Independant advisor fee's????

susi

My daughter is buying her first house, she has been accepted for a mortgage on the condidtion that the damp proof work is carried out before the money is released. Anyway, she has used the financial advisor that is based at the Estate agents who was selling the property. He has been a great help to her but when she called in last week to sort out a few details he offered her insurances, one was a personal insurance, to cover sickness etc, the other a mortgage cover insurance and buildings and contents insurance. These were all through legal and general. When she came home I told her we could probably get them cheaper on the net so she rang the advisor to tell him she would try to get her own. He told her that being independant he would have to charge her a fee of 380.00 to show that he was not favouring any particular mortgage lender and the only way he could waiver these fees was for her to have her insurance through him. So basically she either has these insurances or finds her own but pays him 380.00. Is this normal proceedure, its been a long time since we bought a house and things have changed so much but this seems a bit like blackmail!!!! She wasnt told she would have these fees to pay until now.............we are really confused about this????

GDB2222

The adviser is regulated. One of the conditions for that is that he issues a terms of business letter at the outset. The TOB letter should state any charges. So, your daughter should ask for a copy of the TOB letter, which I assumed she signed and returned to the adviser.

GDB2222

In principle, there is no reason why an IFA should not charge a fee. However, it has to be explained and agreed at outset. So, the TOB letter **may** say that a fee will be charged if your daughter does not take out insurance through the IFA (or cancels insurance within a certain period).

What this comes down to is what your daughter was told at the outset, what paperwork she was given, what she signed, and what records the IFA kept.

LouLouHelen

The IFA has to confirm with the client AT OUTSET how they are going to be paid for the work undertaken. This document has KEY FACTS written in the corner of it. It will also state very clearly any conditions on this fee. HE would have had to have given her one for the mortgage work and one for the insurances work.

Don't think he can restrospectively charge a fee unless she agreed to it!

Good luck

greenwich

I agree with the above advice that she has no liability to pay a penny unless the advisor told her about the fee before he gave her the advice. Even if she is liable, £380 should buy more than 3 hours of advice - is he really saying he's spent that long on her case??

Your daughter will have to be alert though until contracts are signed. They're not supposed to do this but any streetwise person knows that estate agents do try to sell houses to buyers who will also earn them money through insurance sales. If the advisor is as unethical as he sounds then be careful he doesn't try to scupper the sale by suggesting to the vendor that your daughter has financial problems. The idea being to then get a new buyer who would also buy the insurance.

I expect I am just being paranoid but I have more than once come across estate agents who have told me that if I want to get the house I want I need to arrange the mortgage through them...or else. Remember: there are few forms of life as low as estate agents.

LouLouHelen

Good point G!

Get her to play along with the adviser until exchange of contracts and then ask for proof that she agreed these terms at the outset of the meeting.

susi

Thanks for all the advice, its not the fact that she has to pay him, although this was never mentioned and as far as Im aware nothing has been signed, she has only had two actual appointments with him, one was for his advice on a mortgage and the other was to discuss the insurances. At the begining when I rang and asked how much would the whole buying a house thing cost (so she would know how much money she would need) he told me she would need around 200.00 for searches and 280.00 for valuation fees, then of course the solicitors fees, this was all we were told we would have to pay. The insurances he has said she has to have are :-
Mortgage decreasing critical illness cover @ 14.28 per month
Mortgage payment insurance @ 14.25 per month
Buildings and contents @ 269.63
These policys are all with Legal and General, If they are reasonably priced then thats o.k. because she will need insurance anyway, but if they are overpriced then I guess she will be better off paying him the 380.00

GDB2222

susi wrote:

Thanks for all the advice, its not the fact that she has to pay him, although this was never mentioned and as far as Im aware nothing has been signed, she has only had two actual appointments with him, one was for his advice on a mortgage and the other was to discuss the insurances. At the begining when I rang and asked how much would the whole buying a house thing cost (so she would know how much money she would need) he told me she would need around 200.00 for searches and 280.00 for valuation fees, then of course the solicitors fees, this was all we were told we would have to pay. The insurances he has said she has to have are :-
Mortgage decreasing critical illness cover @ 14.28 per month
Mortgage payment insurance @ 14.25 per month
Buildings and contents @ 269.63
These policys are all with Legal and General, If they are reasonably priced then thats o.k. because she will need insurance anyway, but if they are overpriced then I guess she will be better off paying him the 380.00

The easy way out is to go along with the monthly policies for now, then maybe look around for replacements later. At £14 a month, any difference between L&G and the cheapest company for a month or two is not going to break the bank.

payless

All with L&G - wonder if he is really an Independent adviser ? maybe just independent for mortgages - in which case surely the "about our services- key facts" document, issued early in process, should have indicated what fees were payable in what events

in fact to be independent mortgage adviser , a fee only option WITH a rebate of all commission paid by the mortgage lender ( not only to the adviser , but also to 3rd parties involved - ie L&G if part of their mortgage network) should have been on offer.

terrierlady

good spot payless, my thoughts are same as yours and thanks for pointing out some of the differences with a truly independent adviser.
I am often told a buyer is using an independant when in fact only the mortgage part is independent

susi

The two personal Insurances have to be taken out for at least 5 years, which is why Im a bit concerned about her signing anything just yet, do those prices sound reasonable???????