be a fraction of what is invoiced as the final product.  Likewise, if an employee of an IFA firm (or any other professional services firm) wants to make a salary of £50k/ year (and the business wants to be able to pay him £5k of pension, £10k of bonus, spend £10k+ on employer NI etc), the professional services firm is going to have to charge a heck of a lot more than the implied £75-80k a year to its clients, because it needs to make enough money to cover marketing, admin staff, senior management, legal, HR, training, compliance, software licenses, hardware, furniture, rent, rates, utilities, insurances etc etc before it even starts to make a profit for the people who own the business. 

The people in Fred's meeting room comparing £250/h to their own salary of £10-40/h and thinking 'wow, £250 an hour is more than I earn' are missing the point because it is also more than the employee earns - it is the amount of money the business invoices in the hours that it is invoicing; there are other hours that aren't being invoiced where the business is still incurring costs, and there are other things the revenue is spent on before it leaves some fraction of the revenue to cover the hourly rate of the person who was physically in the room representing the company. 

My own experience in IT is that companies who hire out contractors, as distinct from agencies, tend to pay modest to okay salaries to their staff, and can’t charge clients too much due to competition (from India for example) unless they are senior or its specialist work. We once had a project manager leading our team, hired out to us for a few years, he wasn’t poor but not cheap to hire. The company would not have paid £500 / hour, that wasn’t their mentality. But that’s engineering, the City would doubtless be different. 

You are right that permies think contractors are loaded but ignore corporation tax etc. 

Prism

BananaRepublic said:

Prism said:

BananaRepublic said:

Prism said:

BananaRepublic said:

bowlhead99 said:

BananaRepublic said:

Prism said:
I work in IT and get charged out at an average of about £500 per hour and sometimes more (this week is over £1000 per hour). Like you say there is a whole company of fixed costs, staff, admin and taxes to pay for before I get my bit out of that. Completely different job but £250 an hour doesn't sound that much to me.

You are charged out at a hell of a rate. A typical IT contractor will charge ~£40-80 / hour plus the agents cut, so let’s say up to £100/ hour. 

The IT contractor will provide themselves to a company on a contract for months at a time at that 'low' price per hour, but the company that has got him signed up to that long term contract may charge out the time of their specialists (whether employed or working under contract) to their clients at £500 per hour just like  Prism said.

Eh? £500 / hour might be the London rate, for niche work such as finance with scarce skills and experience. We’re talking about a bog standard IFA here, not some gold plated, diamond encrusted specimen. The bog standard IFA should be compared to a more typical IT contractor. You have to add on overheads of course. 

As pointed out earlier in the thread the overheads might be 80% of the value of the fee for an IFA

The actual value per hour or day is not really the important point. This week I am generating around £8500 per day from clients in income. Other weeks it might be zero. More likely its around half that. The back end overheads of running a business can be huge.

I find it hard to believe that overheads are 80% of the fee. Maybe someone with first hand experience can comment. 

I was using this post as an example
https://forums.moneysavingexpert.com/discussion/comment/77970589/#Comment_77970589

I am not trying to argue if the fee for an IFA is worth it or not. I don't pay one. However running a business is an expensive thing to do. From my example in your quoted post I get nothing like that fee taken from clients after all of the overheads.

I’m well aware of overheads, and down time. dunstonh cites one IFA who needs to get £100,000 in fees to earn £30,000. Well that is a low income and I’d be surprised if an experienced IFA would consider that worthwhile. It’s not hard to get such a salary without much qualifications or experience. I’m guessing an IFA who works on his/her own typically nets a salary of £50,000 upwards. Do overheads scale linearly or are they fixed costs?  Many such as an office and a computer are fixed costs and my insurance as an IT contractor was a fixed cost irrespective of clients and hours worked. So they might have to turn over a bit more then £120,000 for a salary of £50,000 to allow for extra coporation tax, employer’s NI and maybe travel. So we’re a long way down from a 1:4 ratio of salary to turnover. 

He cites another who gets 20% but we don’t know details including salary and location. 

I am working under the assumption that not everyone in an IFA company is a fee earner. In my IT example I gave before I would imagine there are at least two non fee earners for each one of me. Thats one reason why the price I am sold out at is high. Now I doubt an IFA organisation is quite that backend heavy but its possible to see where the costs add up along with costs like insurance and buying in research.

£500 per hour doesn't buy you one person, it gets you access to a whole organisation.

Username999

Only fools need an IFA, they just don't know it yet.
IMHO.

BananaRepublic

Prism said:

BananaRepublic said:

Prism said:

BananaRepublic said:

Prism said:

BananaRepublic said:

bowlhead99 said:

BananaRepublic said:

Prism said:
I work in IT and get charged out at an average of about £500 per hour and sometimes more (this week is over £1000 per hour). Like you say there is a whole company of fixed costs, staff, admin and taxes to pay for before I get my bit out of that. Completely different job but £250 an hour doesn't sound that much to me.

You are charged out at a hell of a rate. A typical IT contractor will charge ~£40-80 / hour plus the agents cut, so let’s say up to £100/ hour. 

The IT contractor will provide themselves to a company on a contract for months at a time at that 'low' price per hour, but the company that has got him signed up to that long term contract may charge out the time of their specialists (whether employed or working under contract) to their clients at £500 per hour just like  Prism said.

Eh? £500 / hour might be the London rate, for niche work such as finance with scarce skills and experience. We’re talking about a bog standard IFA here, not some gold plated, diamond encrusted specimen. The bog standard IFA should be compared to a more typical IT contractor. You have to add on overheads of course. 

As pointed out earlier in the thread the overheads might be 80% of the value of the fee for an IFA

The actual value per hour or day is not really the important point. This week I am generating around £8500 per day from clients in income. Other weeks it might be zero. More likely its around half that. The back end overheads of running a business can be huge.

I find it hard to believe that overheads are 80% of the fee. Maybe someone with first hand experience can comment. 

I was using this post as an example
https://forums.moneysavingexpert.com/discussion/comment/77970589/#Comment_77970589

I am not trying to argue if the fee for an IFA is worth it or not. I don't pay one. However running a business is an expensive thing to do. From my example in your quoted post I get nothing like that fee taken from clients after all of the overheads.

I’m well aware of overheads, and down time. dunstonh cites one IFA who needs to get £100,000 in fees to earn £30,000. Well that is a low income and I’d be surprised if an experienced IFA would consider that worthwhile. It’s not hard to get such a salary without much qualifications or experience. I’m guessing an IFA who works on his/her own typically nets a salary of £50,000 upwards. Do overheads scale linearly or are they fixed costs?  Many such as an office and a computer are fixed costs and my insurance as an IT contractor was a fixed cost irrespective of clients and hours worked. So they might have to turn over a bit more then £120,000 for a salary of £50,000 to allow for extra coporation tax, employer’s NI and maybe travel. So we’re a long way down from a 1:4 ratio of salary to turnover. 

He cites another who gets 20% but we don’t know details including salary and location. 

I am working under the assumption that not everyone in an IFA company is a fee earner. In my IT example I gave before I would imagine there are at least two non fee earners for each one of me. Thats one reason why the price I am sold out at is high. Now I doubt an IFA organisation is quite that backend heavy but its possible to see where the costs add up along with costs like insurance and buying in research.

£500 per hour doesn't buy you one person, it gets you access to a whole organisation.

It looks like this won’t go very far as its just your opinion and mine. I have tried to find information online but it is scarce. What I have found does corroborate modest salaries on average. 

This applies to the US but it doesn’t support massive fees and it says overheads are low: 
https://www.godaddy.com/garage/startup-costs-becoming-a-financial-advisor/

This is from the UK in 2018, suggests £75-£250 / hour fees: 
https://www.leisurejobs.com/article/the-definitive-guide-how-to-become-a-financial-advisor/

The above stresses interpersonal skills as there is a big marketing aspect. Certainly the three I met came across as very pushy salesman who tried to flatter me which is what turned me off. I don’t like that style. 

Personal financial advisor salaries from ONS and Glassdoor are quite low:
https://www.checkasalary.co.uk/salary/personal-financial-advisor
https://www.glassdoor.co.uk/Salaries/independent-financial-advisor-salary-SRCH_KO0,29.htm

Many years ago in the commission days I had a financial report prepared by an IFA who was trying to sell me financial reports. I didn’t continue the ‘relationship’ as I was unimpressed. The report had the look of a boilerplate template filled in with my details. It certainly did not require huge amounts of work. He was very pushy, introduced himself via my accountant and I assume a kickback, and his written English was uninspiring. Another one I met was acting as a pension advisor to our company, he revealed my salary to colleagues which led to bullying, so much for professional. I had emails from him for many years after asking to look after my investments. 

AlanP_2

Username999 said:

Only fools need an IFA, they just don't know it yet.
IMHO.

Well that will have insulted a large proportion of the UK population if they read this forum and doesn't add a great deal to the conversation.

Care to add your reasoning and / or evidence or don't you have any? 

HansOndabush

Thrugelmir said:

DiggerUK said:

Why do we need licensed black cabs with drivers who have "the knowledge"  when it is cheaper to have them replaced by Über with a sat nav.

When everybody has a SatNav then everybody follows the same route. If you've ever been caught up in gridlock in London. You'll appreciate the value of a black cab. There'll go down alleys that you never knew existed. 

Any half decent sat nav and certainly ones used by Uber will avoid traffic and can plan the route in advance for the shortest time; 'the knowledge' is a relic from a bygone era.

Malthusian

BananaRepublic said:

Is £250 absurd? I think so. If someone charges 0.5% on £500,000, they take £2,500. How many hours does that take? Ten hours at most is my guess. But, if someone could undercut other IFA professionals, they would do so as that's the beauty of the free market. To my knowledge no-one has. It's possible it's a closed shop, rather like lawyers, and I wouldn't trust them an inch if that. 

It's news to everyone in this thread that being an IFA is a closed shop, given that all you need is a Mickey Mouse qualification which takes about six months of study

Cus

HansOndabush said:

Thrugelmir said:

DiggerUK said:

Why do we need licensed black cabs with drivers who have "the knowledge"  when it is cheaper to have them replaced by Über with a sat nav.

When everybody has a SatNav then everybody follows the same route. If you've ever been caught up in gridlock in London. You'll appreciate the value of a black cab. There'll go down alleys that you never knew existed. 

Any half decent sat nav and certainly ones used by Uber will avoid traffic and can plan the route in advance for the shortest time; 'the knowledge' is a relic from a bygone era.

I have used many black cabs and Ubers in London and my experience is different, Uber drivers go down very unsuitable routes due to the sat nav telling them to. For example there are a number of small streets around the city area that are often full of drinkers (including me...gosh I miss that at the moment... ☹️)  standing outside the pubs. Uber drivers often drive along them at a snails pace or get stuck as they can't get through, with all the crowds laughing. I assume the sat nav doesn't take account of people traffic!
You never see a black cab do it as they have the knowledge.
But I appreciate this is only a subset of the overall picture.

fred246

It's easy to qualify but difficult to get started because of the nature of the job. They are parasites of rich people. Rich people tend to recommend them to other rich people. I always think it's like a football agent. It's not complicated but impossible to get into. So why not be an agent for a non League club? There's not enough money in it. If you read the IFA fora they don't want lots of customers. Just a few big fee payers.

DiggerUK

Username999 said: Only fools need an IFA, they just don't know it yet. IMHO.

I do accept that fools would be best guided in the direction of financial advisers, but I don't think that everybody who uses advisors do so because they are a fool. Those who are intimidated by DIYing and those with time pressures being two such examples.

It is part of the fabric of convention in society, that financial advisers be consulted when unusual wealth comes in someone's direction and will sadly continue to be the popular words of advice offered by friends and pundits in the media for awhile yet.
The reason for that is the closed world of knowledge that we had to live with before the IT world enveloped us. That world ended about 20 odd years back, this thread is evidence of that.

Most with a mind that can evaluate the options can DIY to their advantage and I believe us band of confreres here should encourage such a movement away from an industry who milked the old world for all they could..._