Should I see a fee free IFA?

fimonkey

In September I will have the chance to join a pension scheme through my work, however it's complicated (see thread here) http://forums.moneysavingexpert.com/showthread.html?t=709777

Basically I can join a final salary scheme but have to contribute 7% PLUS take a 13% drop in salary (taking me from 31Kpa to 26500pa, and my 'final salary' for pension purposes would be based on this reduced figure)...OR I can join a stakeholder scheme and contribute 5%.

I also want to begin investing in stock and shares, by saving £100 a month into funds/equities/blah blah.. (I clearly need to do more research on the confusing amounts of products you can invest in nowadays). However I intend to do this through a fund supermarket to reduce costs, and I intend this to be a long term thing with my level of risk starting off as low to begin with.

I want to know which pension scheme would suit me (and before you all bleat 'final salary' please read through the link to the thread above as it may be the stakeholder given the amount I need to contribute plus salary drop). The stakeholder is run through work so would not be oneI choose. Also, I would invest through a fund supermarket so essentailly the IFA I see would not make any money from me at all in terms of selling products, I would be taking his advice and that's all.

Do you think this is Ethical/Fair? Is it possible even?

dunstonh

i dont think you would get away with it. As an IFA you only do so much before you start taking some form of financial commitment which would be on fee basis or a form of customer agreed remuneration (i.e. fee which can then be offset).

Lokolo

To be fair I would like that to exist. For exampe, I've been reading up on funds, got some in mind, got some cash to put into but want advice on the funds I'm picking and for the IFA to 'teach' kind of thing. But just not buy them for me. And for this I wouldn't actually mind paying for (within limits, £100 for an hour session obviously wouldn't be decent!)

Obviously IFAs are good if you have a LOT of money but I am talking OPs amount of putting £100 a month into some funds.

You can get advice on here and other forums about funds you're buying but obviously people can lie etc. For example, dunstonh could be lying about everything he says (I'm sure you don't!) and giving you bad advice, whereas if you went to a legitamate place to get advice it could be quite trustworthy.

Just my 2p

dunstonh

The problem is that the current regulatory requirements mean that even on relatively simple transactions we still have to do a factfind, research and report. We then carry the liability for that for life.

We have this really really stupid position where you take out lending much easier than putting aside investments. Currently an IFA has to do a the same level of factfind, research and report for someone wanting to put £100pm away or someone wanting to invest £500,000. (obviously fund research would be a bit more detailed but the rest is the same).

There is less documentation sorting out a £500k mortgage compared to a £100pm ISA. Thats stupid. However, it does appear that the FSA will allow what they are calling "guided sales" under the revised rules from 2009 where you agree to no virtually no FOS protection and less information gathering and reporting is required.

Lokolo

Ouch so obviously the people who come along with smaller amounts of money are less 'worthwile' as you won't get as much money as someone who wants to invest lots of money.

I didn't realise people go to see IFAs with £100pm investments, I thought an IFA would tell them to shove off! Also didn't realise IFAs create full on reports and things.

What does FOS protect us (people that come to see an IFA) against?

fimonkey

Thanks guys, .. IFA's generally offer the first 1/2 hour free as a fact finding mission (i.e what do you want, what can they do for you, (and how much they'll earn from you)) and it'd be during this 1/2 meeting they'd decide I wasn't 'worthwhile'?.. So would I then suggest a fixed one off 'fee' as suggested by Lokolo for their advice onthe funds I intend to buy and also my pension situation? Similar to the advice on these boards, but with some accountability. If so, what would be a reasonable amount p/h?

Thanks again, interesting debate!

Lokolo

Looking here:

http://www.unbiased.co.uk/independent-financial-advice/how-to-pay-for-advice/

It says:

1. by paying the adviser a fee, either at an hourly rate or through a fee for the whole job. This is known as 'fees only' advice. Fees vary, typically from £50 to £200 an hour. Often the first half hour is free at the initial meeting where you can get to know each other.

£200 an hour!!!!! This advice should get me damn gold coins whilst I'm at it haha.
I want to know how much dunstonh charges.....

dunstonh

Ouch so obviously the people who come along with smaller amounts of money are less 'worthwile' as you won't get as much money as someone who wants to invest lots of money.

The FSA's Retail Distribution Review (RDR) is basically splitting financial services into advice and sales and making a clear difference between them. From 2009 the only advisers will be IFAs. The rest will become sales reps/agents and will no longer give advice. IFAs will also have to increase their qualifications. It is expected that many current IFAs will drop IFA status and become salemen (mainly the ones which act a salesmen and dont want to sit 5 more exams).


The FSA has admitted that generally the lower net worth individuals will go to the salemen and the higher net worth will go to the IFAs and the middle ground will probably lose out.

I didn't realise people go to see IFAs with £100pm investments, I thought an IFA would tell them to shove off! Also didn't realise IFAs create full on reports and things.

I know some that will do anything regardless of the amount. However, most of the decent ones tend to deal with larger cases.

What does FOS protect us (people that come to see an IFA) against?

Basically, advice. If the advice is wrong, then you can go to the FOS. Under the sales option you wont be able to go to the FOS complaining about bad advice because you bought and were not advised.

IFA's generally offer the first 1/2 hour free as a fact finding mission (i.e what do you want, what can they do for you, (and how much they'll earn from you)) and it'd be during this 1/2 meeting they'd decide I wasn't 'worthwhile'?.. So would I then suggest a fixed one off 'fee' as suggested by Lokolo for their advice onthe funds I intend to buy and also my pension situation? Similar to the advice on these boards, but with some accountability. If so, what would be a reasonable amount p/h?

If you want accountability expect the cost to be high as that will mean factfind, research and recommendation. If you want a suggestions off the record then thats different.

£200 an hour!!!!! This advice should get me damn gold coins whilst I'm at it haha.
I want to know how much dunstonh charges.....

£150 per hour although no-one has ever gone with that option. Most common method chosen is 1% of amount invested plus trail (with a minimum and a cap).

There is a regional IFA firm attached to a large accountant that has a minimum fee of £2400 just to get to a written report!!

Lokolo

Ouchie, £150. Thats a months worth of investing right there! Do you have sweets are you desk people can take too? :rolleyes:

I say gamble and rely on here ha.