IFAs-how can their advice be truly unbiased?

mrs_scrooge

A while back we entered into a contract with an Independent Financial Adviser as we needed advice on our complicated finances.

As time has gone on we have come to the conclusion that the IFA is only really interested in the bits of our finances where there is the opportunity to earn commission. Where there are 2 alternative courses of action we seem
to be gently pushed towards the one where commission can be made rather than the non commission making option or the "do nothing" option.

As such we are beginning to question the IFAs advice.

I realise that the word "independent" means they are not tied to a particular institution but were we wrong in thinking that they would be geared to working out the best position for us overall?

Was an IFA the wrong sort of adviser for us to get completely unbiased advice? If so who should we have gone to?

Thanks.

Joolzr68

Hi ,

I'm not sure is theres anyone out there who is truely unbiased.

Maybe the Citizens Advice Bureaux could help.

http://www.citizensadvice.org.uk/press_20070114

Joolzr68

Willman_Rodders

Hi mrs_scrooge,

The answer may be to find an IFA that works on a fee only basis; you pay him/her for the time he/she is with you and for the work he/she does away from your office.

This will remove the potential for bias for your adviser. Some products will still earn a commission on their sale, but the IFA will offset this income against his/her fees.

Most clients however decline the fee paying option when they hear the rates being charged; when I left the sector (some 4 years ago) the hourly rates varied from around £80 to £200+ per hour - and since then their overheads have increased still further. Nevertheless for people who have significant investment transactions on a regular basis a fee paying option can be cheaper in the long run, and you know you have unbiased advise. Just don't offer your adviser a cup of coffee; kick 'em out as soon as possible.

I suggest you ask for quotes from a number of advisers in your area, then see if you can negotiate with your existing adviser.

Retired_I.F.A.

That is the only answer actually.

Some of us never wanted the title Advisor as it's misleading as hell.

Still, it's better than before the financial services act when Joe public turned to a solicitor for advice and ended up with Equitable life .

dunstonh

Was an IFA the wrong sort of adviser for us to get completely unbiased advice? If so who should we have gone to?

IFA is correct. However, the term IFA covers a wide range of skills and specialisations.

I'm not sure is theres anyone out there who is truely unbiased.

Maybe the Citizens Advice Bureaux could help.

They will refer you to an IFA. I know that because I have been contacted a number of times by the local CAB to help in cases. They need to do that because they are not authorised or regulated to give financial advice.

The answer may be to find an IFA that works on a fee only basis; you pay him/her for the time he/she is with you and for the work he/she does away from your office.

This will remove the potential for bias for your adviser. Some products will still earn a commission on their sale, but the IFA will offset this income against his/her fees.

There has been no evidence of widespread commission bias in the FSAs findings. However, it has been evident with some. So fee basis can often be the best option or the increasingly common option of agreeing a fixed level of commission at the start regardless of product. This is effectively a fee but uses the commission to pay for it with any surplus being used to enhance product terms (such as increased allocations, reduced annual management charges or rebate). It also avoids VAT as well.

the hourly rates varied from around £80 to £200+ per hour - and since then their overheads have increased still further.

£125-£150 is the most common nowadays. City locations likely to be higher. Some transactions can carry a fixed amount or as I mentioned you can agree a fixed percentage.

Some of us never wanted the title Advisor as it's misleading as hell.

I have no problem with the title but it is allowed to be used by "advisers" of all skills, from very low to very high. At least the FSA appear to realise this now and one of their proposals for introduction in 2009 is that tied agents will not be able to use the adviser tag and IFAs will require a higher level of qualifications than other types of [currently called] advisers.

A few years back a lot of the old tied salesforces closed down and there was a bit of a flood of people into the IFA role. Many saw it as an opportunity to improve their skills and knowledge. However, some chose to still work in the tied agent way of doing things but just call themselves IFAs. These are the ones that tend to do the reputation damage but they are also the ones that are likely to find the FSAs proposals the hardest to meet.

Of all the advice distribution channels IFAs have the lowest number of complaints to the FOS. So, on the whole, things are not too bad. IFAs also do tend to get the brunt of tied agent problems as well as research has shown that half of consumers getting advice from a tied agent think they are really seeing an IFA. We have seen that on the forum a number of times where someone is complaining about their IFA and it turns out its a tied agent.

mrs_scrooge

Thank you all for your thoughts on this.

I had an email notification on this but it hasn't worked so I have only just seen your replies when looking at my CP. Its odd, sometimes the email notification works and sometimes not. I'll have to get in to the habit of checking the User CP to be sure or searching for the thread.

PS I've just had a further thought on my notification emails. As I don't always log in I may see a reply that I've been emailed about but the system wouldn't know I've seen it and so stops sending me further reply emails????