PENSION WISE ANY GOOD.

zagfles

LHW99 said:

fred246 said:

You will always get people who pay for services that others would happily do themsleves.

That I can agree with, if not much else. And fair play to them, as long (as said) they have taken a minimum of care to ensure they are employing someone who has the relevant regulatory etc knowledge. Its how I keep my car on the road and get a certain amount of building work etc done. I don't want to do it, and I go to someone who enjoys doing it and is capable. Positives all round.

I enjoy fiddling with numbers and spreadsheets, not everyone does or should, and if they feel buying that skill in is worth it by giving them time to build their own house, take trips to the other side ofthe world (not at the moment though) - why not?

Indeed - but a lot of people might not need individually tailored advice, especially with the proposed "investment pathways" coming down the track. What people need out of their pension is likely to be broadly similar for large groups of people, so in the same way as workplace DC pensions tend to offer a default or a selection of default investment options which account for risk tolerance, age etc, soon similar will be offered to people with private pensions eg SIPPs going into drawdown.

People with unusual or complicated situations may still need tailored financial advice, but as DC becomes the norm I think most people who aren't interested in actively managing their investments would be happy with a range of sensible defaults which can account for most normal retirement income requirements. 

zagfles

Malthusian said:

zagfles said:

But of course all the past scandals have caused increased regulation and now the biggest problem is probably getting advice that is genuinely in your best interests rather than advice which is "backside covering", ie less likely to get the IFA into trouble. There was an example here of an IFA putting their client into an expensive multi-asset fund rather than a balanced selection of cheaper single asset funds. Reason given by an IFA? Because if one of the single asset funds plummetted the client might go into panic mode and sell it! 

That sounds like good advice to me, assuming the IFA's analysis of their risk profile was correct. Less knowledgable investors viewing funds in isolation instead of as part of the whole is an inherent problem with multi-fund portfolios. People with lower investment knowledge should be recommended less complex solutions.

And although we're back to backside-covering, the FOS tends to view funds in isolation rather than as part of an overall portfolio as well. Thinking about what the FOS might say in the event of a complaint may be "backside-covering" but it still has to be done. Neither IFAs nor their clients make the rules.

A single multi-asset fund can be as expensive or cheap as a multi-fund portfolio so expenses have nothing to do with the choice between single multi-asset fund or multiple single-sector funds.

This wasn't one-off advice, it was an IFA managed portfolio. IIRC the total charges were over 2%, mainly down the expensive multi-asset fund. Why would a client pay an IFA for advice and then ignore it, and why would the IFA's backside be on the line for something the client does against advice? BTW I'm not disputing this, nor am I blaming IFAs if they really have to do this to cover their backside, just that it seems to be a side effect of the almost over-regulation caused by past scandals, which the financial services industry in general has brought upon itself. Resulting in expensive outcomes which customers end up paying for. 

dunstonh

zagfles said:

Malthusian said:

zagfles said:

But of course all the past scandals have caused increased regulation and now the biggest problem is probably getting advice that is genuinely in your best interests rather than advice which is "backside covering", ie less likely to get the IFA into trouble. There was an example here of an IFA putting their client into an expensive multi-asset fund rather than a balanced selection of cheaper single asset funds. Reason given by an IFA? Because if one of the single asset funds plummetted the client might go into panic mode and sell it! 

That sounds like good advice to me, assuming the IFA's analysis of their risk profile was correct. Less knowledgable investors viewing funds in isolation instead of as part of the whole is an inherent problem with multi-fund portfolios. People with lower investment knowledge should be recommended less complex solutions.

And although we're back to backside-covering, the FOS tends to view funds in isolation rather than as part of an overall portfolio as well. Thinking about what the FOS might say in the event of a complaint may be "backside-covering" but it still has to be done. Neither IFAs nor their clients make the rules.

A single multi-asset fund can be as expensive or cheap as a multi-fund portfolio so expenses have nothing to do with the choice between single multi-asset fund or multiple single-sector funds.

This wasn't one-off advice, it was an IFA managed portfolio. IIRC the total charges were over 2%, mainly down the expensive multi-asset fund. Why would a client pay an IFA for advice and then ignore it, and why would the IFA's backside be on the line for something the client does against advice? BTW I'm not disputing this, nor am I blaming IFAs if they really have to do this to cover their backside, just that it seems to be a side effect of the almost over-regulation caused by past scandals, which the financial services industry in general has brought upon itself. Resulting in expensive outcomes which customers end up paying for. 

The EU came out with a directive in 2007 that said that investments have to be within the knowledge and understanding of the individual (paraphrasing for shortness).   A portfolio of single sector funds is considered a "higher knowledge" level requirement because it is quite common for low knowledge investors to look at each fund individually and not as a portfolio.   
If you have a client that is open to learning and understanding then it's not an issue as you build your way towards that but initially start on something simple.  However, some clients are just not interested in learning or understanding.      So, the use of a multi-asset fund makes perfect sense for them.  It is both suitable and sensible.    The choice of multi-asset fund is of course opinion.   And the availability of very good low cost multi-asset funds today didn't exist a decade ago.   And investment decisions are largely based on opinion.   So, there will always be debate on what investments are best, indifferent or bad.

There was a second EU directive a few years ago which further drilled down requirements.   Like most EU directives, some of it was sensible.  Some of it was just red tape for red tape sake.  Some of it was daft and actually quite dangerous for low knowledge investors.  

a few years back there was a fairly high profile (as in it made the financial media) that the FOS rejected a complaint about charges but took it upon itself to decide the investment selection was unsuitable for the person. The person had not complained about the investments.    It was a portfolio of single sector funds built to a structured allocation using mainstream unit linked funds (nothing unusual about them).  The FOS decided that the investor did not have the mental capacity to understand this advanced investment method and ordered compensation.    Apparently, the investor was a company director who also had investment properties.    

It is easy to say that the use of a multi-asset fund is wrong but a day doesnt go past on this site where people are told to use a multi-asset fund instead of single sector funds.   So, it works in both the DIY world and the advised world.   The primary requirement for advice is for it to be suitable for the individual.  That may mean it is not the best option financially.   

Resulting in expensive outcomes which customers end up paying for. 

The DIY world is full of expensive outcomes as well.    There are plenty of DIY investors paying more for non-advised solutions than they could get on advised solutions.      Both DIY and advised has good value options and expensive options.     

fred246

I've said this before but I think that having an IFA can be detrimental in that the IFA has to manage customer expectations as well as the investments. I think IFAs use less risky investments because customers want a smoother ride. I have invested in equities knowing they may go up and down 40% or even more. If an IFA invests in such a fund and there is a 40% drop then the IFA may get dropped. If equities go up 40% but the customer gets a 5% increase then they will be happy because an IFAs customer does not follow equities.

zagfles

dunstonh said:

zagfles said:

Malthusian said:

zagfles said:

But of course all the past scandals have caused increased regulation and now the biggest problem is probably getting advice that is genuinely in your best interests rather than advice which is "backside covering", ie less likely to get the IFA into trouble. There was an example here of an IFA putting their client into an expensive multi-asset fund rather than a balanced selection of cheaper single asset funds. Reason given by an IFA? Because if one of the single asset funds plummetted the client might go into panic mode and sell it! 

That sounds like good advice to me, assuming the IFA's analysis of their risk profile was correct. Less knowledgable investors viewing funds in isolation instead of as part of the whole is an inherent problem with multi-fund portfolios. People with lower investment knowledge should be recommended less complex solutions.

And although we're back to backside-covering, the FOS tends to view funds in isolation rather than as part of an overall portfolio as well. Thinking about what the FOS might say in the event of a complaint may be "backside-covering" but it still has to be done. Neither IFAs nor their clients make the rules.

A single multi-asset fund can be as expensive or cheap as a multi-fund portfolio so expenses have nothing to do with the choice between single multi-asset fund or multiple single-sector funds.

This wasn't one-off advice, it was an IFA managed portfolio. IIRC the total charges were over 2%, mainly down the expensive multi-asset fund. Why would a client pay an IFA for advice and then ignore it, and why would the IFA's backside be on the line for something the client does against advice? BTW I'm not disputing this, nor am I blaming IFAs if they really have to do this to cover their backside, just that it seems to be a side effect of the almost over-regulation caused by past scandals, which the financial services industry in general has brought upon itself. Resulting in expensive outcomes which customers end up paying for. 

If you have a client that is open to learning and understanding then it's not an issue as you build your way towards that but initially start on something simple.  However, some clients are just not interested in learning or understanding.      So, the use of a multi-asset fund makes perfect sense for them.

Well people keep saying that if you don't want to learn and understand, then you should use an IFA. That is surely one of the main reasons to use an IFA. But it seems that even if use an IFA, you need to learn and understand otherwise you may end up with over simplified expensive investments because you can't be trusted with anything complicated even if managed by an IFA!

Resulting in expensive outcomes which customers end up paying for. 

The DIY world is full of expensive outcomes as well.    There are plenty of DIY investors paying more for non-advised solutions than they could get on advised solutions.      Both DIY and advised has good value options and expensive options.     

Indeed. But even the most expensive funds on the most expensive platforms, eg the HL multi-manager funds, don't come to 2% (not that that's "DIY" anyway - having a MM fund manager choosing a selection of funds which choose a selection of actual underlying equities etc - that's about as DIY as buying a wardrobe from IKEA and getting someone else to build it!!!). Most real DIY options are far cheaper.

One of the advantages of using an IFA and paying the advice fee is surely to get good deals on the other fees like fund/platform fees. Not always the case it seems.

hardshouder

Back to the Pensionwise Consultation.
 I gave them as much information as I could, followed by a very useful 60 min phone consultation. Very useful.

fred246

cfw1994 said:

clive0510 said:

luvchocolate said:

I had a meeting with them a couple of years ago. I understand they should not give advice but the lady I saw actually said "if I were you.......""

That's what im going to do. I've filled in there on line form and they're going to send the necessary in the post.need to get this right. worked all my life for it.

& do please excuse Fred: his father once got turned over by a Financial Advisor, & Fred has suffered a severe allergy to them ever since 😂

When my dad retired there was a whole group of them retired off early. An IFA gave them a seminar. He would be their financial adviser through their retirement. Always on the end of the phone. Available 24 hours a day. Guiding them on their investments. Whatever happened he would be there to help. There was about 10 of them and he took 10% commission off them all. I remember as a teenager thinking "Wow these guys have spent 40 years working for their lump sums and he has earned the same from one seminar. Is that clever or crooked?" The investment was 100% in one UK income fund. When he got all the commission and invested their money he sent them a letter saying he had retired. Goodbye. It was the dishonesty that upset my dad.

dunstonh

There was about 10 of them and he took 10% commission off them all.

What provider was offering 10% commission?

cfw1994

fred246 said:

cfw1994 said:

clive0510 said:

luvchocolate said:

I had a meeting with them a couple of years ago. I understand they should not give advice but the lady I saw actually said "if I were you.......""

That's what im going to do. I've filled in there on line form and they're going to send the necessary in the post.need to get this right. worked all my life for it.

& do please excuse Fred: his father once got turned over by a Financial Advisor, & Fred has suffered a severe allergy to them ever since 😂

When my dad retired there was a whole group of them retired off early. An IFA gave them a seminar. He would be their financial adviser through their retirement. Always on the end of the phone. Available 24 hours a day. Guiding them on their investments. Whatever happened he would be there to help. There was about 10 of them and he took 10% commission off them all. I remember as a teenager thinking "Wow these guys have spent 40 years working for their lump sums and he has earned the same from one seminar. Is that clever or crooked?" The investment was 100% in one UK income fund. When he got all the commission and invested their money he sent them a letter saying he had retired. Goodbye. It was the dishonesty that upset my dad.

Ahh, so my recollection of the deep bitter hatred of IFAs was correct: thanks 

But seriously - yes, there were some terrible financial shenanigans in the past....but that was THE PAST.
IFAs today need far more in the way of qualifications (heck, a pal of mine who was stony broke became an "financial advisor" ac the day!): there are far fewer of them now, and they have to be far more transparent in their charges.
That said, of course they earn a living, and to do that, have a % to take of money they "manage".
The choice is there to take their advice to help manage things, or to DIY. 
As dunstonh often says, you could save money doing the latter....or it could cost you more.   The choice is all there.....
This is, of course, MSE, so many here chose DIY...but....the choice is there!

cfw1994

hardshouder said:

Back to the Pensionwise Consultation.
 I gave them as much information as I could, followed by a very useful 60 min phone consultation. Very useful.

Excellent!
That's the main thing