Are you an IFA?

bowlhead99

newatc said:

OMG- That the IFA has far more control than I expected. I would , in my ignorance, expected those advertising "Discretionary Fund Manager" to have that access not an IFA. I suppose my concern would boil down to fraudulent activity either by an IFA or someone hacking an IFA.

A discretionary fund manager has discretion over what he does on your behalf. Give him the money and he'll do what he likes with it, as his own discretion within the scope of a mandate.

An independent financial provider will advise on a solution and implement the solution by carrying out the transactions, assuming you want him to implement it other than just give you the suggestion and leave you on your own to implement it while still charging you for the advice.   I expect most people wanting the advice don't want to find themselves saying to the IFA, "ok, so you recommend I rebalance these holdings back to their target weightings, and sell these ones down to buy them back inside my ISA or pension, etc etc, but I have to do all that myself, even though I'm paying you a bunch of money each year. Oh great. Now what buttons do I need to press, and how and where do I do this and that and the other, and yes you have probably told me before but can you remind me again, etc etc etc"

If you want the IFA to help you do stuff, at some level you have to trust that the IFA is not going to defraud you, much like you trust solicitors etc not to defraud you and surgeons not to cut corners when working on your insides.  If you don't want the IFA to do stuff because you want to maintain more control and do it all yourself once he's made his recommendations, that is probably fine, but you won't get access to intermediary-only platforms and maybe he would want to charge you more money if you want to use some cumbersome platform of your own finding that doesn't give him the information he needs for efficient ongoing monitoring and tracking what has been done and when and how things performed etc.

dunstonh

newatc said:

OMG- That the IFA has far more control than I expected. I would , in my ignorance, expected those advertising "Discretionary Fund Manager" to have that access not an IFA. I suppose my concern would boil down to fraudulent activity either by an IFA or someone hacking an IFA.

There is no more risk from fraudulent activity from an IFA than there is from your bank, insurer or provider.     And you are at higher risk of being hacked than an IFA.  And even if the IFA gets hacked, its not as if the hacker can get any money out of the investments.

Payments out will only go to an account that has been validated by the provider or platform.  Typically those that have paid by cheque or have provided a bank statement.   

Sailtheworld

bowlhead99 said:

newatc said:

OMG- That the IFA has far more control than I expected. I would , in my ignorance, expected those advertising "Discretionary Fund Manager" to have that access not an IFA. I suppose my concern would boil down to fraudulent activity either by an IFA or someone hacking an IFA.

If you want the IFA to help you do stuff, at some level you have to trust that the IFA is not going to defraud you, much like you trust solicitors etc not to defraud you and surgeons not to cut corners when working on your insides.  If you don't want the IFA to do stuff because you want to maintain more control and do it all yourself once he's made his recommendations, that is probably fine, but you won't get access to intermediary-only platforms and maybe he would want to charge you more money if you want to use some cumbersome platform of your own finding that doesn't give him the information he needs for efficient ongoing monitoring and tracking what has been done and when and how things performed etc.

If someone needs brain surgery I reckon they'd be all over the research. Not with the intention of carrying out the surgery themselves of course but so they can be informed and know the questions they'd like answered.

People don't do that with their finances. They blindly walk in an IFAs office and find it's the IFA that gets to ask all the questions to feed decision trees. It's an industry in danger from AI.

Linton

Sailtheworld said:

bowlhead99 said:

newatc said:

OMG- That the IFA has far more control than I expected. I would , in my ignorance, expected those advertising "Discretionary Fund Manager" to have that access not an IFA. I suppose my concern would boil down to fraudulent activity either by an IFA or someone hacking an IFA.

If you want the IFA to help you do stuff, at some level you have to trust that the IFA is not going to defraud you, much like you trust solicitors etc not to defraud you and surgeons not to cut corners when working on your insides.  If you don't want the IFA to do stuff because you want to maintain more control and do it all yourself once he's made his recommendations, that is probably fine, but you won't get access to intermediary-only platforms and maybe he would want to charge you more money if you want to use some cumbersome platform of your own finding that doesn't give him the information he needs for efficient ongoing monitoring and tracking what has been done and when and how things performed etc.

If someone needs brain surgery I reckon they'd be all over the research. Not with the intention of carrying out the surgery themselves of course but so they can be informed and know the questions they'd like answered.

People don't do that with their finances. They blindly walk in an IFAs office and find it's the IFA that gets to ask all the questions to feed decision trees. It's an industry in danger from AI.

Part of the job of an IFA should be to ensure the customer understands what is being proposed and why. If your IFA is unable to provide understandable explanations find another one.

dunstonh

People don't do that with their finances. They blindly walk in an IFAs office and find it's the IFA that gets to ask all the questions to feed decision trees. It's an industry in danger from AI.

Its not that much in danger from AI.    Some areas can easily be done by AI.  However, some areas are not going to see AI move in any time soon.

AI is not been able to handle risk profiling successfully.  Risk profiling questions and answers alone are not allowed to be relied on with advice for example.  You have to relate to knowledge and understanding and bring more psychology into it.  Flowcharting of outcomes has not resulted in sufficiently high success rates.  

Robo advisers are not eating into the real IFA market much at all and most IFAs can actually undercut robo-advisers if they wish to.  In reality, the IFAs and Robo-advisers are not in the same markets.     IFAs looking at things like CGT, dividend allowance, top-slicing relief, multiple wrappers along with forward planning etc. Whereas robo-advice is more where can the person put £20pm into. 

IFAs deal with clients who ask how much money they can have out to spend on holiday etc.  Robo lacks the ability to factor in emotion and erratic behaviour or adapting to unexpected events.

In time, more will go robo but that is not a bad thing as IFAs do not have the capacity at the moment and are dropping low value consumers.   We recently took on two clients who are worth more in fee income than the bottom 50 clients put together.  I will look to cull some of those and move them into our own robo-advice offering.

There are also future developments on the IFA side too.  IFAs can offer robo-advice already (many are not bothered as there is no need for them to do so but its effectively a multi-asset fund on a platform with a small cut added on top).   However, many see hybrid Robo/personal advice as the future on the IFA side.   i.e. where you have your named adviser but the IFA work is much reduced through technology allowing fees to reduce and increase client bank size per adviser.  A lot of clients like human contact and need the comfort conversation when things are not doing well or like to use their IFA as a sounding board for ideas.   Also, development is underway on IFAs being able to offer platforms at no additional cost to the consumer.  

Ironically, IFA charges are falling but FA charges are increasing. Yet the FAs are showing increasing market share and record profits. 

Most predictions in technology tend to overstate the benefit and impact and take far longer to arrive.