Pension question: IFA fees?

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Ok, allow me to rephrase, have you sat any of the QCF papers from the CII or CISI? Do you have any idea of their content or difficulty? What about the CPD requirements that all IFAs must satisfy in order to retain their Statement of Professional Standing? Or the fact that IFAs must pass the appropriate FCA checks to be considered 'Fit and Proper'?

It's all too easy to extract a single comment from a Wikipedia article and misconstrue it. Having sat my QCF 4 papers, I can say categorically that the content is far more technical than anything I sat during my first year of University, but also far more relevant to understanding financial instruments and the various scenarios and suitability of them to individual investors.

The suggestion that they are salespeople is really rather here nor there as it is not qualified to what extent. We are all salespeople in some capacity, whether it's selling a product or selling ourselves. In the context that IFAs provide recommendations for products based upon a number of factors specific to the client receiving the recommendation, then yes, they are salespeople. But it isn't sales in the concept that they earn commission for the products they sell or are somehow remunerated on a per sale basis. The cost of mis-selling a product is perilously high now, to the point that the FCA can revoke an IFAs license if they have been found to mis-sell a product and on top of that charge them inordinately high damages (see: Arch Cru and Keydata structured products).

Now, I don't dispute that there are (as with any profession) bad examples. I will hold my tongue on naming and shaming a few who I believe tarnish their reputation to a degree, but the reality is that the stakes of being an IFA have risen so high now that the penalties for behaving in such a way make it madness. Some of the IFAs I work with have been stung with £500,000 bills to pay to the FCA because they recommended products that the FSA themselves signed off as 'suitable for retail investors.' Christ, there are people out there who have had their licenses revoked for recommending other products that the FSA also signed off as being suitable.

I know Orch is an IFA himself and I have been working with IFA practices throughout the UK for years now and it seems that your opinions are based on either a bad experience years ago or just a general lack of understanding of the financial advice industry as a whole.

Well explained, much better than my rambling attempt. :D
 
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yup you would...though it explains why you're seemingly getting a bit butt hurt over this...

To become an IFA simply requires passing some basic exams... if you've gone and taken some advanced wealth management qualifications or something then good for you... most of your contemporaries only require some very basic level 4 qualifications in order to practice

as for not being sales people... get a grip... :rolleyes:



Those wouldn't be IFAs... the key word being 'Independent'

I'm not going to continue arguing with you. It's a waste of time. You just carry on jumping into other peoples threads giving false opinions. I need to get back to flogging some packaged products I know nothing about. ;)
 
Caporegime
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Ok, allow me to rephrase, have you sat any of the QCF papers from the CII or CISI? Do you have any idea of their content or difficulty?

yup.. though it was the SII... 3 exams: financial regs, securities and derivatives

difficulty - low... these were 'level 3' qualifications at the time... equivalent to 'A-Level'... you turn up at a test centre and sit a multiple choice exam - its not rocket science anyone who works in financial services in a regulated role has to pass these sorts of exams...


What about the CPD requirements that all IFAs must satisfy in order to retain their Statement of Professional Standing? Or the fact that IFAs must pass the appropriate FCA checks to be considered 'Fit and Proper'?

tick in the box stuff... "pass the appropriate FCA checks" get over yourself...


Having sat my QCF 4 papers, I can say categorically that the content is far more technical than anything I sat during my first year of University, but also far more relevant to understanding financial instruments and the various scenarios and suitability of them to individual investors.

I guess it depends on your degree... I've not seen much that would upset most science graduates... even CFA exams just cover basic undergrad maths/stats... a lot more rote learning but nothing particularly deep or technical... just lots of material

The suggestion that they are salespeople is really rather here nor there as it is not qualified to what extent. We are all salespeople in some capacity, whether it's selling a product or selling ourselves.

it was relevant to my comment that I'd be worried about an IFA managing funds.... as most of you are essentially sales people who've passed some basic exams...
 
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yup.. though it was the SII... 3 exams: financial regs, securities and derivatives

difficulty - low... these were 'level 3' qualifications at the time... equivalent to 'A-Level'... you turn up at a test centre and sit a multiple choice exam - its not rocket science anyone who works in financial services in a regulated role has to pass these sorts of exams...

So by your own admission, standards have increased.

tick in the box stuff... "pass the appropriate FCA checks" get over yourself...

Everybody's experience for this is different, but I'm going to guess you haven't been through the process recently or have a limited back book of business? :)

I guess it depends on your degree... I've not seen much that would upset most science graduates... even CFA exams just cover basic undergrad maths/stats... a lot more rote learning but nothing particularly deep or technical... just lots of material

Economics for me, which was never really as technical as I'd have liked it to be, if I'm honest. I'll concede that exams on regulation are usually very straightforward - how many different ways can you get into trouble etc - but there are a great number of difficult papers out there if you want to progress beyond the minimum QCF4 (which will obviously be raised to QCF6 soon enough).

As to CFA exams being basic, I'm sorry, but I really disagree here. CFA Level 1 is fairly simple if you've done the IMC or similar, but once you progress to CFA 2 and 3, we're talking 6 hour exams and MSc equivalent questions. I'm just about to start part-time study for my MSc in Wealth Management with the CISI, a course which has a <60% pass rate for near enough 3 years of study. It isn't a case of simply turning up and facerolling a pass for many of the accredited courses that people are turning to now. I'm not alone in noticing that many of the more forward-looking practices are seeing QCF4 as a bit of an embarrassment and that acquiring chartered status is a must, something that I welcome.

it was relevant to my comment that I'd be worried about an IFA managing funds.... as most of you are essentially sales people who've passed some basic exams...

You can belittle anything when you say it like that, so I'm not really sure what the point you're trying to make with this statement is.
 
Soldato
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Don't feed the troll - let him be.

One thing I would check is the fact that I'm surprised that the IFA can still take 20% of the 1st years premiums as his fee.

Under RDR, Commission (which that is effectively) is banned and thus a fee has to be taken. Speaking to my Scottish Life rep, he said that the old way of taking a % of 1st years premiums is not allowed any longer as it can fall foul of both the "commission" and in effect a "consultancy fee" which is not allowed under Auto enrollment which a number of employers are moving towards.

DWP ban consultancy charges in auto enrolment schemes

Individual advice cannot be used to pay for the cost of services that deliver benefits to the employer. Such services include scheme establishment, default contribution structure and default investment fund. The cost of these services needs to be paid by the employer as a fee.

If you want the IFA to return it and review your fund each year, then an ongoing fee is going to be payable if someway shape or form.

1% employer contribution is not a lot at this time but will increase as you company moves towards their "staging date" under the new Auto Enrollment pension scheme. Likely to be 3% when they get to the date (between now and 2017 generally)
 
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Don't feed the troll - let him be.

One thing I would check is the fact that I'm surprised that the IFA can still take 20% of the 1st years premiums as his fee.

Under RDR, Commission (which that is effectively) is banned and thus a fee has to be taken. Speaking to my Scottish Life rep, he said that the old way of taking a % of 1st years premiums is not allowed any longer as it can fall foul of both the "commission" and in effect a "consultancy fee" which is not allowed under Auto enrollment which a number of employers are moving towards.

DWP ban consultancy charges in auto enrolment schemes



If you want the IFA to return it and review your fund each year, then an ongoing fee is going to be payable if someway shape or form.

1% employer contribution is not a lot at this time but will increase as you company moves towards their "staging date" under the new Auto Enrollment pension scheme. Likely to be 3% when they get to the date (between now and 2017 generally)

On individual policies:

You can still do % of first years premium, but it can't be indemnified, its either 100% of premium until fee is paid or % of first years premium. Either way the fee is only paid when the premium is paid.

On group scheme:

I agree, it shouldn't be allowed at least under auto-enrollment since the employers is obliged to pay the money, the cost of setting up the scheme is their responsibility. I don't see how the pensions trustees can pay for advice the member didn't agree to. (I know its happening though)
 
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The 20% is an initial fee.

OK, badly worded. I meant that there is a fixed £ fee payable once. The IFA arrangement is a % (worse for large contributions) and is payable on any future increases. I would prefer the fixed £ fee in this case.

One thing I would check is the fact that I'm surprised that the IFA can still take 20% of the 1st years premiums as his fee.

Under RDR, Commission (which that is effectively) is banned and thus a fee has to be taken.

It is a fee. It is just expressed as a %. For the first 12 months, a certain amount of money is paid from employee to IFA.

What is being banned is the IFA saying "I'm not charging you anything" and then the platform giving him a backhander that you may or may not know about.

IF this scheme is auto-enrollment then additional restrictions may apply. But it may not be and the company could be getting the charges paid before the rules change and they wouldn't be able to.

Set up pension now when it isn't mandatory -> employees can pay some of the cost.
Set up pension later -> company has to foot the bill.
 
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As far as I understand it, The IFA can't charge fees to the plan/member for setting up a group scheme, the employer must meet these, but he can charge individual fees relating to specific client advice.
 
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On individual policies:

You can still do % of first years premium, but it can't be indemnified, its either 100% of premium until fee is paid or % of first years premium. Either way the fee is only paid when the premium is paid.

100% correct.

Oh and OP, you have to be given the option to pay the fee upfront from your own pocket, instead of from the premiums.
 
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As far as I understand it, The IFA can't charge fees to the plan/member for setting up a group scheme, the employer must meet these, but he can charge individual fees relating to specific client advice.

I thought they could, but that a scheme on that basis doesn't meet the auto-enrollment criteria (i.e. they would have to offer another one that does).

I could be wrong. I have a nice cosy FS scheme, although my wife has a GPPP and I'm sure she had to pay IFA fees despite not receiving individual advice on the pension. She did join 7 years ago so the rules may have changed.
 
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I thought they could, but that a scheme on that basis doesn't meet the auto-enrollment criteria (i.e. they would have to offer another one that does).

I could be wrong. I have a nice cosy FS scheme, although my wife has a GPPP and I'm sure she had to pay IFA fees despite not receiving individual advice on the pension. She did join 7 years ago so the rules may have changed.

If it was that long ago it was probably on a commission basis, although this would be shown on the quote. If it was its a different story, the adviser is effectively being paid by the provider for introducing business (the legal relationship is between adviser and provider).

Under fees its an agreement between adviser and person receiving advice. If its not for AE then consultancy fees are not so bad, as the employer doesn't have to provide it and the employee doesn't have to join. If the employee wants the pension they have to accept that the employer wants it to be funded from the contributions.

Under AE, the employer must contribute (the facilitation cost is his problem). If it is done on consultancy charges, the employee does not explicitly agree to the fee (and gets no advice) and therefore in my view, it is on shaky ground. It is in the process of being banned, but I am not convinced it would stand up anyway.
 
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It would obviously need to be full advice, rather than just pick this fund.

This would be cool if it included considering transfers and switches in.

Whether to opt out due to:

  • Enhanced/Fixed protection
  • Life time allowance
  • Flexible Drawdown

Most EBC aren't going to be bothered with all that though.
 
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Indeed. I can only assume this is being established on the basis of it being a normal GPP scheme, but one is that AE ready.

That's shaky ground and not something I would do to be honest. Any group schemes we establish from now, well six months ago in fact, are arranged on a full AE basis. IE we would charge the employer for all set up costs.
 
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I just can't find anyone doing anything that can compare yet. From an employers point of view, the system is superb, and from an employee's point of view they get a great, flexible scheme at a very competitive price.
 
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They have been ready with it for a long time. I was talking to them about it 2 years ago all fee based. They get on my nerves a bit though, they bang on about the model portfolio and there special software that just plugs into the employers payroll. My firms likes them on the individual side so will probably be using for AE.
 
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