Do all independent financial advisors charge a fee?

nuttytart_2

Hi

The last time we used one of these was 3 years ago when we moved to our present house, and he arranged our mortgage and sickness policy. He did not charge us a fee.
Our fixed rate is just coming to an end so we called out the financial advisor again, however this time he told us that things have changed, and he is now able to charge upto 2% of the mortgage/insurance amount as a fee.
I've always avoided paying any fees when taking financial advise, but is it now the case that most will charge (as well as getting commission from the bs/banks for arranging the mortgage/insurance)?
I would hasten to add that we totally trust this chap so no reason to think he is pulling a fast one!
Thanks

payless

To be classed as independent he must offer an option whereby he offers to charge a fee and then rebate all/ any commission earned ( including any % to his mtg club/ network / packager) back to you. ( Plus the whole of market definiton of his lenders)

He can also provide a no fee, but commission option (Or I suppose even a fee + commission option - as I can't see any rule against this ) -Suppose its a bit silly in that he could make the fee that come swith a with rebate very high

If he implied different perhaps time to start thinking about who you trust
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There are lots of advisers out there that do not charge fees, or who will offer a rebate of what they earn with fees much much less than 2%

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Oh- also a remtg is much less work than a purchase mtg

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I feel people really should actually think carefully as sometimes fees can be cheaper / fairer route

dunstonh

The ruling on for IFAs came in on 1st June 2005. If the IFA does not offer a fee option, they are not allowed to use the term independent on any documentation or presentation.

For mortgage brokers, the ruling came in a bit earlier. Remember when getting mortgage advice, if you have an IFA sitting in front of you, they will have their mortgage advisor hat on. An IFA doesnt need to be independent on mortgages but can still be called an IFA. Their initial disclosure documents/menu will confirm the status.

Its damned confusing since the FSA split advice into 3 catagories (designated investment, mortgage and general). You can be independent in one and not the others. You can have an individual that is both an IFA and a (multi) tied rep depending on what they choose to be when dealing with you. They can also deal with all three areas or just one.

I have the hybrid option of fees & commission listed on my IDD. It is there to protect me in case I have a time waster. I doubt it will ever be used by choice but it does allow me to enforce a minimum fee if someone choses to pull out at last minute after doing a lot of work and incurring costs. Its more to do with complex IHT or pension transfer cases where external costs may be incurred by me rather than mortgages. I know quite a lot of IFAs with the hybrid option on their IDD for much the same reason.

Some IFAs have gone down the fee only route and will not take commision. This will result in better value products (lower premiums or lower charges) or where commission is paid, it will be refunded.

I reckon your IFA is doing this and not the hybrid. You can tell by looking at the IDD/Key facts menu issued to you which will show the fee and commission options available.

mountainofdebt

I worked for an independent Financial Advisor until a few months ago and they had began charging an initial fee and a small monthly fee as well.

I think they also kept all the comission but in certain cases did give the client a percentage of the commission.

Conrad

nuttytart wrote:

Hi

The last time we used one of these was 3 years ago when we moved to our present house, and he arranged our mortgage and sickness policy. He did not charge us a fee.
Our fixed rate is just coming to an end so we called out the financial advisor again, however this time he told us that things have changed, and he is now able to charge upto 2% of the mortgage/insurance amount as a fee.
I've always avoided paying any fees when taking financial advise, but is it now the case that most will charge (as well as getting commission from the bs/banks for arranging the mortgage/insurance)?
I would hasten to add that we totally trust this chap so no reason to think he is pulling a fast one!
Thanks

I own a mortgage brokers and we usually charge fees and keep commission.
I know a few that still rely on commision only but in my experience they tend not to be as thorough. Many cases take a considerable amount of time and research to place (if done properly) and clients often fail to complete (eg - house purchase falls through).

It is simply no longer cost effective to rely on only comission. A straightforward case is usually charged at c£250. For really complex cases it might be 2%.

We will often charge up - front fees to 'weed - out' time Vampires and information rapers.

Brits are adverse to paying fees and want everything for nothing, until that is it comes to thier own incomes and time. Some people do not need advisers and can quite easily source thier own mortgage just as some people do all thier own DIY.

luckyfool

If you are happy to deal with an adviser over the phone then there are a few national no-fee brokers. e.g. Moneyquest, London and Country etc. You could do a google and browse some of the mortgage broker sites to check out what deals are available before phoning them up. Obviously the first think you ask is "how much are you going to charge/are you going to charge?"

I would echo what was said earlier in that (especially)if your mortgage is on the smaller side, and you have very complex circumstances, then you may be better off with a fee charging broker if you have good vibes about them. They "could" be able to devote more time to dealing with you and perhaps "hold your hands" to a greater degree. Really a matter of preference?

Also you have Charcol who charge a small fee for telephone based, and will offer a no fee option if you do "everything" over the internet.

It is certainly worth shopping around to get a broker who will not charge a fee, especially if your adviser is talking in terms of 2%. That kind of fee level is very difficult to justify, even if he rebates all commissions to you. The average procuration fee they are receiving from the lender is 0.4% so a no fee broker would be doing it for effectively 1/5th the remuneration as the guy charging 2%, and thats assuming he rebates his commission back.

payless

Remember
If a mortgage adviser claims to be "Independent " he must offer you the option of a fee based service ( with all commission rebated) as well as "whole of market"

Some internet services use a panel ( even the case when they might use whole of market over phone / branch)

UMSLtd

I am a Director of a mortgage firm and we offer two options :-

1) Fee Free
2) A Fee (typically around 1%) with any mortgage proc fee's refunded back to the customer.

We also still do a very thorough job for the customer with an initial Fact find meeting followed by a presentation and sign up meeting after a period of research. If insurances are to be arranged then information is gathered at the first meeting and these are then usually presented on during a third meeting.

dunstonh

It is also important to make the difference between IFAs and Independent mortgage brokers. An IFA does not need to be independent in mortgages and may not even deal with mortgage business. An independent mortgage broker does not need to be independent on the insurances .

So, the thread title is a little misleading for the topic content as the rules regarding IFAs charging "shapes" and different to those of mortgage brokers.

idjones

I wondered if someone could let me know if this is a good deal.

I was cold called last week about getting a cheaper mortgage, as I had been considering doing it anyway, I agreed to their representative visiting me.

The Brokers are going to charge £1600 (which will be added to my mortgage balance), but as far as i recall him saying all legal and arrangement fees will be paid from this figure. The £1600 is a fixed fee regardless of borrowing amount.

Bearing in mind I am looking to remortgage for £60,000, is this a reasonable amount to charge?

Any views would be gratefully received.

Thanks.

payless

Possible the legal & val fees (if not arrangement fee ) are paid by lender anyway- but even if not they appear still to be charging something

Thats over 2.5% in fees !

If straight forward case ( no credit problems ) there are a number of brokers that would transact this without charging a fee- whether this be telephone based or local advisers

failing that consider speaking to existing lender for a new deal

see http://forums.moneysavingexpert.com/showthread.html?t=77239 for views on cold calling