Wealth Management problems (Pt.2)

Wednesday, 18th March 2009 13:41 - by Resident IFA

On February 17th, Howard Bullock blogged on his perception of the poor choice and service offered by some well-known ‘Wealth Management’ companies. I think it is worth re-visiting this topic as I have since read a newspaper article raising similar concerns. The Mail on Sunday published an article on March 1st querying the benefit versus cost of the self-same Wealth Management companies, mainly Barclays and St.James’s Place (SJP). They cited three examples of poor advice and the poor product choices available. Case 1: A risk-averse divorcee with no income or pension. Barclays recommended she invest all her money in a single investment fund, netting £20,000 commission in the process. Case 2: A retired single woman wanted capital security and a modest income. SJP recommended investment funds exposing her to stockmarket and currency risks. Commission: More than £12,000. Case 3: An ‘At retirement’ couple selling their business to provide their retirement income. SJP recommended a small commercial property fund...and that alone! Commission: £6,000. I came across a similar case to #3, whereby a couple were urged to invest £2M...yes, £2M...in a commercial property fund. This provides no diversification whatsoever. Beware...they (awful Financial Advisers) walk among us! Unfortunately, this was a commission-driven IFA (Independent Financial Adviser), though I have met many IFAs who are paid by commission, yet not commission-driven. They think of advice and their Clients well-being before they come to thinking of what they will earn from the particular product solution/recommendation. The printed media would have you believe that you need a fee-based IFA and nothing else. I would strongly agree with seeking the advice of an IFA – based on the limited to non-existent choice recommended/available from the above Wealth Managers – but delve deep into the person you are speaking to. Fee-based IFAs aren’t Gods, but do offer a transparent cost structure which will be of benefit and provide peace-of-mind for some people. Regardless of remuneration, the IFA must be able to withstand hard questioning and be able to explain what you get for your money, whether fee or commission-based. As they say...’People buy people’...your gut instinct being one of the many things you should take notice of when seeking out a suitable IFA. Until next time...