Are these IFA fees reasonable?

exil

When you pay a doctor's bill you pay not just for the operation or treatment (which might only amount to a few quid's worth of drugs, stitches, etc) but for the years of training and experience that allows him to make the correct decisions to make you better (rather than kill you). Same (on a lesser scale) with an IFA.

caveat_emptor

dunstonh says:"There is the cost of liability. "
What does this cover?

dunstonh

caveat_emptor wrote: »

dunstonh says:"There is the cost of liability. "
What does this cover?

Cost of complaints. For the rest of my life, I have a financial liability for the advice I have given. I can be 86 years old and retired for 36 years but if someone complains and it goes to the FOS, I will have to pay £400 even if the complaint is rejected. If upheld I will have to pay the redress (I have no problem with that and wish it was the same for all advisers/tied reps).

The cost of liability/regulation is quite high as well. FOS/FSA/FSCS levies are over £3000 a year (increasing at about £250-£500 a year). PI cover is £2500 a year. Network/Support companies take over £17,000 a year. So thats £22500 a year. Whilst on costs, lets add in the £10k a year in software for research, database etc.

Thats a cost of £32500 a year before you get out of bed. How about those that have offices? Add that cost on. What about staff? A compliance officer (in place of network/support company) is about £30k a year. A P.A. is £15k at least

Its not a cheap industry to be in any more. Some of those costs will continue after you retire as well (PI cover is recommended to be held for 6-10 years after).

freddy124

Okay chaps, so you're worth the money, keep your hair on

Any ideas about this..

Anyway, another issue.
If I'm only paid £5k/year through the company and take the rest in dividends can I really put £15k into a pension? I've tried searching this forum and the answers are mixed. What is the definitive answer?

whiteflag_3

dunstonh wrote: »

Cost of complaints. For the rest of my life, I have a financial liability for the advice I have given. I can be 86 years old and retired for 36 years but if someone complains and it goes to the FOS, I will have to pay £400 even if the complaint is rejected. If upheld I will have to pay the redress (I have no problem with that and wish it was the same for all advisers/tied reps).

The cost of liability/regulation is quite high as well. FOS/FSA/FSCS levies are over £3000 a year (increasing at about £250-£500 a year). PI cover is £2500 a year. Network/Support companies take over £17,000 a year. So thats £22500 a year. Whilst on costs, lets add in the £10k a year in software for research, database etc.

Thats a cost of £32500 a year before you get out of bed. How about those that have offices? Add that cost on. What about staff? A compliance officer (in place of network/support company) is about £30k a year. A P.A. is £15k at least

Its not a cheap industry to be in any more. Some of those costs will continue after you retire as well (PI cover is recommended to be held for 6-10 years after).

Gobsmacked - is this the same person who advised earlier in the thread

Aim for 1.8% as that is the FSA average for collective investments. You can get lower but more will be higher.

Dh what is your hourly fee? What would you charge for seeing two company directors, assessing their needs, researching, producing a report , seeing them again and processing two pension and an ISA application?.

dunstonh

Dh what is your hourly fee?

I have one the menu obviously but I havent had anyone pay by the hour in years.

I typically take 1% of amount invested, take trail of 0.5% with a cap and collar on the amount of initial depending on level of work required. That method of remuneration is the most popular. Its low for initial basis but then I do tend to deal with larger portfolios.

meester

freddy124 wrote: »

I've no idea how long it will take; it's just a matter of filling in forms isn't it?

Anyway, another issue.
If I'm only paid £5k/year through the company and take the rest in dividends can I really put £15k into a pension? I've tried searching this forum and the answers are mixed. What is the definitive answer?

Yes at least one of you can be paid £15k out of COMPANY funds. You can also make a PERSONAL payment into a pension of the amount of your salary (this is the limit), minus 22% tax (even though you haven't paid any), and get it grossed up to the £5k by HMRC.

'Wholly and exclusively for the purposes of the business' is the doctrine. In other words, where you are given a pension (and hence Corporation Tax relief), your total remuneration must not be excessive for the job, as compared to someone doing a comparable job on the open market. It is also acceptable to top up an underfunded pension. Though don't forget you only get tax relief on this years profits.

You don't say what you and your wife actually do, but if one of you is not contributing to the business, and your arrangement is just a tax-minimisation exercise, then it is quite likely that the total package would NOT be a market rate.

In addition, as from April it looks like the new 'income shifting' legislation will come in - this would prevent a non-income-earning spouse from receiving dividends from the company, and would cut your income by about £30k.

I'm not sure your IFA was qualified to advise you. While I daresay his investment advice is of a good quality, the tax situation with respect to your limited company is something he should have advised you of, because it obviously affects what you do with your money. Perhaps you just haven't asked him enough questions (which you should be entitled to do for the money IMO).

whiteflag_3

dunstonh wrote: »

I have one the menu obviously but I havent had anyone pay by the hour in years.

I typically take 1% of amount invested, take trail of 0.5% with a cap and collar on the amount of initial depending on level of work required. That method of remuneration is the most popular. Its low for initial basis but then I do tend to deal with larger portfolios.

So what your saying is you charge for example

Client 1 - £500K into a pension- £5000 "FEE"
Client 2 - £100K into a pension- £1000 "FEE"

So client 1 pays five times as much as client 2 for the same work- How do you justify this in terms of treating clients fairly?.

This New Model Adviser nonsense is the biggest con ever .

Shame you couldnt answer the original question- What is your hourly rate?

dunstonh

So what your saying is you charge for example

Client 1 - £500K into a pension- £5000 "FEE"
Client 2 - £100K into a pension- £1000 "FEE"

So client 1 pays five times as much as client 2 for the same work- How do you justify this in terms of treating clients fairly?.

This New Model Adviser nonsense is the biggest con ever .

If that is such a con then how come on those examples you, as a tied agent who has said in the past that you take maximum, be paid:

Client 1 - £500K into a pension- £35000 commission
Client 2 - £100K into a pension- £7000 commission

My fee would be correct for the £100k but the £500k would have a cap at around £2000-£2500 (the placement of the cap may depend on the level of work required). Although the last £500k investment I did (end of December) went through with no initial fee or commission.

So client 1 pays five times as much as client 2 for the same work- How do you justify this in terms of treating clients fairly?.

Easy. Larger portfolios have a larger fund spread. How do you justify taking £35,000 when I take £2,500?

Under TCF, your fees shouldn't equal the commission or be higher in such a way to deter fees. Mine are nowhere close and significantly under the FSA average. A local accountant's (regional company) IFA arm starting fee is £2400.

Shame you couldn't answer the original question- What is your hourly rate?

Its irrelevant because I haven't done an hourly charge for ages. The NMA charging method is typically lower than the amount that would apply using an hourly charge.

whiteflag_3

dunstonh wrote: »

If that is such a con then how come on those examples you, as a tied agent

Where do you get that from?

who has said in the past that you take maximum, be paid:

Dont think so!

Easy. Larger portfolios have a larger fund spread.

So the more money just means more and more funds! What about asset allocation?

Under TCF, your fees shouldn't equal the commission or be higher in such a way to deter fees. Mine are nowhere close and significantly under the FSA average. A local accountant's (regional company) IFA arm starting fee is £2400.

Well if you answered the original question it would prove your point wouldnt it!

Its irrelevant because I haven't done an hourly charge for ages. The NMA charging method is typically lower than the amount that would apply using an hourly charge.

Enough said