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  • FIRST POST
    • br1anstorm
    • By br1anstorm 12th Jan 19, 3:16 PM
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    br1anstorm
    Financial advice - flat fee versus percentage
    • #1
    • 12th Jan 19, 3:16 PM
    Financial advice - flat fee versus percentage 12th Jan 19 at 3:16 PM
    I try to keep reasonably well informed about financial and money-management matters. I review savings rates, I have an ISA and a SIPP and some money in funds and shares (mostly via the Hargreaves Lansdown platform).

    Over the years I have followed the forum-discussions on MSE and elsewhere about platform-charges. I have seen the comparative tables produced for example by 'snowman' (on this site IIRC) , the Telegraph, and also The Lang Cat, a consultancy firm. These are very useful in working out the best deal for investments of various amounts in ISAs or in shares and funds.

    My question - and the reason for this post - is to ask if there is any similar comparison available, on MSE or anywhere else, of financial-adviser charges?

    I have been burned in the past by advisers whose motivation was upfront commission rather than the client's best interests. I even got reimbursement for some mis-sold investment plans. Since then I have essentially been a self-investor making my own decisions.

    The regulatory and legislative reforms of recent years were supposed to bring clarity and transparency to the way such advisers were paid and to bring commissions out into the open. The rules are also intended to distinguish clearly between "tied" (or restricted) and "independent" (whole-of-market) advisers. All very fine.

    Now however, in retirement, I'm grappling with various choices concerning for example SIPP drawdown, annuity purchase, and reallocation of investments. None of these are horribly complicated; but I do feel I would benefit from some professional/expert advice. But I'm far from certain where to look.

    Hargreaves Lansdown offers advice. But on a 'restricted' basis, and for a percentage fee. I'm attracted by the argument advanced by flat-fee advisers that it takes no more time, and costs no more, to advise on 100k than it does on 500k.

    I'd like to look at, and ideally compare, the fees and charges of different advisers in much the same way as it's possible to compare the fees and charges of competing investment platforms.

    I know that there are hundreds, if not thousands of professional advisers out there, and that individual needs and circumstances differ. But that's equally true if you're buying a car or a washing machine: doesn't prevent comparison of providers and products in terms of cost, performance and value for money.

    Is there any existing comparative table or analysis (a "Which-style" review or 'best buy' table....) of even a selection of financial advisers?
Page 1
    • Tarambor
    • By Tarambor 12th Jan 19, 6:05 PM
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    Tarambor
    • #2
    • 12th Jan 19, 6:05 PM
    • #2
    • 12th Jan 19, 6:05 PM
    Over the long term no advisor or investor has beaten just putting money into index funds and the like.

    Whether flat fee or percentage is best depends on the size of your stash so the maths is simple. Whether or not that extra money you pay gets you better advice is questionable at best and any advice they give you in regards to investing is basically a crap shoot anyway as nobody can predict what the global economy is going to do with any accuracy in 3 months time let alone 3 years so personally I'd not bother wasting my money on anything other than advice on how to do it in the best tax efficient manner possible.
    • dunstonh
    • By dunstonh 12th Jan 19, 6:40 PM
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    dunstonh
    • #3
    • 12th Jan 19, 6:40 PM
    • #3
    • 12th Jan 19, 6:40 PM
    My question - and the reason for this post - is to ask if there is any similar comparison available, on MSE or anywhere else, of financial-adviser charges?
    No. Most IFA firms are 1-4 advisers with the sort of internet coverage that your local butcher has. Its not feasible.

    Hargreaves Lansdown offers advice. But on a 'restricted' basis, and for a percentage fee. I'm attracted by the argument advanced by flat-fee advisers that it takes no more time, and costs no more, to advise on 100k than it does on 500k.
    Actually, it does take more time. Smaller investors are more likely to be on multi-asset or more basic investments over 1 or 2 tax wrappers. Larger investors are more likely to have bespoke portfolios, have multiple tax wrappers and things like CGT, dividend allowance etc to be calculated.

    I know that there are hundreds, if not thousands of professional advisers out there
    Around 20,000 FAs and IFAs going by recent FCA stats.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Aegis
    • By Aegis 12th Jan 19, 6:49 PM
    • 5,043 Posts
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    Aegis
    • #4
    • 12th Jan 19, 6:49 PM
    • #4
    • 12th Jan 19, 6:49 PM
    Over the long term no advisor or investor has beaten just putting money into index funds and the like.
    Originally posted by Tarambor

    Presumably this isn't deliberately so, but this is a misstatement of what the research actually shows. Almost every study demonstrates that the average active fund underperforms benchmark indices over the long term, but that most certainly does not mean that no adviser or investor has beaten the market over the long-term. I'm not sure how you'd even prove that claim without actually analysing every investment portfolio in the world.


    Most studies don't do a particularly good job of even attempting any sort of filtering process, and many studies completely ignore the level of risk taken within certain market sectors, which doesn't seem valid.


    I don't disagree with the conclusions on active vs passive, i.e. that on average they both underperform their respective indices over the long run, but there is still certainly room to research and find funds that are better suited to someone's short-, medium- and long-term requirements and restrictions when constructing portfolios.





    Whether flat fee or percentage is best depends on the size of your stash so the maths is simple. Whether or not that extra money you pay gets you better advice is questionable at best and any advice they give you in regards to investing is basically a crap shoot anyway as nobody can predict what the global economy is going to do with any accuracy in 3 months time let alone 3 years so personally I'd not bother wasting my money on anything other than advice on how to do it in the best tax efficient manner possible.
    To an extent my own view is in line with this - advisers should be at their best when managing the tax, risk and cash flow, and this process should work alongside any investment strategy, whether active or passive. Which strategy is suitable for a specific client varies though, so I don't commit to either active or passive in advance.
    I am an Independent Financial Adviser
    Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.
    • Tom99
    • By Tom99 13th Jan 19, 8:35 AM
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    Tom99
    • #5
    • 13th Jan 19, 8:35 AM
    • #5
    • 13th Jan 19, 8:35 AM
    Over the long term no advisor or investor has beaten just putting money into index funds and the like.
    Originally posted by Tarambor
    If you remove those investors who are using an index tracker, then of the investors who remain half (by value) must have beaten the index and half fallen short.
    Ie the accumulated total of all the non index trackers must equal the index performance.
    • EdSwippet
    • By EdSwippet 13th Jan 19, 9:36 AM
    • 855 Posts
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    EdSwippet
    • #6
    • 13th Jan 19, 9:36 AM
    • #6
    • 13th Jan 19, 9:36 AM
    Is there any existing comparative table or analysis (a "Which-style" review or 'best buy' table....) of even a selection of financial advisers?
    Originally posted by br1anstorm
    Perhaps start here: https://www.vouchedfor.co.uk/
    • dunstonh
    • By dunstonh 13th Jan 19, 12:03 PM
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    dunstonh
    • #7
    • 13th Jan 19, 12:03 PM
    • #7
    • 13th Jan 19, 12:03 PM
    Perhaps start here: https://www.vouchedfor.co.uk/
    Originally posted by EdSwippet
    Very little coverage of adviser firms. Lead generation sites like these require the adviser firm to pay money to them. Most of the decent firms have more business coming in then they can handle (or at least enough that they do not need to go chasing it). So, they will not pay to be listed on sites like that. Instead, you get the ones that need business on those sites. There could be genuine reasons why they need the business. New firm/new adviser starting out for example. Expansion of firm meaning they have capacity for more business etc.

    I just did a search on my postcode and the first 5 were all employee advisers of regional firms (with a pay split that sees the main firm take 30% of their income on self gen stuff and 70% on firm generated stuff. Plus, a monthly fee to the parent firm. So, dont expect them to be cheap). Only two were within a 10 mile radius. The others were 35 miles away. and city based. None of the small rural firms were listed. None of the advisers I would consider top tier locally were listed. Mainly, as they don't need to pay to get more clients.

    Unbiased has gone lead generation too. Trustpiliot is really expensive for advisers (so fees will reflect that).
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Mr.Saver
    • By Mr.Saver 13th Jan 19, 4:21 PM
    • 131 Posts
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    Mr.Saver
    • #8
    • 13th Jan 19, 4:21 PM
    • #8
    • 13th Jan 19, 4:21 PM
    Very little coverage of adviser firms. Lead generation sites like these require the adviser firm to pay money to them. Most of the decent firms have more business coming in then they can handle (or at least enough that they do not need to go chasing it). So, they will not pay to be listed on sites like that. Instead, you get the ones that need business on those sites. There could be genuine reasons why they need the business. New firm/new adviser starting out for example. Expansion of firm meaning they have capacity for more business etc.

    I just did a search on my postcode and the first 5 were all employee advisers of regional firms (with a pay split that sees the main firm take 30% of their income on self gen stuff and 70% on firm generated stuff. Plus, a monthly fee to the parent firm. So, dont expect them to be cheap). Only two were within a 10 mile radius. The others were 35 miles away. and city based. None of the small rural firms were listed. None of the advisers I would consider top tier locally were listed. Mainly, as they don't need to pay to get more clients.

    Unbiased has gone lead generation too. Trustpiliot is really expensive for advisers (so fees will reflect that).
    Originally posted by dunstonh
    Hi dunstonh,

    Your post is very helpful. But I have a question after reading it. If those websites (vouchedfor, unbiased, etc.) aren't the best place to find a reasonably priced good IFA, where are the better places to find one?

    Thanks in advance.
    • br1anstorm
    • By br1anstorm 13th Jan 19, 11:18 PM
    • 205 Posts
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    br1anstorm
    • #9
    • 13th Jan 19, 11:18 PM
    Finding a financial adviser
    • #9
    • 13th Jan 19, 11:18 PM
    Thanks to all who have responded to my OP.

    Just to make one point clear. I was not looking for views on whether using an adviser was likely to generate better returns than self-investing. Nor was I seeking comments on the perpetual debate over active versus passive (index-linked) investing.

    My question was specifically about the charges financial advisers make: how the fees are calculated (flat-fee, hourly rate, or percentage of amount being advised-on), and how they might vary (either geographically or for different kinds of advice).

    Platforms are pretty transparent about the way they charge. So even though they may use different formulae (some charge for every share trade, some have a fixed fee for eg managing a Sipp, some levy a percentage of the total holding) it's demonstrably possible to calculate and compare what it would cost to invest a given sum via HL, or AJ Bell, or Bestinvest or whoever.

    The same is true in other areas. It's possible to compare banking charges to see which bank is best for those who need overdraft/credit, and for those who hold substantial balances. It's possible to price a basket of household products from Waitrose, Tesco, Asda and Lidl to see what you pay for comparable products. It's equally possible in the "professional" arena to compare the price for having, say, a hip-replacement or dental work in Harley Street, a BUPA hospital or in Romania.... You can get a quote for - say - writing a standard will from a selection of solicitors and from will-writing firms.

    That's the thinking that lay behind my original question. I recognise the points that dunstonh makes. There are lots of advisers. Each client's circumstances are different. But most people have a pretty standard set of needs.

    Which is why it ought not to be impossible to find, and compare, the costs of financial advice offered by different firms for a range of standard financial services. Not just investment-advice, but pension-admin, tax-planning, and other "basic" matters.

    Like Mr Saver, I'd like to know how to go about finding a good adviser, and like him I am a bit disappointed that sites like unbiased and vouchedfor are in fact not to be relied on because they are (in the jargon) lead-generating operations where firms pay to be listed. A bit like paying commission, then? Or like the comparison sites that only show the firms that pay them retainers....

    At the moment choosing a financial adviser feels a bit like a blindfold lottery, or pin-the-tail-on-the-donkey, or a trawl through the Yellow Pages. Surely there is a more methodical way of deciding who to look to for financial advice?

    Is there scope, I wonder, for MSE - or other consumer-champions - to take a look at the world of financial advisers fees and maybe at least offer some pointers on how to find a decent adviser, and how to take a view on whether their charges are reasonable and in line with the prevailing market-rates (whatever they may be...)
    • eskbanker
    • By eskbanker 14th Jan 19, 12:28 AM
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    eskbanker
    Is there scope, I wonder, for MSE - or other consumer-champions - to take a look at the world of financial advisers fees and maybe at least offer some pointers on how to find a decent adviser
    Originally posted by br1anstorm
    They could perhaps publish an article like https://www.moneysavingexpert.com/savings/best-financial-advisers/
    • dunstonh
    • By dunstonh 14th Jan 19, 11:38 AM
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    dunstonh
    Like Mr Saver, I'd like to know how to go about finding a good adviser, and like him I am a bit disappointed that sites like unbiased and vouchedfor are in fact not to be relied on because they are (in the jargon) lead-generating operations where firms pay to be listed. A bit like paying commission, then? Or like the comparison sites that only show the firms that pay them retainers....
    The lead generation style directories range from taking a fixed fee per referral to actually taking a cut of the adviser remuneration. They either do not show non-paying advisers or filter them so they appear at the bottom and with a basic listing. Or have a default to not show them at all unless you untick a box to show them.

    PFS and adviserbook are non cost directories. Adviserbook is relatively new and many firms are not aware it exists yet. But they do verify IFA status for those that actually have registered there. PFS doesnt show IFA/FA status but does verify the qualifications.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • br1anstorm
    • By br1anstorm 14th Jan 19, 1:09 PM
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    br1anstorm
    They could perhaps publish an article like https://www.moneysavingexpert.com/savings/best-financial-advisers/
    Originally posted by eskbanker

    Fair call, eskbanker - I hadn't seen that!

    Having said that, the article doesn't quite deliver. It has all the familiar generic advice about the ways in which advisers charge (flat fee, hourly rate, percentage) and the encouragement to ask pertinent questions. I note it mentions VouchedFor and Unbiased.com, which - as dunstonh has pointed out - are essentially paid-listings and neither objective or comprehensive.

    But the article doesn't address the key point which I am trying to clarify. It says for example "hourly charges can be anything from 50 to 250 per hour"; and "percentage fees can range from 0.5% to 5%". Saying that the most expensive advisers charge 5 or 10 times more than the cheapest ones is not hugely useful - in fact it's hopeless.

    If you were paying 5 or 10 times more for a unit of electricity than your neighbour, you'd want to know and compare tariffs. If you bought a car that cost 10 times more than your mate's, you'd at least want to know how much bigger and better it was.

    In the case of investment platforms (which offer services in the same arena as IFAs), their tariffs are clear and comparison is possible, as the tables produced by snowman and the Telegraph show. At present, looking for a financial adviser seems a bit like looking at restaurants where there's no menu in the window and no prices on the menu, and you only find out whether you're paying Big Mac or Michelin-star prices after you've sat down and ordered the food!

    Seems as if transparency and consumer-information still has some way to go, at least in this area.
    • dunstonh
    • By dunstonh 14th Jan 19, 1:28 PM
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    dunstonh
    It says for example "hourly charges can be anything from 50 to 250 per hour"; and "percentage fees can range from 0.5% to 5%". Saying that the most expensive advisers charge 5 or 10 times more than the cheapest ones is not hugely useful - in fact it's hopeless.
    Isnt that the same for many professions. years back, I needed some work and the quotes ranged from 1500 to 20,000. Recently, I was getting quotes on something and the person said rather than charge be for the job, they would charge me the day rate as it would be repeat business.

    In the case of investment platforms (which offer services in the same arena as IFAs), their tariffs are clear and comparison is possible, as the tables produced by snowman and the Telegraph show.
    Not necessarily true. With three platforms, we have special terms over their published tariff. One of them goes even further and will price bespoke terms if we ask for them and the value is high enough.

    At present, looking for a financial adviser seems a bit like looking at restaurants where there's no menu in the window and no prices on the menu, and you only find out whether you're paying Big Mac or Michelin-star prices after you've sat down and ordered the food!
    I would disagree on that as the adviser is not allowed to charge until the fee has been agreed and a chance to exit at no cost given (usually stated as if we go beyond this point, you will incur charges). So. nothing is charged until it is agreed.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • br1anstorm
    • By br1anstorm 14th Jan 19, 6:41 PM
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    br1anstorm
    Thanks, dunstonh.... and believe me, I'm not suggesting that IFAs are unique in being 'elastic' over charges, as anyone who has sought a quote from a builder will know: "Well, guv, it all depends on what you want....".

    But just to pick up on the point about platforms - of course certain IFAs may be able to get special deals with particular platforms. But it remains the case that platforms have a published set of charges which everyone can see, and which allows anyone to work out how much their individual investment-management needs might end up costing.

    To continue the restaurant analogy, it allows you to look at the cost of a meal in the kebab shop, at the pizza restaurant, or in Michel Roux' place, before you book a table. Having the option to walk out later, once you've sat down and the menu-prices are revealed, isn't quite the same thing!
    • masonic
    • By masonic 14th Jan 19, 6:47 PM
    • 10,617 Posts
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    masonic
    To continue the restaurant analogy, it allows you to look at the cost of a meal in the kebab shop, at the pizza restaurant, or in Michel Roux' place, before you book a table. Having the option to walk out later, once you've sat down and the menu-prices are revealed, isn't quite the same thing!
    Originally posted by br1anstorm
    To continue the analogy even further, if you walk into a kebab shop or pizza restaurant and order something that is not on the menu, but expect to pay the price of something that is on the menu, then you will likely end up disappointed.

    If you can walk into a kebab shop or pizza restaurant and order exactly what you want from the menu, then why would you instead visit a swanky restaurant where the chef will prepare you something tailored to your personal preferences, for a price? It would be crazy to go somewhere like that and order fast food.
    Last edited by masonic; 14-01-2019 at 6:50 PM.
    • dmelife
    • By dmelife 14th Jan 19, 7:02 PM
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    dmelife
    Op, is there a price comparison site for IFAs? No.
    Is there a price comparison site for Solicitors? No.
    Is there a price comparison site for your profession? I doubt it.
    • dmelife
    • By dmelife 14th Jan 19, 7:05 PM
    • 68 Posts
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    dmelife
    Oh, and to use your restaurant analogy, a pizza is a pizza, thus price pretty much same ballpark wherever you go. Financial planning not a pizza. Lots of variables.
    Plus, you are likely to get a pretty tasty starter for FREE from most IFAs.
    • short butt sweet
    • By short butt sweet 14th Jan 19, 7:39 PM
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    short butt sweet
    what you could do is go to an IFA for an initial free chat, find out how much they propose to charge, say you'll go away to think about it, and then post about it on here so people can say whether the charges look fair or greedy.

    the point of the initial chat is also to see whether you get on with the IFA.

    though i'm not sure what the restaurant equivalent is for this approach
    • newatc
    • By newatc 14th Jan 19, 8:35 PM
    • 340 Posts
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    newatc
    I agree with Brainstorm that finding a good IFA, unless you have a personal recommendation, seems a daunting prospect. Do IFA's provide a choice of a references that can be contacted as standard or request?
    • dunstonh
    • By dunstonh 14th Jan 19, 9:04 PM
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    dunstonh
    It should be remembered that IFAs, despite handling millions of transactions a year, only accounted for 1678 complaints at the FOS in 17/18. Quality is not really an issue. IFAs are not seen as a problem area.

    The areas to look at are:
    1 - cost. There are a lot of differences.
    2 - Are they really IFAs. A lot of FAs try to make out there are independent by using similar words but not the protected words.
    3 - A small number of IFAs run a rigid model that only uses one platform and they put everything with the same DFM. Many of these are now ex IFAs but some are holding on to their IFA label as long as they can. A true IFA will be placing products/investments in various places. So, question on who they use as providers/products. A proper IFA would likely be vague on that response as they wont commit until research. They may have an idea but that is all. If they come out saying which platform and what investments or DFM they are using then they are not likely to be real IFAs.

    Avoid factory line advice services. These have a poor reputation and time and again the FCA seem to find issue with them (most recently on DB pension transfers).

    Apart from that, its best not to overthink it because generally, the vast majority will do a perfectly good job. Cost and personality are the key things and only meeting them will tell you that.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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