There’s a lot of confusion out there about what IFA customers should be paying.
And it seems like it’s not just the customers who are confused – IFAs’ fees for the same services differ by thousands of pounds.
Which? recently carried out an investigation in which 200 IFAs from the UK were asked to quote for various services.
It found one IFA quoted £2,450 more than the cheapest alternative to transfer money over to a stakeholder pension. And while the average charge for transferring a £10,680 investment to a stocks and shares ISA was £356, the highest quote was £2,500 and the lowest was £106.
So where does this confusion leave the customer?
We believe it’s completely contradictory for an IFA to overcharge or give confusing messages about their rates, because an IFA’s business should be built on helping customers get on top of their finances and save money.
The conclusions of the Which? report were that IFAs should publish a rate guide on their websites to help people make an informed decision about which IFA to choose, and what rates are reasonable.
At My IFM we give our rates upfront to clients at the first meeting. We either work to an hourly rate, or give a fixed fee in advance. Either way, we ensure our customers know beforehand what their costs are going to be, and we’ll talk to them about what that cost pays for.
We’re glad to hear that despite the confusion, Which? still recommends customers are better off going to IFAs for financial advice than banks. To help customers make a well-informed decision, they recommend eight questions to enable them to assess whether an IFA is charging reasonably. Any IFA who dodges or challenges them should be avoided.
They are:
- How will the fees be charged?
- Does the IFA receive commission set by product providers? If so, what plans does the practice have to bring its charging approach in line with the Retail Distribution Review?
- At what stage of the process will you be charged?
- How will you have to pay the fees: by cheque or bank transfer?
- Are different fee options available to you for the service you require? For example, are you able to choose between paying by fixed fee or hourly fee? If different options are available, ask the IFA to explain the pros and cons of each one.
- What level of qualification does the IFA have?
- What service are you receiving for the fees/ commission? Is it just the initial service or is any ongoing review involved?
- Will there be any ongoing commission or fees?
To discuss how to choose IFAs and assess their fees, give My IFM a call today on 0845 066 9432.
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