Financial advice: can you trust your adviser?

malcol-r.
Seems to me a portfolio management situation . Fortunately there are good firms. Churning of the portfolio is always a concern if you have a shady firm.

Financial planning in terms of my brother and sister-in-law was sorting out the various pensions they both had plus an unneeded £100,000 plus. This did not proceed well an the charge AFAIR was meant to be a fee of £2300.

I watched their trading and they don’t churn. Over the years I have become more and more confident in their integrity. It is portfolio development and management at their discretion. We have had a few face-to-face discussions – including 3 home visits at no cost – on our requirements and attitude to risk, including appraisals of our overall financial position which helps determine their (recommended) strategy.

Financial planning, particularly for retirees, is crucial. Most will not have the knowledge or expertise to do it properly, or maybe at all. The fees paid for a competent professional service are likely to be more than repaid in better performance than you might achieve on your own.

I am not sure that asking just a few basic questions of IFA businesses is enough to sort out the good from the bad. Asking people who have used IFAs for a number of years for the overall growth in their portfolio, the income it generates, churning, how pensions were handled might, for example, yield more useful results. Fees are important but performance is more so.

Could not agree more. I actually censored my post somewhat as I veered into discussing the current unique situation for those retiring. Suffice to say there is no easy answer -at all.

I am concerned that the Govt. has made buy to let seem attractive by its allowing 25% withdrawals. This does raise the spectre of two [or more] illiquid assets and buying in a boom in house prices. I could go further but I actually have ethical qualms about reducing the available for purchase housing stock for the next generation. The next Government may also think so.

The trouble is that this is a very deep and complex subject and not really a Converstion -al friendly topic.

On the simpler question of IFA discipline and punishment more can be said if Which? provides the information.

We know a few people who have piled into ‘buy-to-let’ and are now starting to worry very seriously about the government’s increasing pressure on this sector which is reducing overall returns, and about the CGT and IHT implications of their investments such that they now need to plan a staged exit from the business over several years. As if that were not enough they realise that outside major cities there is market saturation and rentals are not advancing as anticipated. Those with mortgages are dreading even a half a percent rise in interest rates as they might not be able to pass it on. I should be surprised if an IFA would now recommend this area except in very particular circumstances.

A friend who I have known since university days has been running a successful buy to let business for around 20 years. When approaching retirement he started to dispose of some of his property because of the tax implications. On the other hand, the estate agents were very busy with people wanting to buy up property in advance of the introduction of additional SDLT on additional homes.

Yes there has certainly been a flurry of buy-to-let acquisitions in order to beat the deadline [which has now passed, so any buyer who did not exchange contracts by around mid-March might have come a cropper if the transaction was unexpectedly protracted]. Renting out properties is still seen as a very lucrative business because of the leverage whereby – so long as the income covers all the outgoings from the outset [and possibly provides a surplus as profit] – any and all capital appreciation on the entire initial purchase price is a bonus . . . until CGT, and ultimately IHT, intervenes. The new SDLT surcharge has raised the costs of purchase and thus reduced the potential gain which might be a favourable consideration in some cases but taken all together the Chancellor’s new rules have dampened the buy-to-let market and made being a landlord more problematic and much more difficult to do without using an agent [which impacts on income].

I have to say I am not a fan of a buy-to-let economy. I prefer to see people in a position where they can buy their home and not purchase it for a landlord. It seems that many properties that could be affordable to new buyers are taken for investment purposes. No doubt they are good investments but not for those in need of a home.

It would be great if everyone was able to own their own home but that’s unlikely to happen and home ownership is less common in many countries than in the UK. Thankfully mortgage providers seem very good at warning that your home is at risk if you do not keep up payments.

Some income redistribution could enable more people to own their own homes but would that prove popular with those who have decent incomes or have inherited sufficient money to get on the housing ladder?

Beryl, I’m not sure this is now generally the case – certainly not in my experience. Maybe others can elaborate.

I believe you can, in some cases, be offered the option of a fee or paying by commission, and some people dislike the idea of paying for professional advice and see commission wrapped up in the product cost. i buy car insurance through a broker and they disclose their fee – small – as part of the cost breakdown. But the point is appropriate, and most advice would be to avoid commission payments as the advice may well not be the best.

I view independent financial advisors in the same way as the costs of paying an insurance company for an extended warranty, accidental damage insurance, water supply pipe cover and a hundred and one other things we can spend our money on. Although some benefit, most of the time they are poor value for money. I might have been best to pay someone when the health of my elderly father and then my mother took priority. Throughout my life I have tried to be as independent as possible, so looking after my own finances is just another job.

If you know little or nothing about investments, SIPPs, inheritance tax planning, for example, as many don’t then you can either gamble yourself or pay someone who knows better to do it for you. Like paying someone to survey your new home, fix your car, prepare your will, give legal advice if you are losing your job………… Even if you know something it is highly likely a professional, who keeps tabs with other experts on the market, tax laws, legislation will do a better job than you can. But you’ll never know because you won’t be running a direct comparison.

I think it bad advice to suggest IFAs are poor value. Like everything, some will be, many will not. Use your contacts, common sense, friends, and see if you can’t find someone suitable. I hope Which? will take a positive view of their benefits and perhaps see if they can’t guide us to be able to select good ones.

Incidentally, “you” is not personal but used in the general sense. 🙂

It will only be worthwhile to employ an IFA if the benefits exceed the costs.

Well, like all professional services I suppose this might be seen as self evident. But, of course, you are unlikely to ever know unless you run identical financial scenarios, one on your own and one with financial advice. It is also of course a long term issue – will you be better off in 10, 20, 30 years and will your SIPP perform? And it is about risk – what should you invest in, what proportion in what type of investment, when should you sell and when should you buy?

I don’t think such important choices that depend upon real and broad knowledge can be reliably done by amateurs. Why risk your financial future for the sake of paying someone a relatively small amount who knows a lot more than you might? Not a gamble I find worth taking. But for the person who is prepared to put time and effort, and has the insight, into researching they might well save money – but it also depends upon how much you value your own time.

The key is to find the right professional.

I was just trying to add some balance, Malcolm. A lot depends on your personal circumstances and whether you gamble on high risk investments or take safer options.

Planning for your future is on the face of it a simple matter, I have x lump sum and y income and I wish to keep an acceptable standard of living over the next ten, twenty, thirty years.

And for those still employed they need additionally to factor in how much they need to put away to have a decent enough pot.

So simples is the initial problem.

However the range of choices for almost every aspect you could consider is large and that is where all the complexity lies. Those who have nothing but a stae pension probably have no choices than can make. Anyone else is probably floundering on how to preserve a cash sum to stretch it as far as possible in an uncertain world whilst guessing how inflation might erode the purchasing power of their pension.

Nobody can be certain but what financial planners will have is greater knowledge of financial matters and life expectancies than the average person. Incidentally if you are reading this then the odds are you are above average : ).

I was going to write some platitudes of the stocjmarket, unit trusts and risk etc. However on reflection and given the time one could live I am going to suggest that people look seriously at minimising out-goings. We have a Dutch company claiming for £35,000 it can make a current house incredibly cheap to run through using current technologies. I believe this to be true.

So my suggestion is given that £35,000 earns little that retirees look seriously at this, and of course if yuo provide electricity to the Grid even earn money – though this is not a necessary part of the project. Ideally retirees in an area should band together to give them a practical interest and to maximise the shared costs and learning.

In Europe several consumer associations [which is what Which? is} are working together to monitor and arrange mass home improvements in using solar energy and assisting those thousands of members who sign up by choosing the contractors , monitoring installations, and after-care.

Why Which? is not involved I have no idea perhaps we should ask the Trustees of the Consumers’ Association who can then ask the businesspeople running Which? Ltd. on behalf of the charity.

Excellent points, DT. One can only hope W? takes this up.

“Making Net Zero Energy refurbishments a market reality
Energiesprong brokered a deal between housing associations and builders to refurbish 111,000 houses to Net Zero Energy (E=0) levels in the Netherlands. E=0 means, annually a house does not consume more energy for heating, hot water, lights and appliances than it produces. The refurbishments are financed of the energy cost savings; a refurbishment is executed within 10 days and comes with a 30-year energy performance warranty from the builder.
The approach is based on organizing massive demand for a Net Zero Energy (E=0) refurbishment proposition, making financers and governments tune their financing offerings and regulations towards this product and challenging the construction sector to start an ambitious innovation process to deliver the proposition. The massive demand, the security that there will be financing and an enabling regulatory environment de-risks the innovation investment –based on developing an industrialized product- for the builders. Currently, Energiesprong is progressing into bringing these solutions to the private homeowner sector through a recent deal with 175 parties (including local and national governments, banks, real estate surveyors and builders) to align the market conditions for this housing segment.”

Bob. It is exactly this sort of advice, or should I say withholding the full facts, that alarm bells should not be ignored when contemplating the services of an IFA.

All advisers can still accept commission from providers for life, critical illness and income protection insurance policies, and mortgage broking. Here, advisers take a cut every month that the product is held. This may seem free to you, but your money still pays them, just over a longer period instead of upfront – and it often adds up to a much higher cost.

Since 31st December 2012 IFAs have been banned from accepting commission from providers on products, such as investments and pensions when they must charge a fee they agree with you. See more @ moneysavingexpert.com – How Much Does Financial Advice Cost?

“Rich returns” are not the claim of real IFA’s are they? In my experience an IFA shows how to deal with your finances efficiently. I can only speak of my experience. As some of the scam conversations show, some people lose all reason when their greed is being tempted. The usual advice is if it sounds too good to be true, it probably is.

Thanks Beryl. Coincidentally, I had been looking at this website just before I posted. When I have looked into care for family and friends I have looked only at the quality of care. As you say, there are many issues to consider regarding funding it.

I thought I would show how industrialised techniques can work to give you zero emissions and consequently reduce fuel costs. This 3 minute video shows a house being converted in a day. One day is pretty darn impressive
youtube.com/watch?v=I3WBT2eAArI

John Ward is correct that life can change your plans and at some stage you will leave your house* however I am prepared to bet a zero emissions house will be worth more in the open market compared to a house with substantial costs for heating occupants and water.

As a note of caution the video is showing an industrialised process optimised I suspect for housing associations or where houses are very similar. Individual’s houses or individual houses may be more expensive but the underlying message is powerful.

Certainly in vast areas of the UK we DO have houses , terraces and estates where the houses ARE alike. Not all necessarily will have roofs optimised for solar power. Given 80% of all UK houses that will exist in 2050 are already built retro-upgrading must be seen as important.

* Pneumatic lifts for the home are a viable alternative to stair-lifts and more flexible as to positioning. This may allow people the option to stay on in their current property.

I think it was the current government that rejected the excellent idea of enforcing a change in building regs that would require all new-build housing to be fitted with solar panels.

Thanks for the link DT, very interesting.

Having seen solar panels perched on top of roofs that don’t look fit for purpose, a complete insulated solar roof has to be the future.

It could save the need for another power station.

We are now off-topic, but minimising outgoings is obviously very relevant to good money management. I wonder how many IFAs would consider suggesting ways of minimising the cost of living.

It’s high time that all new buildings, not just residential ones, were constructed to use solar power unless there is a convincing case for doing otherwise. The appearance of add-on solar panels is not good but if they are built into new homes and oriented to make best use of the sun, it is worth doing. The appearance of the modified home in the video provided by DT is not exactly attractive but the solar panels don’t stick out like a sore thumb.

As DT says, there is the problem of existing housing stock that is not energy efficient, but there is a lot that can be achieved. In some cases expenditure of money on improved energy efficiency could produce more certainty of long-term gain than some financial investments.

Perhaps Woody had an axe to grind? “Even Woody Allan was in a New York court alleging that his long time financial advisers had bilked him out of $14m.”

Grouch Marx said something like “Please accept my resignation. I don’t want to belong to any club that will accept people like me as a member”.

I don’t think “celebrities” have any particular qualification to advise us. I wouldn’t ban IFAs or clubs. But some do seem to revere all their pronouncements, whether in print or on Question Time. How come some think they know better?

2009 “A group of wealthy pensioners have been accused of kidnapping and torturing a financial adviser in Germany after he lost £2 million of their savings in the financial crisis.” Maybe direct action is the answer when you are unhappy about your treatment. (But who says the pensioners were in the right? Maybe they were suffering from greed).

It’s a difficult world , isn’t it?

youtube.com/watch?v=IYIa_JlcR3o

This particular video is a presentation in English of the concept and how they arranged to refurb to zero emissions 111,000 houses in the Netherlands. That was in 2014. Somewhat ahead of the UK then and the presenter makes very telling points why our approach is flawed.

The talk also intimates that it need not be mass housing as the current low level of interest rates can make this self-financing. To be honest I would be astonished if any IFPlanner had a grasp on the possibilities of investing to lower outgoings in future expenditure.

In 2015 they expanded the concept into France, Italy, and the UK. In 2016 Feb it seems they have reached an agreement in the U though I have no details accessible.

My despair is that Which? has been banging on about switching and controlling the energy companies without a glimmer of what can be done by people, or housing associations to make it all a moot point. Fighting yesterdays battles or simply garnering lots of email addresses in support of rants against the current energy market seems pretty poor to me if it means ignoring
practical solutions.

We may disagree on this malcolm-_r.

Where Which? should be focussing itself has been a concern of mine for some years and I believe its primary role should be testing and informing its subscribers. I fear that getting itself involved in extra activities means it is prevented from judiciously reviewing them as it is a competitor.

Of course I have looked at the consumer associations in several countries do see what they do better and worse than Which?. Fundamentally I think Which? has over the last decade become more lightweight in the quality of testing. It also seems to lack teeth compared its continental rivals seemingly content with highly publicised campaigns and talking to quangos or the governement – witness the nuisance calls result where Which? chaired a committee.

We also have a problem , witness two excutives pay of over £800,000 and a directorial Board made up of business people. Whilst the complaints of the remaining 6900 shareholders has had an effect this rapidly diminishing band would appreciate more subscribers getting involved and offering to pay up to 50p to be a shareholder.

Which? has enshrined powers to bring cases and I think the business world appreciates this more than the members of Which? who I suspect remain blissfully ignorant. A charity that has lost its mojo.

dieseltaylor, we don’t disagree. I was tongue in cheek with Which? financial advisers. 🙁 I do not agree with Which? putting resources into will writing, mortgages, and other such “commercial” enterprises, no more than they should set up a financial advice service. They should be robustly investigating and rating these services, weeding out the good from the bad, helping us make a good choice (as the tv adverts say) but not getting directly involved simply to try to make a bit of money. I regard Which? as a members’ organisation primarily for the benefit of those who subscribe. This will have, of course, benefits for the population as a whole. They should concentrate on that, and testing products properly.

If Which? want commercial operations I think these should be quite independent of the charity (presumably this is the members’ bit), not share staff (and dilute attention), not use charity funds, and not trade on the Which? name. Establish their own reputation.

@ldeitz, thanks for the response. I seem to view Which? differently perhaps from you, and maybe others (or I may have misunderstood your explanation)

You say “Instead, all of our revenue is generated from our commercial business. “. I joined Which? as a Member, (now an ordinary member) paying a subscription to help Which? pay for testing, investigating and providing me with reports through its magazines. There was nothing commercial about this – no magazines on bookstalls, no separate businesses, no paid-for endorsements like Which Best Buy logos. I regarded this as a kind of donation, fundraising rather than a commercial magazine payment.

Now being a Member seems pointless – apart from the magazines. You regard all this as “commercial” while some (maybe many) people feel Which? has lost its way. It seems not to want to take on issues with business (Whirlpool, VW, Sony, Amazon for example). it produces data from “surveys” that have a dubious basis, and it campaigns on some issues in ways that are not impartial, fair or balanced.

This discussion would be better either on the fairly obscure Which Member Community or perhaps under a Convo about Which? So I’m sorry to raise it here but I felt a need to respond to your comment.

And its cool and raining so I can’t get in the garden to finish off the good work. Sorry Lauren 🙂

The commercial business of WHich? is selling subscriptions. It is specifically mentioned in the Articles and with a phrase about not trading for profit. That is the charity is a subscription organisation.

Carbusters was a brave move and I think we can safely conclude was successful AND did not make a profit. However I am intrigued about how the totally commercial magazine publishing venture in India was ever justified or indeed justifiable. That it lost £14.94m in total and yet no one was to blame in Which? Ltd is a mystery to me. What we did have was this year 2015-16 four of the executives shared a £2.24m bonus.

I think fundamentally the Consumers’ Association [100% owners of Which?] has had its elected Trustees diminished and sidelined whilst appointed businessmen and senior execs run the Which? Ltd arm. And not very wisely apparently given the accumulated losses for Which? Financial Services are also in the millions.

Perhaps I am misjudging them but when it started 40% of the Which Board were Trustees. Perhaps there is a concrete vision but it is not being shared and discussed with subscribers or those who are also shareholders.

I understand where malcolm is coming from.

We need a new electric shower and Which? have just published their reviews.

One website lists 253 showers, okay some of them will be colour variations, but Which? have only reviewed 13. While I appreciate you cannot test every single model, 13 is a pretty poor show. You have reviewed the Mira Sport, but not the Mira Sport Max which is the model I wanted to read about.

Online reviews used to have a write-up giving useful insight into the product but the Product Summary has shrunk somewhat with Which? verdict 4 words, and one-liner pros and cons. (for the Mira Sport)

I started buying the magazine many years ago for the product reviews and assumed my subscription was going to help pay for those reviews. There was no internet and Which? was the only place you could turn to for trusted reviews on products.

But time and time again, the product I want to read about is missing. Which? is either months or even years behind the latest products and cheapness often seems to push things into a best buy category.

So I keep asking myself why I continue to pay a subscription when I get little out of it?

I am not particularly concerned over the governance issues as some are [but I am grateful to them for taking such an interest] as it’s not what I wish to worry about. I took out a subscription to Which? magazine decades ago and really don’t care [or even understand] whether I am a member or a subscriber or any other kind of participator. My reasons for wanting to read Which? magazine are the same today as originally – to get information on new products and services, to read reports on tests, to pick up any warnings or recommendations, to learn about consumer law and regulation, and generally to improve my experience as a consumer. Overall I have welcomed the new opportunities for fulfilling and expanding these aims by the opportunities provided by the internet and realise that magazine subscription income alone will not cover this development [even though numbers remain very high and generate a massive income]. A lot of what Which? does in terms of outreach, education and public protection is entirely unremunerative, and rightly so in my opinion, but to some extent I share the concerns of other correspondents here and wish there could be a less compromising way of attracting revenue and sponsoring meaningful campaigns.

As the internet frontage of Which?, Patrick Steen and Lauren Deitz are unfortunately having to consider and respond to adverse constitutional and governance comments that would be better addressed to other echelons in the organisation and, speaking only for myself, I feel Which? Conversation would be less fractious overall if there was a better place for those sort of contributions to be raised and responded to, but I would not be so bold as to predict that total satisfaction will ensue.

Someone had to say this, so thanks John.

If Which? Convo becomes a forum for sustained criticism of Which? then the organisation is less likely to pay attention to what we post, which would be a shame. I am very happy that Which? has broadened its remit in recent years.

As I am perhaps the most prolific critic here perhaps I ought to provide some background.

Of course there is a Community Forum which the then Trustees voted for given the criticism that they were insulated from members comments by everything coming through the executive. And obviously 100 people may write to the Chairman but never know if there feelings were shared by many.

The launch of the members forum was ” soft-launched” Whether by design or by neglect it has never grown and was not even mentioned at the AGM in the month it was launched. Obviously there are governance matters where the charities Articles have been breached.

As to what Which/ provides I think Conversations has been a major step forward. There are other areas where Which? simply duplicates Citizens Advice. It also generates a large number of videos watched by very few. I recommend people have a look at other consumer organisation sites around the world and see how they manage. I am a great fan of the Australian Shonky awards.

I am fortunate in having spoken to or exchanged emails with probably two hundred shareholders/subscribers and there is a disquiet on the current nature of Which? / CA so I am channeling many common concerns.

To turn to some running but simple problems. Undated guides. Testing products awarding Best Buys and not amending despite subscriber complaints. Surveys were usage is relevant to performance but not asking the question. These are not unimportant matters for a charity funded to report on products.

I have also quite often asked non-members and ex-members why they have never joined or lapsed. That has been interesting and one theme is that Which? is continually self-referential and barely ever mentions other charities or organisations even if they are very or more pertinent to the topic.

The new all-season tyres launched in 2015 have yet to be mentioned and they are a significant safety improvement and relevant to the vast majority of subscribers. TTIP may be deemed political but there is relevance for all UK consumers – surely linking to BUEC directly would be a fair compromise.

On an income of £100m one wonders if Which? could be more active and more joined up than it is. It is the best thing we have and we need to keep it sharp.

dieseltaylor references the Members’ Community forum. It is poorly set out, very little used, yet is the only discussion site where members should be able to interact directly with Which? staff. I have had private comments to make to Which? by email and received replies generally best described as defensive, and rarely answer the questions asked. So the only forum where such matters can then be discussed, where others can join in either to add comment, to disagree or agree, in an open way are the Convos.

It is important that comments are generally reasoned and constructive , but Which? should be just as tolerant and responsive to “criticism” as the organisations it seeks to criticise.

All credit to Patrick, Laura and their team who respond in a tolerant and informative way when they can. But clearly resources – or back up – are a little lacking.

I have elsewhere on more than one occasion felt the need to make critical comment, and suggested that a Convo could be devoted to it for lack of any other outlet. Like Patrick did by launching the “New Conversation”. He’s not afraid of constructive criticism! (seemingly).

It is sometimes out of place in a Convo on a particular topic but unless you want Convos and Which? to be above any form of critical comment then I’d repeat that proposal.

Hi all, thanks again for your comments. You know how much we appreciate your feedback -Lauren and I do our best to get you answers, we create lists of the issues that the community cares about and we work with other teams to move them forward, whether through campaigns, investigations or other. Which? Conversation and the community is incredibly powerful and I hope you know that. We’re working on a lot of the things you talk about, and when I can tell you more about our progress, I will do so.

Anyway, this conversation is about financial advice and I would ask you to avoid the temptation of going off-topic. You are the ambassadors of this community for all consumers, and I would really love it if you could help us in keeping discussions on topic and show just how useful Which? Conversation can be. Otherwise we’re at risk of scaring away new visitors from commenting and joining our great community.

@malcolm-r, I’m investigating how we can give you a place to talk about these kinds of things in a safe place. In this case, I’d really appreciate your patience.

@patrick, thanks. If you think it worthwhile then great. I am, as I hope you appreciate, patient! 🙂 Let me just say that Lauren’s response I suspect sparked off a brief foray into Which?. No criticism of Lauren – far from it – because she made a response to exactly what was being asked, which is I’m sure what we look for in these Convos.

It is becoming increasingly evident of late how a specific important topic of consumer interest is being surreptitiously sidetracked and diverted into a forum to denigrate and disparage which.co.uk.

Whilst I appreciate certain quibbles and whinges need to be aired and declared to relieve oneself of ones feelings and sentiments, it may prove more worthwhile to confine any gripes of a critical nature to an entirely separate conversational forum for this specific purpose.

This particular whinge, I hope is viewed in a more positive light than has been demonstrated recently 🙂

Perhaps it would help if we did more to stick to the subject as Beryl has advocated in the past. Some of us have suggested a ‘chat room’ available to everyone but separate from Convo would help maintain a constructive and more friendly environment that is more welcoming to new contributors.

To say something relevant, it would be interesting to hear from the experiences – good and bad – of more people who have used IFAs.

Malcolm R

You make alot of sense about WHICI’s remit and financial advice.. Could you recommend your IFA please?. I am desperate. Happy to give my permission for WHICH to give you my contact details.

I know this Conversation derives from a Money Which? article. I assume from malcom’s post that there was more to the article in which case I feel as though I have gone off half-c**k if it is already covered in depth.

As to no one reading the small print Bob I suspect a couple of us here would – but we would be roughly 1% of the population. I am impressed you do go to a small pot as explaining the realities to people who think it is a significant amount is always tricky.

I wish you great success.

dieseltaylor, the Which? Money article covered rogue activities, from a few criminal advisers, unregulated and high-risk investments, boiler room scams, dishonesty, It focused on the bad side (no criticism here- people need informing about such stuff) but pointed out the vast majority of financial advisers are “responsible”.

Sound financial advice, particularly later in life, is valuable in my mind, and needs tailoring to an individual’s particular circumstances. I think one suggestion might be for Which? to start a “Trusted Financial Adviser” scheme, like Trusted Traders, and evaluate suitable people that could be recommended.