finding an IFA for Pensions health check - info already consolidated - cost ?

gm0

@gm0

>"They (like all advisers) are selling you a transfer or consolidation onto a new arrangement that is "suitable" to >financial situation and risk appetite. it doesn't have to perform better (no promises there), or always be cheaper than >the existing one or anything like that.  Potential for improved performance justifies increased fees.  "

So if I am reading this correctly, IFA/FA quite righty are interested in selling a new product/arrangment moreso, than reviewing/improving existing portfolio/pensions/situation? - forgive me if I am wrong?

Again, surely someone can't be selling something/recommending something if that statistically/whatever isn't likely to perform any better than what I've got already?


I have presented this in a slightly jaundiced way.  But it is accurate.  To how the incentives are set for regulated financial advice around pensions.  Advice does not have to promise or to provide a product that is better.  Or cheaper. 

The core obligation is to ensure that someone in your position (personal finanical situation and goals) should be taking the risk level of the portfolio to be recommended to you by the adviser and ultimately chosen by you in accepting the recommendation.  Suitable means financially and emotionally able to handle it.  Risk capacity and Risk appetite are the terms used.  And the portfolio should be goal appropriate and appropriate to tax circumstances.

Whether it randomly comes in above or below a whole of market passive average return or some other tilted portfolio setup - is not part of the promise.  

The language used here is often of the form that the advised portfolio will be "better" than bad DIY with bad DIY implying mistakes in asset allocation and fund selection (portfolio construction).  Examples would be a more expensive than necessary fund (to hold the same assets), or overlapping funds which create an (unwanted) concentration of stock holdings in a particular market or company.  e.g ending up overweight in US technology mega cap stocks which could be / has been spectacular either way around

The difficulty that arises is around incentives.  And the (regulated) basis for pricing and the core of services that must be provided.  There is also a matter of operational convenience. With ongoing advice and portfolio review and such like - having clients risk and wealth graded into a smaller number of patterned arrangements is clearly superior for the adviser than a long tail of random old setups to look at.  It may make little difference to the client of course.

Performance year to year and from fund set to fund set will in most cases swamp small differences in costs.
Predicting the "correct" fund set to have chosen in advance is no easier for the adviser than it is for you

An IFA sells a heavily regulated service around pensions.  And is paid the initial charge and if selected, ongoing review and management fees to provide hand holding and more general financial advice and admin around that.  Their incentive is to build a book of satisfied customers. 

Working on cases where "do nothing" is the recommendation and no initial charge on a new setup is payable - is "problematic" for the business model.  Unless the customer contract is explicitly setup to deal with this.

FAs perform larger mental gymnastics every day to remain convinced enough that their product IS superior that they can tell clients it is with a straight face.

Most of UK retail financial services - big bank savings accounts and loans products are the same way.  Selling a trusted branded but inferior in the detail product (to other available alternatives) to people who do not wish to engage further to sniff out something better.

It's not a hit on IFAs.  It's just how this market works.  The strange situation is a product of regulation intended to stifle worse abuse by bad actors.