To wonder if people's suspicions of financial planners are founded

[necromumda]

I am thinking I need the help of an independent FP but I'm getting so much negativity, paranoia and general naysays from family and friends re seeing one.
Whats the deal? Are there such things as INDEPENDENT FPs and should I be concerned?
Any good or bad experiences?

I have only had a good experience with mine. Thanks to him I will be financially comfortable when i retire. Also when he first advised us he rearranged life cover so we got more for the same amount which I was very grateful for when my husband died unexpectedly a few years later. I would ask around your friends for a recommendation.

You need a recommendation.
I am very secure thanks to mine.

I think your family's reaction is very strange. They generally just help you to avoid paying unnecessary tax and invest for you based on your attitude to risk and when you're going to need your money back. They do charge a fee but if you want to invest and know nothing about it, this is worth paying.

heartsease68 100% with you on this. DH's family, my only family now, are "money under the mattress" kind of people

Like any sales product there are good and bad and some with strong own interest incentives to screw you. There are fee only FP that will advise you based on where you are, where you are going and where you want to be financially who generally have no interest in the products beyond making you happy and a returning customer so that is who I would use. The fee on activity ones have a strong incentive to keep you moving and changing. Those who get a commission also have a strong incentive to put you into the ones that pay them the most.

I used to work for a company selling financial products. Our sales team could only sell our companies products, but they had to comply with rules and ensure the product was suitable for you and inform you fully of any charges. An independent financial adviser has the same responsibilities, but has more products to choose from - on the flip side they earn their income from commission on what they sell you, or on charging you a fee, or both. So I always think, if you need a relatively simple product, choose a company you trust (look up info on money saving expert or similar). And if choosing an IFA avoid charismatic charming people or relatives (my friend was mis-sold a mortgage by a relative and its very hard to challenge!)

I would always choose one that you paid, rather than "free" as they then have a reason to sell you lots of products. I had an appointment with one soon after leaving university that tried to get me to sign up to numerous policies that I didn't need, luckily I knew what I was talking about and the guy stormed out when I confronted him about it, but numerous friends were conned by similar.

Good ones are worth their weight in gold though!

Where the suspicion may come from is that if you are looking to invest for your future, any money you pay anyone to make choices on your behalf is expected to reduce what you will have in future, compared to DIY. (This includes money paid to both advisers and fund managers.)

This is very counter-intuitive, usually paying an expert rather than DIY is expected to improve outcomes. However market efficiency means that if you buy assets randomly, you will with average luck get the risk-adjusted return you deserve. It also means that if you pay some fraction of your returns to someone else to make the choices on your behalf, you will get the DIY expected return less what you paid them. In other words, their expertise doesn't (and broadly speaking can't) add to your return.

Help with investment choices aside, there are lots of reasons I can think of why a decent adviser would be good for some people. The can help with tax and legal issues, and stick to a sensible strategy on your behalf if you don't have the emotional temperament to avoid behavioural errors.

If you pay anyone, only consider an independent, but first go somewhere on moneysavingexpert forum and get advice, in case you can get by without paying someone.

They also have many many hoops to jump through now. Their behaviour is heavily regulated.

I would personally choose a reputable independent financial advisor (not planner) because they're not limited to one set of products. However, the reality is that anyone with integrity and intelligence will probably make you a little bit extra without risking a large amount of your initial investment and that's all any of them are going to do.

Money under mattress is daft, yet I read only yesterday the average household has £345 at home so some obviously have huge amount more. Hoping OP is not a journo collecting data for that story

I'm the opposite, I encounter way too much faith that Indie FAs are wonderful. They charge a bomb and for people without a LOT of money you will pay out more than you can back, b/c you are supposed to consult indie FA repeatedly (at least twice a year).

The same online communities that advocate indie FAs, that say only a fool would go to a free FA, are the people who find it bizarre that someone wouldn't spend 20 hours a month (every month) managing their financial portfolio. The same communities talk about investment products that no one in a real bank I can locate has heard of or can help me access, even though the online communities insist "You can walk into any branch of Barclay's to invest in this product" (you can't, believe me, I tried!).

Not a choice only between under mattress and risky investments. Middle way is there's plenty good advice online about minimising debt & getting decent interest returns without too much risk or having to pay for expensive specialist advice.

I work for an IFA so am biased, but I think that everyone could benefit to talking to one. For example a cash ISA with no tie in period could get you 1.25%, an invested ISA should get at least 4% after charges. Yes there will be an initial fee as commission has been banned but you should get this back within 6 months and then your pot is growing.
As a pp said, IFAs can also find better insurance deals for you.

A lot of people think of commission-based advisers and mis-selling scandals but the rules have got a lot stricter since 2012. There are some good low risk investments out there. A good IFA will offer a free initial meeting to chat things over.

Perhaps be careful rather than suspicious and if you can get a personal recommendation, even better. I would have had no idea about investments, but my IFP has made a great job of mine, with profits between 5% and 10% a year, when I would have left it in the building society earning nothing. Life changing for me, in a good way.

We ‘found’ one locally (there are lists) and I did research (mostly online) to check him out before we spoke to him. We pay him (or rather my husbands pension pot does) he’s really helped us clarify our position, split our risk, is open and honest, yes us what if anything his cut is.
I would advise you do your research. A google of their name & organisation. Also how long have they been in business? Ours has been around in same premises for 20+ years.

My dad had a bad experience.

He’d used the same IFA for years. He had a very small pension pot (abt £50k). When he retired his IFA recommended a stocks and shares based scheme. Dad went with his recommendation. All was well for 3 years, until he stock market took a battering thus reducing the size of the remaining pot.

When the pension was reviewed, and income amount reduced, my dad started asking questions. Apparently with a small pot like his, an annuity should always be purchased. There was other stuff he hadn’t done as well, I can’t remember that so we’ll coz it’s a long while ago.

When challenged, he said that the reason why he hadn’t recommended an annuity was because the rates were so low (failing to mention that the rates were so low because people were living longer). I think it was because the commission on the stocks and shares arrangement was greater (approx £3k) which immediately came out of dads already paltry pension pot.

Anyway, this all ended up in the hands of the regulator (can’t remember the proper name) and after literally years he was awarded a significant sum. Must have taken something like 7 (ish) years. Even after the judgement he didn’t pay up until dad employed a specialist solicitor.

So it’s made me very wary of IFAs!! What made this worse as my dad had used him for years beforehand, and if I needed one I wouldn’t know where to start finding one.

Like anything there are are good and not so good people out there. I found mine to be so useful - I asked around and looked at reviews/testimonies etc and our first meeting was just about getting all of the information and stating what I wanted. My one did work for a company who I could look up and check their history, how long they had been about etc.

Basically, I came out with two policies which worked me for - I am financially independent but wanted cover in case I became ill and also life cover which pays my mortgage if I die. Both policies were suggested to me but were with well known companies and the financial adviser was basically there just to facilitate my taking them up. At a similar time I was changing my mortgage and my mortgage adviser (who also sells policies) looked them over and judged them to be decent policies - she had no reason to say either way but it reassured me.

If you do take out any policies you get plenty of time to read everything through plus a cooling off period and it is so important to ask, ask, ask - its your money and you are entitled to get the best you can. I think the image of dodgy FAs comes from when they used to knock on the door to sell stuff - any decent one will now be heavily regulated, which you can check.

Saying all of that, I didn't put all of my eggs into one basket, for eg, I arranged my will through a separate company (recommended by my mortgage person who she had used personally) and my pension (I am in education) is all organised separately - I guess what I am saying is that you haven't got to allow one person to deal with your entire finances/estate if you don't want to.

Firesuit pretty much all of your post was double dutch to me.
Yes, I am embarrassed.

Saying all of that, my post might be useless as you may wish for a wider range of services such as investing your money etc.

Even so, two of my most savvy (and wealthy!) friends have used (heavily researched) FAs and have found them to be extremely useful.

IFAs invariably try and sell me Critical Illness insurance policies, which is a policy that comes with high premiums. I presume they get a handsome commission for it.

Perhaps the IFAs on this thread can comment on why this is.

Firesuit and Ragged I would agree with what you say. I take a largely DIY hands-off approach to my investments, picking up bits and pieces of advice from moneysupermarket, the Telegraph (Money section) and whenever something catches my eye in the press.

What I have noticed is that there is a lot of financial illiteracy around even amongst people with the cash to invest. My dh, who is a professional and I gather a clever person, hasn't got a clue nor particularly wants to know. I do all things financial in the house: mortgage, ISAs, JISAs, pensions, insurance.

Therefore, there is still a role for IFAs. It is not just which investments to choose. There are people whose level of financial literacy is literally rock bottom, who have not got insurance sorted, paying SVR on their mortgages or renting a TV (dh, I am looking at you).

The risk is if a person does not understand finances at all, it puts them at risk of being duped by an unscrupulous IFA. Hence, I would still recommend people read up on finances and arm themselves with some knowledge to be able to question the IFA and also better understand their advice.

I’ve experienced both good and bad.

I was misold a private pension and specifically told that I shouldn’t just increase my work pension contributions as I “shouldn’t put all my eggs in one basket”. A conversation with someone from HR about a year later put me straight with regards to fees and charges and I complained and got compensation.

Now I use someone recommended and he’s saved me money in fees by consolidating existing financial products.

FAs invariably try and sell me Critical Illness insurance policies,

Speaking as a share holder in a family business, I can tell you why this is. It's easy money.

But you knew that, didn't you.

However. People coming to a financial adviser come full of worries about the future. They want protection and they want to increase their wealth - often two competing goals. Financial advisers have to spend a lot of time thinking 'what's the worst that could happen in this person's life?' and trying to make sure you'll be provided for it. They're used to having people pay them to do this. So in their world, it's easy money but it's also what people want from them. But yes, they get a cut and there's a conflict of interests. Hence the heavy regulation.

I have one relative I would never go to in his professional role. Another I would. The most important thing is to find someone who has pride in the performance of their investment portfolio but is also cautious by nature and full of integrity. Don't go to someone who is essentially a salesman because yes, they will simply sell you things.

Some are great, some are shit. It's like any profession.

Financial advisers have been heavily scrutinised in the banking royal commission in Australia, but I have worked in finance all my adult life and have known plenty of fantastic advisers.

blueshoes When I am having a conversation with a client about their financial planning arrangements and their future aspirations, I will talk to them about the "what ifs" and the benefits of a Critical Illness policy if appropriate.

This is not because I am thinking about the commission I might earn, but because I don't want to have to explain to the client or their relatives in the future why I didn't have that conversation and put something in place to help cushion the blow of a devastating cancer/heart attack/stroke diagnosis.

It's up to the client whether or not they choose to follow my advice, but I'd be failing them if I hadn't drawn their attention to it, not to mention leaving myself open to a complaint about negligence.

The main problem right now is finding out what they charge before you make an appointment.