Why is the cost of advice so high?

Albermarle

Ibrahim5 said:

I would be a lot poorer if I used an IFA so the value of advice would be negative.

You might think that but there is no way you can prove it , one way or the other .

Ibrahim5

If you want to know how IFAs operate you need to look at the way they buy and sell their businesses. There are 3 things:
1)Total value of all the investments they look after (more is better)
2)The total number of customers (less is better)
3)The percentage they charge (more is better)
So if you have 20 people with £1 million pension pots paying 0.75% the business will generate £150,000 a year with very little effort being required. So if someone with a million pound pension pot phones an IFA they are desperate for your business and will accept a smallish fee if you are going to pay them 0.75% forever.
If your pension pot is £20K you are dross and the IFA won't talk to you or charge you a daft amount to look at it. Having you as a client isn't good for their business. They aren't interested. Interestingly the OP hasn't ever revealed the total size of their pots which I suspect is quite low.
For an IFA to 'grow' their business they have to add another customer who has plenty of money invested and is willing to pay the annual fee. That's why IFAs don't like transactional advice.
Dunstonh says that people should only use IFAs but he would sell his 'business' to an FA. He is happy to throw his customers under the bus if that benefits him.
When an IFA has collected enough people all willing to pay the annual fee his business is worth enough for it to be sold and they retire.

MK62

Businesses are bought and sold all the time, so I don't see why you think IFAs are any different.......and as for throwing customers under a bus, if they don't fit with the new owners they are free to leave, so I don't see that being much of a problem tbh.
On the subject of a customer with £20k not being of much interest to an IFA, that's probably true in general, but IFAs are not alone in turning away low value business....if there's little or no profit, then many businesses do the same. Overheads make such clients non-viable from a business perspective.....at least at the 0.75% charging level......hence why many might have a minimum fee, say £500 (that's a guess btw), but then they are accused of overcharging...
I don't use an IFA btw, nor am I an IFA, and nor do I know any personally, so I have no skin in this game.....I merely see IFAs as another service business which I am free to use if I wish.....currently I don't, but I would have no problem suggesting a friend or relative should use one if they weren't confident of sorting out their own financial affairs.

Idiot_Savant

Ibrahim5 said:

1)Total value of all the investments they look after (more is better)
2)The total number of customers (less is better)
3)The percentage they charge (more is better)
So if you have 20 people with £1 million pension pots paying 0.75% the business will generate £150,000 a year with very little effort being required. So if someone with a million pound pension pot phones an IFA they are desperate for your business and will accept a smallish fee if you are going to pay them 0.75% forever.
If your pension pot is £20K you are dross and the IFA won't talk to you or charge you a daft amount to look at it. Having you as a client isn't good for their business. They aren't interested. Interestingly the OP hasn't ever revealed the total size of their pots which I suspect is quite low.
For an IFA to 'grow' their business they have to add another customer who has plenty of money invested and is willing to pay the annual fee. That's why IFAs don't like transactional advice.
Dunstonh says that people should only use IFAs but he would sell his 'business' to an FA. He is happy to throw his customers under the bus if that benefits him.
When an IFA has collected enough people all willing to pay the annual fee his business is worth enough for it to be sold and they retire.

Most luxury brands in the World operate this model, nothing wrong with it. An awful lot of people in this world would see being able to use an IFA as a luxury (i.e. having the funds to allow use of an IFA)

I see nothing wrong with using an IFA if the need arose.

Ibrahim5

Not sure what you are talking about idiot_savant.

Ibrahim5

According to the FCA over 90% of customers in 2020 are put on ongoing fee arrangements up from 60% in 2016. Average fee 0.8%. Suggests IFAs are unwilling to see anyone who doesn't agree to ongoing fees. Seems like commission has been replaced by ongoing fee arrangements. Not good for customers. Ongoing fees are a rip off. Massive fees for doing very little. Need to make customers pay fees on credit/debit cards so they realise how much they are being charged.

Bianchiintenso

Ibrahim5 said:

According to the FCA over 90% of customers in 2020 are put on ongoing fee arrangements up from 60% in 2016. Average fee 0.8%. Suggests IFAs are unwilling to see anyone who doesn't agree to ongoing fees. Seems like commission has been replaced by ongoing fee arrangements. Not good for customers. Ongoing fees are a rip off. Massive fees for doing very little. Need to make customers pay fees on credit/debit cards so they realise how much they are being charged.

I had this very issue, 3 IFAs I contacted would only entertain managing my pension. After looking through what my 'historical' advisor proposed and the reduction in fees he eventually offered when I expressed surprise, left me feeling I was being financially mugged.
I'm sure if I shared the IFAs illustration and fees with people on here, and they compared it to where I am at now they would wholeheartedly agree that It would not have been in my interest.

BritishInvestor

Ibrahim5 said:

According to the FCA over 90% of customers in 2020 are put on ongoing fee arrangements up from 60% in 2016. Average fee 0.8%. Suggests IFAs are unwilling to see anyone who doesn't agree to ongoing fees. Seems like commission has been replaced by ongoing fee arrangements. Not good for customers. Ongoing fees are a rip off. Massive fees for doing very little. Need to make customers pay fees on credit/debit cards so they realise how much they are being charged.

How long were you an IFA for to determine that your job required very little work?

And what are your thoughts regarding active fund managers charging similar fees? Many investors seem very happy to pay them

BritishInvestor

Bianchiintenso said:

Ibrahim5 said:

According to the FCA over 90% of customers in 2020 are put on ongoing fee arrangements up from 60% in 2016. Average fee 0.8%. Suggests IFAs are unwilling to see anyone who doesn't agree to ongoing fees. Seems like commission has been replaced by ongoing fee arrangements. Not good for customers. Ongoing fees are a rip off. Massive fees for doing very little. Need to make customers pay fees on credit/debit cards so they realise how much they are being charged.

I had this very issue, 3 IFAs I contacted would only entertain managing my pension. After looking through what my 'historical' advisor proposed and the reduction in fees he eventually offered when I expressed surprise, left me feeling I was being financially mugged.
I'm sure if I shared the IFAs illustration and fees with people on here, and they compared it to where I am at now they would wholeheartedly agree that It would not have been in my interest.

Not really sure what "managing a pension" involves?

Bianchiintenso

BritishInvestor said:

Bianchiintenso said:

Ibrahim5 said:

According to the FCA over 90% of customers in 2020 are put on ongoing fee arrangements up from 60% in 2016. Average fee 0.8%. Suggests IFAs are unwilling to see anyone who doesn't agree to ongoing fees. Seems like commission has been replaced by ongoing fee arrangements. Not good for customers. Ongoing fees are a rip off. Massive fees for doing very little. Need to make customers pay fees on credit/debit cards so they realise how much they are being charged.

I had this very issue, 3 IFAs I contacted would only entertain managing my pension. After looking through what my 'historical' advisor proposed and the reduction in fees he eventually offered when I expressed surprise, left me feeling I was being financially mugged.
I'm sure if I shared the IFAs illustration and fees with people on here, and they compared it to where I am at now they would wholeheartedly agree that It would not have been in my interest.

Not really sure what "managing a pension" involves?

I always assumed an investment manager 'managed a pension'
ie the IFA chooses the platform/investment manager suitable for the individuals needs/requirements?