The Snug Rhino

i see your point.....but FA is about more than the ultimate fund performance. When the market dropped i did a lot of work where people still lost money due to the market performance and my best efforts......yet without those efforts their losses (in fund growth and taxation) would have been many times greater....should i not get paid.

EddScott

We have had one instance where a client has quite a substantial share portfolio which was supposed to be actively managed by one of the high street banks. The bank did a particularly poor job either by poor management or neglect. The fund whittled away until such a time that the bank contacted the client and basically said - your fund is no longer over £££££ and therefore it is not in our financial interest to look after it, either give us more money or take your fund somewhere else - I kid you not!!! Tell me how high an IFA would have been strung if they came out with a line like that???

Snug Rhino is right that performance related fees blurs the distinction between fund manager and IFA - if it were solely performance related, the IFA technically would have more control if they invested directly into company shares rather than into investment funds - this way there would be no third party (the fund manager) who could potentially affect the performance of the IFAs advice.

The compromise (I believe) is this idea of tiered advice - the more actively managed the clients want their funds the more they pay - simple. If its a one off ISA then the choice would be reasonably low risk funds that could be checked once a year and advised accordingly or on the clients request. This could be tiered upto quarterly contact with the client with a short report on their portfolio performance and any investment recommendations provided at that time.

The days of stuffing people into silly monthly premiums in order to bag the high commission is over. Good IFAs are moving away from doing nothing but product flogging to proper advice regarding wealth management and financial planning.

I'm sure there are still the odd practice that leave alot to be desired but thats no different to accountants and solicitors - you get good ones and bad ones - the difference is because the way IFAs are traditionally paid, people have preconceived (sp) ideas of them.

Those that have had bad experiences may not realise that good IFAs actually get a buzz out of making clients money and reducing thier tax bill. Easier to sleep IMO knowing you've done the best for the client rather than knowing you've stiffed the client for the commission.

Reality

That's why your performance should be relative to the Market. My example of performance against the FTSE was just an example - I'm sure there must be something for each individual client that could be used as a benchmark.

If your advice leads to someone purchasing an investment that leads to poorer than "average" performance I would say that you certainly shouldn't be paid as much had your advice lead to the investor making millions.

Having your payments related to the quality of your advice can't be a bad thing in terms of improving your relationship with your potential and existing clients.

Besides - it's you that said you wanted to change things - not me .

Spoon

Interesting announcement that.

A difficult image to shake off indeed.

Should be the case in any profession, but as above, with the image still largely portrayed, it going to take some work convincing a lot of people.

Good luck in the endeavour, it's long overdue.

EddScott

This is what we want to be paid on - the quality of advice. Being paid on fund performance is why fund managers get bonuses of £1m+. If you want your IFA to be your fund manager then thats suits us assuming we get the same kind of bonuses.

In fact, that would be where your compromise could work. The client and adviser set out a minimum payment structure. You have to have some minimum payment or it just won't work.

If the advice from the IFA exceeds an agreed percentage, then a bonus is paid to the IFA. The problem there is how the client pays the IFA - either through renewal commission or through invoiced fees (which in turn raises all the issues with bad debts etc)

Going back to my previous post though, are solicitors paid on their performance? They still charge say £50 just to write a letter FFS, they act on your behalf and you pay them a figure. Assuming that they are acting for you in something like a divorce or in relation to a motoring offence - if you come off worse in the divorce or they fail to stop you losing your license, you can't turn round and say I'm not paying you, you didn't get me off.....

Accountants can also make mistakes and yet their invoices arrive as and when they are due. Our accountant handles our wages and a number of times some staff have been paid each others wages by mistake. We can't turn round and say we are only going to pay you half because you cocked it up again.

The IFA is paid for the advice, not the fund performance. The payment of performance might be used as a bonus if the IFA achieves a growth percentage agreed at the outset - much like a fund manager.

The Snug Rhino

i suppose one problem here is that the perception of yearly fees (trail/fee/etc) is that it is related 100% to going after fund performance.

in reality there are lots of other tasks surrounding an invested sum that need to be explored/reviewed/advised upon that have nothing to do with % growth/income and they still need paying for each year.

Rhino

Jonathan Davies

Not sure! I'd like to think that by demonstrating more clearly the cost of advice, its value would become clearer too. So where there's a benefit to the punter, they'll pay, and where it's not cost effective they won't. If all advisers charged fee-only, we could soon see where the value was. The difficulty for advisers (I think) is that commission costs have traditionally not been made terribly clear to clients, leading to confusion and mistrust.

I agree there's a problem of consumers of financial products not taking responsibilty, or understanding or even reading the stuff they get. And the FSA/Govt doesn't help by trying to cobble together half-arsed decision tree compromises. It's part of the paternalistic govt culture we have... people feel (and are encouraged to feel) they should be looked after in old age whether or not they've given it any thought in their working lives. Politically difficult to do otherwise I suppose.

Pensions are a fair example. In the days of final salary pensions, people got a bit of advice about it at work and then signed up. Investment was nothing to do with them. No, responsibility is effectively back with the punter, but even there it's possible to offer some fairly simple choices that most could cope with. HNWIs are a different matter, but they're the sort of people who pay for advice anyway.

As far as the topic goes, I'd welcome more transparent charging.

Reality

Don't get me started on those lazy overpaid ***** .

Solicitors are worse than Estate Agents !

Have you ever tried to Sue a Solicitor - Don't bother !

They make IFAs seem like the Financial Industries equivalent of a MacMillan Nurse

The Snug Rhino

Johnathon,

Your right...people dont realise. On of the earlier posts on this thread said "trust" was important.......yet people trust the advisers that invest their £100k getting 7% in the process. This is a commbo of trust/lack of clarity.

If i showed a client who already has a FA they "trust" the difference between a lump invested with a big payout to the FA and one with a smaller one but a fee paid they would be amazed.....its getting that message out to a public that are very much on the defensive.

HNWI are not that much different, i know plenty of people that have invested £1m + with no interest in the amount i got paid. While i am happy they got a good deal (and what i get is always explained no matter how uninterested they are).....their trust was not something that was a good basis for their indifference. They should trust me because i am trust worthy.....but i am also well trained to make people feel that and it is only their good luck that i am as trust worthy as i suggest.

The Snug Rhino

PM me your initals and town/city.....thats going on our "what are clients say about us" brochure

Reality

Has a certain ring to it .

ps - you'll have to work out where the apostrophe goes - I couldn't so left it out all together .

Jonathan Davies

I sympathise to be honest. Like lawyers, IFAs get it in the neck when clients don't get the results they want. But you pay for advice, not results. Legal outcomes, like financial, are not predictable.

For IFAs, being transparent about fees seems to be a competitive disadvantage, regardless of the end result for clients. I do think there's a market there for fee-based services, and I'm in favour of more transparency - might help people understand that commission payments are not free, and might not be the best way to pay for fin servs and products.

The Snug Rhino

you know what....you are prob right.

i have just had a meeting with a chap that wanted a Will but no IFA advice. during our chat we discussed his investments he's leaving to various people and i noticed he had a bond in trust (came up as he wanted to leave it to XYZ not realising it was already in trust).

i chatted with him about the plan and it seemed reasonable enough but i did mention that the adviser had taken 7% from the provider (about £21k) nothing wrong with that i said but mentioned our plan for the future...£500pa retainer, 1% charge plus trail and the rest re-invested into his plan.

he said "doesnt sound very appealing if i have to pay you £500" I said, "fair enough, in which case we could take an extra .2% from the plan on day one to cover the years fee...he said "yes...but your still getting £500 of me arent you".....lol, meanwhile his current FA made £21k.

i remember very clearly the first time i did a £1m investment.....my commission was £50k and the chap fully understood that and was fine with it - which was handy then but now i want people to sniff the coffee it seems it has to be force feed to them.

ScoobLou

iTrader: (21)

didn't pay any vet bills

What a dick you are

Tiggs

wow...thats really good news....i'll list that info under "i dont care" it will be just under the exciting news about your wimpy mongrel's fear of vets

Chip Sengravy

Quick question on the subject of IFA's...morgagesand the arrangement of, do they get a fixed amout, or do different lenders give different commissions for the IFA selling their wares?

The Snug Rhino

right,

sensible hat back on and in Rhino mode.


anymore FA opinions? or has the subject bored everyone to death....need to give it a political slant to get more interest in here or add speed cameras to the title thread

The Snug Rhino

different lenders pay different amounts and then some FA's will add a fee on top.

ScoobLou

iTrader: (21)

lol whatever, I really don't give a **** what you think

ScoobLou

iTrader: (21)

You sensible, whatever I think its you that has bored everyone

The Snug Rhino

then get of my thread and check your manky mutt for lumps.....sounds like you dont treat it to well if its always poorly?

ScoobLou

iTrader: (21)

You didn't get off my thread when I asked so I won't be doing the same for you!

Bring it on Snug Rhino or should I say Tiggs

If this is the best you can do, I am very disappointed

Chip Sengravy

cheers, is there a considerable difference?..it might explain why my FA fcuked me about for so long

The Snug Rhino

thats cool, hang around if you like. tales of your dog are most amusing, you sure when the vet said theres an ugly lump attached to your dog that needs dealing with he wasnt looking at you?



chip,

proc fees... can be a big difference, but it doesnt explain why you got mucked about. he should be able to stich you up as quickly as sort you out properly!

have you asked what the delay was?

ScoobLou

iTrader: (21)

My god I thought my niece was childish but she is actually very grown up compared to you.

So what next?

Chip Sengravy

Smug..

Its a long story, but I had an agreement in principle on a IO mortgage, which was about the best 2 year fixed deal that came up at the time. I had to self cert for this, but when it came to filling out the forms he did the self cert and the normal multipliers..which says was a faux pas on his part, and the lenders computer said no...

but then he came with another morgage for the same amount but this time the first year was another 100 a month, and the 2nd was another 150, to which i suggested he look elsewhere. He looked elsewhere, and so did I, and while he was farting about I set a mortgage up elsewhere, and am now sorted, at the rate I was getting in the first place.

I just get the impression that the first morgage wasn't really kicked back, he just said it was to cream some more commission out of me as he knew I needed a mortgage pronto to buy the EX she-devil out. Perhaps he found a better deal for himself while my first ,morgage was being processed and pulled the plug on it?

The Snug Rhino

wow...possible but highly unlikley unless he was a real crook. in the scheme of things its more probable he was a muppet....if you are really interested pursue it with the first lender and find out what went wrong as far as they were concerned. if they tell you the deal was stopped by the FA then get on the blower to the FSA!

was he a mortgage brooker or a financial adviser?

The Snug Rhino

sorry? are you trying to converse with me? this is a thread about finance, not your manky dog or problems you have with your family members.

NorthDave

Sounds great to me. I dont trust the advice of IFAs at the moment because its not clear if they have pushed me one way or the other because of kick backs. If I got the commision and then paid you I would have more faith. I could also do my own research to ensure our approach was the same.

It would simply come down to how much I was prepared to spend every year versus how much you expected for your services. The assumption being that the more I spend every year the more proactive my IFA is.

Excellent - do any companies operate like this now?

Luan Pra bang

Is that 5 % ?

Was he a moron ?

from tiggs