Is an IFA really worth it?

chiang_mai

By the time you add up the percentage of your investment that the IFA takes, the percentage the fund manager takes and then the percentage the platform providor takes, the figures start to become serious money. I cut my IFA loose many years ago for this reason, it turned out he was also taking a cut from any rebalancing activity, as well as all buy and sell activity via the platform provider. If you wiegh all those costs against the cost of a couple of simple low cost global tracker funds where it's hard to go too far wrong, the argument against is compelling. It might be different if the IFA came with a guarantee but it seems to me that the more costly mistake might be  using an IFA, when compared to the simple alternatives.    

dunstonh

 It might be different if the IFA came with a guarantee

IFAs do come with a guarantee, effectively.    Regulation gives the consumer that protection.

Albermarle

artyboy said:

I do hope that @Ibrahim5 is ok... 3 pages in to a classic IFA rage bait thread and nothing...

(Sorry OP, just a little in-joke...)

Did you know that this was the Oxford Dictionary Word of the year ?

chiang_mai

dunstonh said:

 It might be different if the IFA came with a guarantee

IFAs do come with a guarantee, effectively.    Regulation gives the consumer that protection.

The parts that I would ideally like guaranteed are those that aren't capable of being so, ie, returns. The rest of the framework is a preamble and very much like management consulting where you borrow the clients watch to tell them the time and then keep the watch. But if it makes some people feel more comfortable and they are willing to pay for the service, each to their own I suppose. My views on IFA's are tainted by my experience of them during the 1990's when a chap in a sharp suit was always sniffing round trying to sell me this or that. That was the same chap who advised me to buy an Endowment Policy, even though I argued the math didn't make sence from the outset. They are further tainted by the "thoroughly honorable" ex army officer who became an IFA who hid charges left right and center. I trust in my twenty year absence that the industry has improved at least somewhat. I might add that I have come accross a number of UK IFA's where I live in Thailand and I have seen first hand some of their work. They are of course operating in an unregulated territory and capacity but they are keen not to let their would be customers know that. I now of one who churned one expats pension four times, just to generate cash for the expat.....shameful.

dunstonh

The parts that I would ideally like guaranteed are those that aren't capable of being so, ie, returns. 

How on earth could you guarantee such a thing?
a) Investment returns are variable 
b) IFAs have no influence on the returns on assets.
c) the primary objective of an IFA is suitability.

My views on IFA's are tainted by my experience of them during the 1990's when a chap in a sharp suit was always sniffing round trying to sell me this or that.

So, completely out of date.   Qualifications didn't start until 1994 (increased further by 2013).   Regulation levels increased in 1995, 2013 (RDR a significant step), 2015 (FAMR), 2018 (MIFIDII) and more recently the Consumer Duty.   

And usually the sniffing around was FAs rather than IFAs  IFAs only accounted for around 1 in 10 advisers in the 90s.  There were around 300,000 of all types back then.  Today, just 20,000.  The 80s, 90s and early 2000s were sales environments.  Especially if you saw someone from a salesforce.

They are further tainted by the "thoroughly honorable" ex army officer who became an IFA who hid charges left right and center.

You cannot hide charges.    Platforms provide cost disclosures of each of the cost areas at least annually.

I might add that I have come accross a number of UK IFA's where I live in Thailand and I have seen first hand some of their work. 

Seeing as IFAs are a minority with FAs the majority, you do seem to have come across a disproportionate number of IFAs.    However, back in the 90s, when the qualifications started, many who failed to meet the required standard were recruited to the Middle East and Far East to sell products there.     Those regions even today are comparable to the UK in the 1980s.

chiang_mai

dunstonh said:

The parts that I would ideally like guaranteed are those that aren't capable of being so, ie, returns. 

How on earth could you guarantee such a thing?
a) Investment returns are variable 
b) IFAs have no influence on the returns on assets.
c) the primary objective of an IFA is suitability.

My views on IFA's are tainted by my experience of them during the 1990's when a chap in a sharp suit was always sniffing round trying to sell me this or that.

So, completely out of date.   Qualifications didn't start until 1994 (increased further by 2013).   Regulation levels increased in 1995, 2013 (RDR a significant step), 2015 (FAMR), 2018 (MIFIDII) and more recently the Consumer Duty.   

And usually the sniffing around was FAs rather than IFAs  IFAs only accounted for around 1 in 10 advisers in the 90s.  There were around 300,000 of all types back then.  Today, just 20,000.  The 80s, 90s and early 2000s were sales environments.  Especially if you saw someone from a salesforce.

They are further tainted by the "thoroughly honorable" ex army officer who became an IFA who hid charges left right and center.

You cannot hide charges.    Platforms provide cost disclosures of each of the cost areas at least annually.

I might add that I have come accross a number of UK IFA's where I live in Thailand and I have seen first hand some of their work. 

Seeing as IFAs are a minority with FAs the majority, you do seem to have come across a disproportionate number of IFAs.    However, back in the 90s, when the qualifications started, many who failed to meet the required standard were recruited to the Middle East and Far East to sell products there.     Those regions even today are comparable to the UK in the 1980s.

As I wrote, it is not capable of being guaranteed, but that doesn't prevent me from thinking that some form of minimum return would make the arangement seem more equitable. As things stand, the Advisors role is limited to pre-selection filtering, reducing the number opportunities to invest poorly or badly.  

As a client of an IFA in the UK on the Transact platform many years ago, I was unable to get sight of any payments made to my IFA by the platform. It was only when my IFA exited the industry that I wound up having no Advisor and dealing with Transact on a one to one basis when I saw for the first time, the history of payments made from my portfolio, to the IFA. Hitherto there was no anual financial disclosure, annualy or otherwise.  subsequently left Transact and moved to HL.

I confess I have never asked for proof of exactly what the advisors are, all I know is they have always represented themselves as IFA's, whether or not they actually were/are, who knows.

I don't know how it works in other countries in Asia but I suspect it is similar to the way it works in Thailand. Financial Advisor is a reserved profession for which a non-Thai must have a work permit and membership of the regulatory body that governs such activities. In over twenty five years here I have never met or even heard of an Thai IFA, all FA's are employees of banks or asset management houses. The foriegners (all Brits) I have met here who claimed to be IFA's were typically here for stays of between one and two months, in order to "service existing clients" and find new ones, from within the expat community. Anyone within even a minimal understanding of financial services in the West, understands such characters are at best rogues and at worst, crooks. The context of all of this however is the events that have helped form my opinion of (I)FA's.   

Lastly, can I just confirm that you are a financial advisor, an IFA I believe?

dunstonh

As I wrote, it is not capable of being guaranteed, but that doesn't prevent me from thinking that some form of minimum return would make the arangement seem more equitable. As things stand, the Advisors role is limited to pre-selection filtering, reducing the number opportunities to invest poorly or badly.  

Investments do not provide a minimum return, whether advised or non-advised.  You get what you get.   Asking for a guaranteed minimum is unrealistic.  Especaially as the IFA is not in any way responisble for returns.

As a client of an IFA in the UK on the Transact platform many years ago, I was unable to get sight of any payments made to my IFA by the platform. 

Transact, like all the other platforms, complies with the MIFIDII legislation that requires annual cost disclosures.    Also, they show all adviser fees, platform fees or any other fees in the transaction history which is viewable and downloadable.

I don't know how it works in other countries in Asia but I suspect it is similar to the way it works in Thailand. Financial Advisor is a reserved profession for which a non-Thai must have a work permit and membership of the regulatory body that governs such activities. In over twenty five years here I have never met or even heard of an Thai IFA, all FA's are employees of banks or asset management houses.

What you describe would be an FA in the UK.   IFAs are independent.  They are not beholden to a product provider or fund house.  They cannot restrict their offering (otherwise, they go back to FA status) and have to include products and services available from the whole of market.

The foriegners (all Brits) I have met here who claimed to be IFA's were typically here for stays of between one and two months, in order to "service existing clients" and find new ones, from within the expat community.

I recall loads of failed FAs that went abroad back in the 90s.  They failed to meet the UK requirements but the further East they went the less regulation existed. The majority failed as they had to farm the same contact lists as many before.   Generally, in the UK, the career path is to start as an FA and progress to an IFA.   So, if an adviser had already made it as an IFA, it's hard to see why they would follow the path of failed exam sitters going East.

Anyone within even a minimal understanding of financial services in the West, understands such characters are at best rogues and at worst, crooks. The context of all of this however is the events that have helped form my opinion of (I)FA's.   

Your minimal understanding of what an IFA is, along with 1980s/1990s experience (when FAs were a sales role), is leading you to an incorrect opinion.  Even FAs today are far better than the old days.   They are just usually expensive and the restrictions can make them poor value.

Bostonerimus1

As has been said many times "IFAs are not investment managers". I can see their utility for answering questions about taxation, insurance, overall personal finance and investment strategies, particularly when it comes to drawdown, but the individual should be ultimately responsible for what they invest in. I don't like the idea that you can spend a few percentage points and hand that responsibility over to some spiv in "The City" or probably now someone with GCSE maths entering data into an algorithm. That's how people end up invested in Woodford, Indonesian pork bellies or with a portfolio of 20 plus funds and no understanding of how to manage their money. That is why I advocate simplicity for the vast majority of people and learning that basics about investment funds and ultimately sticking to multi-asset funds and or index funds from the major providers.

boingy

chiang_mai said:

dunstonh said:

   

Lastly, can I just confirm that you are a financial advisor, an IFA I believe?

Yes he is. It's in his signature. There are others on this site too.

Middle_of_the_Road

Bostonerimus1 said:

As has been said many times "IFAs are not investment managers". I can see their utility for answering questions about taxation, insurance, overall personal finance and investment strategies, particularly when it comes to drawdown, but the individual should be ultimately responsible for what they invest in. I don't like the idea that you can spend a few percentage points and hand that responsibility over to some spiv in "The City" or probably now someone with GCSE maths entering data into an algorithm. That's how people end up invested in Woodford, Indonesian pork bellies or with a portfolio of 20 plus funds. That is why I advocate simplicity for the vast majority of people and learning that basics about investment funds and ultimately sticking to multi-asset funds and or index funds from the major providers.

Highly insulting to the IFAs on here who generously answer questions from those seeking free guidance.