What questions to ask new IFAs in order to choose between two (having had bad experience with previous!)

(6 Posts)
zipzap Thu 01-Mar-12 00:19:56

Just wondering if anyone could give me any pointers...

Back history:
My mum is looking for a new financial adviser. Having been burned twice out of three times (changed after bad advice, then got good advice, person retired, had more bad advice and now they have wound down so rather than be handed on she thought she would try to find somebody who was better and local.

She has spoken to a couple of IFAs that other people have used and recommended (albeit both through professional rather than personal recommendations) and liked both of them.

So when discussing which she was going to choose, I asked her a couple of things like:
* How much will it actually cost you - for the first year with them (ie any start up fees) and subsequent years
* What returns are they typically getting at the moment for similar sized investments, did they get over the last few years and expecting to get for the next few years and why
* What happens if they lose a big chunk of money

and she didn't have the actual answers to any of these questions.

So she's going to call them tomorrow/friday and find out the answers. I just wondered if anyone had any other good questions that she ought to be finding out before signing up with anyone?

And does anyone know if it is OK to ask for references or to contact other clients to check that they really are doing OK...

Thank you!

zipzap Thu 01-Mar-12 09:44:16

Bump - anyone???

Pleeeeeease.... Pretty pretty please...

CogitoErgoSometimes Fri 02-Mar-12 06:57:47

Your first question on management fees is valid. The IFA should be able to give you that as well as explaining if they get any fees for their services. No point investing money if any gains are eaten up in fees. The second question, unless your mum is looking at investments with a guaranteed interest rate like bonds, is an impossible one to answer. Past performance is no guarantee of future performance and there is rarely such a thing as a similar investment if you're talking stock market funds. 'Investments can go down as well as up' etc. If they could predict returns accurately they'd be billionaires.

The third question is therefore 'how risky' is the investment. If investments lose money, the investor loses money.... game over. The riskier the investment, the higher the chance of making a large amount of money and the higher the chance of losing a large amount of money. So performance is not something they can predict but they should be able to explain the relative risk of various options very clearly and offer an opinion on particular funds. An older person is usually less willing to be exposed to risk than a younger person because they have less time to correct matters if things go wrong. A good IFA will understand the client's attitude to risk in order to recommend the right investments. They will not push the client into taking on more risk than they are comfortable with.

I'd also want an IFA to make sure I was taking advantage of all the tax-free investment products available before they started to recommend fee-paying ones. Cash ISAs, for example. This would reassure me that they weren't only interested in getting a commission but were more interested in me making the most of my cash.

manyballsonthefloor Wed 28-Mar-12 10:12:27

hi zipzap, has your mum tried a chartered financial planner? It's a qualification level up from financial adviser and more likely to be fee-based. Generally, a bit more pricey, but at least worth costing out that option, especially since times are hard for chartered financial planners, too!

Just be aware that it's possible to be a chartered financial planner without being an independent adviser, and most chartered financial planners describe themselves as chartered rather than IFA, so you'e got an extra question to ask, unless it's obvious - Are you an independent chartered financial planner?

phew! After all that, I bet she's already sorted it.
Back to work now, byeee
(HTH)

manyballsonthefloor Wed 28-Mar-12 10:15:34

...and, yes - asking to speak to other - long-standing - happy customers might be useful (if a data protection challenge for the planner!)
ttfn

Alad Wed 28-Mar-12 19:19:34

Check their FSA registration and average portfolio turnover rate

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