Who has consulted an Independent Financial Adviser (IFA)?

Started using an independent FA when I retired - 7 years ago- really to get to grips with my pensions and what to do for the best going forward. I did lots of research on the multiple review sites and found a medium sized company who have been in business for donkeys years. They are local and our chap is chartered. Very calm office environment driven by giving good advice and not fees - which are 1% of managed fund value. R-

2 Likes

Oh, thanks so much @Rogerb - so great to hear from someone who has experienced the advice

Do I take it that the trust you had in them was therefore originally in the firm rather than the person - where they’ve been in business for ages so … presumably, can be trusted?

Without revealing any private details, was there any sort of advice that really made the difference or was particularly helpful that they were able to offer? Or is it just that they put in the hard work of research so you don’t have to?

Yes, basically just that. Start with a visit to the business premises and make a judgement about how that feels [sweatshop!] and have a couple of meetings with whoever is going to provide the advice. There should never be any pressure to hurry decisions [been there, done that, got burnt, got compensated]. Where to invest I had to leave to the FA, smoke and mirrors to me, but the logic made sense. Gone a little southward just at present, but it’s a long game. R-

2 Likes

Cheers @Rogerb. I was just thinking, even though I’m at the beginning of my financial journey and I already feel there is a stigma with using IFAs. In other words, I’m a little scared to go to one even though I’m more than certain they know more about finance than I do.

Did you feel this way before going to one?

1 Like

Absolutely - mainly because of my earlier poor decisions. It is well worth spending time scoping out the marketplace, you are considering making life changing [hopefully positive] choices. R-

Definitely feels like a subject that shouldn’t be rushed. Where would you advise a newbie like me to start looking? Is it something your bank provides?

Just to be clear, I am not connected to Dozens - or any other financial institution. R-

I jsut feel that now with so many online providers such as PensionBee, Nutmeg, Bricklane, you can be in control of that.
To me, the IFA would be helpful in a sense on how to diversify wisely.

I had a brief chat with an IFA (I beleive) through my company, and he was very worried about all those online platforms etc, and told me to back away from that which I didn;t like and thought to be old-school.
Hence me worried now to have a proper IFA who is looking towards the future, not the past…

3 Likes

I didn’t look at the online providers mainly because you need to have some clue about which investments to make. There is also that worry about not following the markets, financial news, blogs, forums, Auntie Mabel’s tea leaf readings and all the other avenues of data closely enough to enable you to sell and buy at the optimum moment. That is where the advisor comes in and, for the money, for me it has proved the best way. R-

1 Like

I used https://adviserbook.co.uk. Be sure to tick “confirmed independent”. And only go for someone who charges fixed fees for their time, not % of your portfolio.

I used one having found someone who was truly independent, upfront and honest in our first meeting, and only charged fixed fees.

The % fees that most financial advisers charge are likely to significantly or even completely wipe out any investment gains. My IFA and I both recognised this as inherently reprehensible.

My IFA wasn’t in the business of selling me anything, just giving good advice. I already knew pretty much what I wanted to do, and all he really ended up doing was confirming most of my plan and suggesting some specifics and making sure I thought about certain scenarios.

I sought this “double-check” advice because I was going to invest a very large sum of money. Most people are not in that position, and using an IFA for less than a few hundred thousands pounds just wouldn’t be worth the time or money, even if they were charging a reasonable fee.

Those financial advisors that would take on a client investing small quantities are simply unscrupulous, because they would know full-well that their fees would put their client in the negative, yet they take the money anyway.

Don’t see how. A % by definition is less than “everything in the fund” providing you don’t agree to a figure equal to or greater than 100. R-

Wipe out the gains, not the principle. If the investments only gain 1% in the year (quite possible, especially for a conservative investment, or during a bad year), and your IFA charges 1%, you portfolio increases in value by 0% that year.

2 Likes

Right, gotcha! My chap gets 1% of whatever is there when payment is due. So the greater the fund the better his payment. R-

Right, so the idea there is they supposedly have an incentive to find well-performing funds to increase the amount they’ll earn, which is also in your interest. Win-win, right?

That’s what will happen with someone trust-worthy, honest and actually capable. Hopefully your chap is one such person.

But equally you could have someone that just sits back and does nothing of value, and just rakes in the money. For example:

  • Client invests £1mil
  • Good IFA John picks good investments that increase the value by 4% after a year, to £1,040,000. He then charges his 1% fee, making £10,400.
  • Or bad IFA Sam picks an investment he didn’t bother researching. It only increases value by 1% after a year, to £1,010,000. He then charges his 1% fee, making £10,100. (Notice client now has less than he started with, but Sam just doesn’t need to care.)

John’s reward for his excellent performance and hundreds of hours of hard work is an extra £300 compared to Sam, who basically did nothing and laughed his was to the bank.

Basically, for an IFA on a % fee, they don’t actually have much incentive to do well. If they really want to make extra money, it’s far more lucrative to become unscrupulous and take an additional % cut/fee/kickback for investing in certain products. That way they can get 1% from the client, and 1% from the fund, and make an extra £10,000 instead of a meagre £300.

Yes, can see that and hopefully I do have a good chap. Can you do the same scenario with a fixed fee IFA? R-

Sure, with a fixed fee it looks like:

  • Good IFA Carl picks good investments that increase the value by 4% after a year, to £1,040,000. He then charges his £3,000 flat fee.

Here’s what the client ends up with after 1 year:

  • Good IFA John who charges 1%: £1,029,600
  • Bad IFA Sam who charges 1%: £999,900
  • Good IFA Carl who charges a fixed rate: £1,037,000

Obviously, clients are better off with Carl. It’s a lot easier to trust Carl because we know he isn’t driven by greed. He’s just charging enough to make his living, in line with the value of his advice. (You can be especially sure of this if you pick funds based on his advice and buy them yourself - then you know with certainty there’s no kickback situation.)

Carl’s incentive to do well is that if he gives you bad advice that doesn’t meet your financial goals, you simply won’t go back to him for advice next year. You’re free to leave him, because as a good IFA he hasn’t done anything to “trap” you in to his service.

You can bet that Sam, on the other hand, will do everything in his power to make it as difficult as possible to leave him, and to convince you there’s nothing wrong and you’re doing well. He just wants his 1%. Sam’s main skill will be making clients happy that their investments gained 1% this year, while hiding the fact the client is actually poorer. Sam’s clients consider “feelings”, and don’t really look at the reality of the numbers.

2 Likes

I consulted one as I’m self employed and manage my own pension.

I simply wanted a pension review, and advice on which funds to invest in. I got this and the selected funds have outperformed my previous funds, so the advice had more than paid for itself.

However the actual process was much as I’d feared - much more interested in selling me into a scheme that would get them commission, couldn’t answer specific questions about products they weren’t pushing (p2p lending for example).

Also used two for mortgages (one was not good, the other excellent and also used her for life insurance).

So I guess my experiences bear out other people’s concerns - how do you find a good one? If you do they’re probably expensive, upfront costs are rarely clear etc etc…

1 Like

I don’t feel I need general ongoing investment advice. I’m perfectly happy to do that myself. Where I feel an IFA could potentially help me is for ad-hoc large financial events - mortgage, inheritance, whether to transfer pensions when moving jobs, etc.

I don’t know if I can get an IFA for ad-hoc needs or if I need to employ one on an ongoing basis via some kind of retainer fee in order to access ad-hoc advice. This has been an obstacle for me.

1 Like

When you’re unsure of where to go, do you often resort to the internet or chat to friends? I used to call my parents but I now realise that their financial journey was so different to mine that it actually isn’t the best resource for me.

1 Like