Independent Advice

Heard a discussion this morning between the Hobbit and Conal O'Moran on the Sunday Show at Today fm about "independent" advice. The Hobbit said that it didn't exist. Funny I thought that it did, but there you have it. He said that there was just different degrees of "dependency", which is a new line on me. Maybe we should rank all advisors on their dependencies, like commission, fees, weight of business towards financial institutions, alcohol consumption etc

There are three types of financial advisor regulated by the Central Bank/IFSRA:

(1) Authorised Advisors - these have agencies with all product providers and should be the bext bet for truly independent advice.

(2) RIAPIs/muti-agency intermediaries: these have agencies with a specific set of product providers and can only give advice about these and not others. Some deal with more providers than others. Depending on the advisor, your needs and the number of agencies they hold these may be able to meet your independent advice needs.

(3) Tied agents: these are basically sales people for a single provider. Unless you know a priori the product that you want you should probably avoid these and certainly not depend on them for objective, independent advice.

Intermediaries obviously need to be remunerated for their services so when using one be aware of how this is done (e.g. fixed fee versus commission etc.), choose the method of remuneration that best suits your needs and if possible agree the work to be done and the fee up front.

IFSRA can provide a list of these intermediaries on request if required.

[broken link removed]

I would tend to agree with the broadcast. Any adviser who depends on commission cannot be considered truly independent, even though many of them will genuinely try.

A number of people have tried to offer fee-only services: many of them have starved to death.

d

Above

O's correctly pronounced the statutory definitions, but I don't think that was the issue. The law is probably the worst place to draw lines like who is operating more impartially than who - its a lot more complex than that.

The meaning of advice

The Advice word is being hugely overplayed. Most intermediaries are salesmen/tipsters.

Ask 5 intermediaries for their "advice" to a particular punter and likely you will get 5 answers, even allowing that they may all be acting from honourable motives. How else do all these broker companies survive?

The most pretentious aspect of all this is this concept that through a factfinding process the professional advisor can zone in on exactly what fits a person's needs.

It just ain't that scientific folks. Most punters need do no more than read a good independent guide such as is produced by IFSRA or even Mr Burgess and then shop around for the cheapest version of the product which she wants.

Re: The meaning of advice

There is a qualitative difference between stock tipping, attempting to predict the markets, drawing conclusions from past performance etc. and carefully assessing a person's individual circumstances (including existing savings/investments, personal situation - single, married, dependents etc., attitude to risk/volatility, investment timeframe etc.) and selecting a product or products that best matches these without doing any sort of hard sell or giving any unsustainable guarantees. A good independent advisor should be able to do the latter. Anybody who attempts the former is a chancer in my view.

ARSFI Comments

It would be great if it were so simple, but the vast, vast majority of punters don't either want to, or don't have time to read guides, or indeed get online advice. Selling / advice whatever you want to call it is dominated by relationships from Private Banks selling to High Net worth persons to your bog standard Credit Union counter staff selling to the low paid.

So is it the consensus on this thread that authentic Independent Advice is a worthy pursuit, but like the Holy Grail, it doesn't really exist?

I agree, which is the strongest argument in favour of regulated products.

d

0,

I believe you are incorrect with your first post stating that Authorised Advisor's have agencies with all product providers.This is incorrect.
Authorised Advisor's are expected to provide advise on investment instruments without the necessity to hold an appointment in writing.

In other words AA,S are expected to give advise on products with insurance company's they do not hold agencies with if they feel that product is better suited to the client.
The onus is on the AA to keep informed for all products for sale with product producers he does not hold agencies with nor can he sell that product, but is expected to advise his client to buy that product i.e do the researce and send his client to the competition!

Johno

If that's the case then I stand corrected and apologise for any confusion caused!

Mission Impossible

The above requirement is patent nonsense of course in light of the fact that we are in a Global market, or at least an EU one. The Irish market doesn't exist, merely a corner of Europe AND Mc Creevy equalised tax treatment between collective fund managers a few years back.

Its illogical to expect an AA to keep abreast of the global choice available when you factor in all gross roll up's available in Luxembourg, Dublin IFSC, and the local market - it runs into thousands. An AA would need to fork out at least €15,000 per year for Bloomborg's or Reuters AND have a full time employee filtering and analysing product selection. Nobody does this, even a fund manager isn't expected to analyse all stocks in the market.

This is junk thought up by someone in the old CB to put the frighteners on AA's. It's horse**** and the regulator knows it.

Mission Impossible

From what I can ascertain the word Independent should be dropped, not just for the financial adviser but for every occupation.

I would be hard pressed to put forward an occupation that is Independent.

independent?

A priest?

Re: independent?

Isn't he a bit like a tied agent? An authorised independent spiritual advisor might be a better bet if you really want to shop around for the best deal. However many people like to choose their religion based on blind faith which is a bit dangerous in my view but it's usually impossible to argue with them. Always check the terms & conditions of any religion to make sure that it meets your needs. A good hedge against risk might be to review you needs each year and move to a different provider from time to time. I myself am going for the high risk/no reward atheist strategy.

What's in a name?

The word "advisor" should be dropped.

When I was a boy we had the following species, amongst others:

"The insurance man" - he called at the door and collected the insurance money. Now and again he would try and sell us more insurance. We clearly knew who he worked for and he didn't drive a Merc.

"The broker" if you wanted your car insured at cheapest rate you went to a broker who would shop around and negotiate a best price for you. We thought he did this in an unbiased way. To be sure he did tend to drive a Merc so maybe we were naive to believe we got the best deal.

"The banker" sometimes he'd try and flog you a bit of insurance.

Seemed to work, don't remember any misselling scandals. All this pallaver about regulation and standards of advice is nothing more than a licence to mislead. Some of the stuff you read in this Website from AA's would make you cringe. Far better that their halo was stripped away from them and then we would know where we stood and we would be as wary of them as we would be of any smooth talking salesperson. Imagine if a used car salesman could put a plack on his wall saying authorised by the Ministry of Transport to give you the best advice on purchasing a used car. Bang goes "caveat emptor".

Tied Agent

The description of a priest as "a bit of a Tied Agent" has completely restored my faith in humanity and this site.

Execllent observation - there is a new spring in my step

Tee hee

Misleadind Information

All this pallaver about regulation and standards of advice is nothing more than a licence to mislead.

Click to expand...

You mean like One Direct is a multi agency intermediary and a tied agent and a mortgage intermediary.

Re: Misleadind Information

0, that post has set a new high. Well done.
You've raised the AAM Bar considerably.

-Rd

Re: Misleadind Information

Thanks. But I'm probably going to an imaginary hell for it.