Nationwide Frustrations with Financial Advisors

[PadKiss]

Most of that sounds ok to me, except: if an adviser only did fact-finding on a first meeting, I'd worry that he's fishing around for how much he can get out of me. I like the idea of "educate as you advise" -- education would be my primary objective in talking to an adviser. I don't expect him to make any actual decisions. I want to know what he knows, and take it from there myself. "Life Assurance is the foundation of all good plans" -- this sound like an over-generalisation. I wouldn't have the slightest interest in, or use for, life assurance.

Hi dubnerd
Yes i did generalise in order to answer the question as every case is specific to each individual, in regard to the first meeting if it begins with an assumption of 'fishing around for what he can get out of me' don't hold the meeting as it would be a waste of time for all parties. Padraic

 

[Gerry Canning]

Most of that sounds ok to me, except: if an adviser only did fact-finding on a first meeting, I'd worry that he's fishing around for how much he can get out of me. I like the idea of "educate as you advise" -- education would be my primary objective in talking to an adviser. I don't expect him to make any actual decisions. I want to know what he knows, and take it from there myself. "Life Assurance is the foundation of all good plans" -- this sound like an over-generalisation. I wouldn't have the slightest interest in, or use for, life assurance.

dub-nerd.
I think Pad-kiss,s comment could transpose mortgage or loans for life assurance.
the problem advisers have is that regulation dictates they follow a fact find type formula.
as Pad-Kiss says rapport is all important .
Maybe start a fact-find with , this is a formula I have to use but please stop me any time ask any questions as there are things here I do not necessarily need to know ,nor indeed do you want to tell me.
I think we all get caught up in our own (important) to-does and forget these are not important to client and can be construed as nosiness..

 

[monagt]

dub-nerd.
as Pad-Kiss says rapport is all important ..............not important to client and can be construed as nosiness..

I had great rapport for the car salesman but that didn't end well.

I want back to an advisor after many years and an unknown (to me) accounting technician sent out docs and ask me to complete which were very intrusive..........personal touch gone and so was I.

 

[Steven Barrett]

I want back to an advisor after many years and an unknown (to me) accounting technician sent out docs and ask me to complete which were very intrusive..........personal touch gone and so was I.

A lot of advisors send out factfinds in the post/ email. It is something I avoid as much as I can. It is an incredible boring exercise to do and you get minimum information from the client. You need to find out what makes people tick, what is important to them, what are their fears. It is something you can only find out by asking questions at a face to face meeting.

Dub Nerd,

A good advisor will ask you all of those questions at the initial meeting. If I am going to advise you on your money, I need to know about you. I look to build long term relationships with my client and I want to see if there is a rapport there. If I ask about your kids and what ages they are, it's because I want to know how much of a demand are they on your money. Are you paying out €2,000 a month in creche fees? Do you need €5,000 every September for school fees or €10,000 because your eldest is in college in Galway? This is all relevant information when advising people on their money. It is all held in the strictest confidence and not disclosed to anyone.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[galwegian44]

Galwegian44, are you going directly to the banks/ life companies all the time?

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Hi Stephen,

No, I went to the BOI Financial Advisor as a courtesy to my BOI Business Advisor without expecting much. However, I was hugely impressed by the depth of his knowledge in relation to my questions but the hook is that his advice is obviously skewed towards BOI products. His approach was very similar to what you outlined as your approach in another thread on AAM.

My second foray was with a financial services company through a recommendation from my business partner and unfortunately this gentleman proved to be next to worthless.

Finally I talked to an independent financial advisor recommended by my company accountant and she was somewhere in between. I went ahead and opened the pension just before year-end, transferred the money but I'm not confident in her ability to guide me to the best investment.

My primary issue is that I don't have enough confidence in my own ability to predict the optimal investment in the current economic climate with:

- Japan continuing its experiment with the most radical quantitative easing program
- Europe still on a knife edge with a possible Greece exit, Italy & france in serious trouble and Draghi/Merkel fighting over a possible EU QE program
- China potentially heading into recession or at least a "hard landing" as it reduces its dependency on debt and the subsequent impact on emerging markets
- Russia has tumbled into a full-fledged currency crisis
- At current valuations the US stock market is due a correction......but when?
- potential for a global currency war as the EUR/USD rate drops to 1.17 and the JPY/USD rate goes to 120
- the recent history of property investment downturn in Ireland
- gold doesn't even react to all the above crisis situations by appreciating

So maybe I'm looking for too much from a financial advisor (as another poster mentioned) in calmly assessing the financial mess that we are in on a global basis and pointing me to an investment plan that will generate high single digit returns with minimal risk. Or I could just leave the money on deposit!!!!

All the best.

 

[Steven Barrett]

Hi Stephen,

No, I went to the BOI Financial Advisor as a courtesy to my BOI Business Advisor without expecting much. However, I was hugely impressed by the depth of his knowledge in relation to my questions but the hook is that his advice is obviously skewed towards BOI products. His approach was very similar to what you outlined as your approach in another thread on AAM.

My second foray was with a financial services company through a recommendation from my business partner and unfortunately this gentleman proved to be next to worthless.

Finally I talked to an independent financial advisor recommended by my company accountant and she was somewhere in between. I went ahead and opened the pension just before year-end, transferred the money but I'm not confident in her ability to guide me to the best investment.

My primary issue is that I don't have enough confidence in my own ability to predict the optimal investment in the current economic climate with:

- Japan continuing its experiment with the most radical quantitative easing program
- Europe still on a knife edge with a possible Greece exit, Italy & france in serious trouble and Draghi/Merkel fighting over a possible EU QE program
- China potentially heading into recession or at least a "hard landing" as it reduces its dependency on debt and the subsequent impact on emerging markets
- Russia has tumbled into a full-fledged currency crisis
- At current valuations the US stock market is due a correction......but when?
- potential for a global currency war as the EUR/USD rate drops to 1.17 and the JPY/USD rate goes to 120
- the recent history of property investment downturn in Ireland
- gold doesn't even react to all the above crisis situations by appreciating

So maybe I'm looking for too much from a financial advisor (as another poster mentioned) in calmly assessing the financial mess that we are in on a global basis and pointing me to an investment plan that will generate high single digit returns with minimal risk. Or I could just leave the money on deposit!!!!

All the best.

If you go to the doctor, you could be talking to the guy who came top of the class or the guy who came bottom of the class. Both are still doctors. Same with financial advisors, some of them do little more than fill in proposal forms.

I wouldn't worry about not having the ability to predict the future. I can't either! That is why I always recommend a diversified portfolio. Not everything will go up and down at the same time. It is impossible to predict who will be top one year from the next. It simply can't be done. Pick a strategy that you are comfortable with and stick with it for 5 years.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[galwegian44]

Thanks Stephen, I feel that I've been to a few quacks recently!!

I would appreciate your thoughts on investing in a Structured Product (basket of 12 equities - 4 UK, 5 USA, 1 Macau, 1 China, 1 Canada) for a recently opened pension. With the expected volatility from my list of worldly woes above my primary aim is capital security but I'm a bit reticent to commit to a 6 year investment as I would like to be liquid when market conditions settle over the next few years (if they do). I'm not sure if I'm allowed to name the product on AAM.

This Protected Income Bond has 100% capital protection which applies at maturity only. My understanding of this (if correct) is that the investor invests 100,000 euros. So the issuer invests in a risk free bond that has sufficient interest to grow to 100,000 euros after the six year period. This bond might cost 80,000 euros today and after six years it will grow to 100,000 euros. With the leftover funds (20,000 euros) the issuer purchases the options and swaps etc needed to perform whatever the investment strategy is......and hopefully makes a profit!

Thanks in advance.

 

[Steven Barrett]

Thanks Stephen, I feel that I've been to a few quacks recently!!

I would appreciate your thoughts on investing in a Structured Product (basket of 12 equities - 4 UK, 5 USA, 1 Macau, 1 China, 1 Canada) for a recently opened pension. With the expected volatility from my list of worldly woes above my primary aim is capital security but I'm a bit reticent to commit to a 6 year investment as I would like to be liquid when market conditions settle over the next few years (if they do). I'm not sure if I'm allowed to name the product on AAM.

This Protected Income Bond has 100% capital protection which applies at maturity only. My understanding of this (if correct) is that the investor invests 100,000 euros. So the issuer invests in a risk free bond that has sufficient interest to grow to 100,000 euros after the six year period. This bond might cost 80,000 euros today and after six years it will grow to 100,000 euros. With the leftover funds (20,000 euros) the issuer purchases the options and swaps etc needed to perform whatever the investment strategy is......and hopefully makes a profit!

Thanks in advance.

Run a mile. The only people who make money off them is the promoter and he gets paid up front. By it's very nature, there is risk when buying equities, so when someone tells you there is none, there is something wrong.

You have described how they work well (except fees are also taken from your €100,000). Who is the bond with? I would suspect there are a few more catches to it such as limited return or maybe if the fund falls by a certain amount, the guarantee is off. Or all 12 of the equities have to perform, if just 11 hit their target, you just get your money back.

If you want a guarantee, put it on deposit. You can calculate how much you will get back very easily and you access your money at any time.

If you want to take risk, look at equities. You enjoy all of the returns and can get out at any time. Or have a blend of the two.

I won't be the only one on here who will tell you to avoid at all costs.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[dub_nerd]

Run a mile. The only people who make money off them is the promoter and he gets paid up front. By it's very nature, there is risk when buying equities, so when someone tells you there is none, there is something wrong.

I was offered one of these by the adviser in a bank recently. I told him I didn't believe the product was any good. He claimed all the banks were offering them to customers who wanted capital protection because of the low deposit interest rates currently. I told him it was illogical that the bank could be offering me all the possible upside of equity investments *and* capital protection. He said the downside was in reduced liquidity, but I put it to him the downside was an extremely low likelihood of any appreciable return. Heaven save us from "advisers" like these!

 

[Steven Barrett]

Dub Nerd

Loads of my clients have come to me with these great deals they've been offered by the banks. Huge upside, no downside. They give me the flier and yes, it's true. It's only when you ask for the product prospectus do you see where the catches are, such as capped returns and/or capital guarantee to a certain level. The fact is, with rates so low, they have to put more of your money into securing the capital guarantee so they can't buy an option without it having a few terms and conditions of its own.

The "advisors" in the bank are nothing more than salesmen. They have been told by their manager that they are to peddle that structured product. They have weekly sales targets! Weekly!! They have no ongoing relationships with the people they sell to so their sole interest is maximising their income with each client. Plus, they're all tied to one company and you don't have the option of paying by fee.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[galwegian44]

Who is the bond with? I would suspect there are a few more catches to it such as limited return or maybe if the fund falls by a certain amount, the guarantee is off. Or all 12 of the equities have to perform, if just 11 hit their target, you just get your money back.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Interestingly enough it is the independent financial advisor who is pushing me towards a structured product. I bumped into the BOI financial advisor a few days ago when I was in the bank and he echoed your comments above - stay away from structured products primarily because too much of it is invested to secure the capital guarantee.

I thought I could provide a link to the details of the product (Protected Income Bond 2) from Blackbee.ie but you have to register to access the details. I will review my hardcopy brochure again to see if I can identify potential downsides as identified above. However, I agreed with Dub Nerd that even if these 'catches' don't exist the product cannot guarantee my capital AND expose me to decent equity returns as well.

Thanks guys.

 

[monagt]

Interestingly enough it is the independent financial advisor who is pushing me towards a structured product. I bumped into the BOI financial advisor a few days ago when I was in the bank and he echoed your comments above - stay away from structured products primarily because too much of it is invested to secure the capital guarantee.

This echoes my response to the initial query! and partly answered by:

"If you go to the doctor, you could be talking to the guy who came top of the class or the guy who came bottom of the class. Both are still doctors. Same with financial advisors, some of them do little more than fill in proposal forms.

Its not like using Cowboy Builders and making a mistake, finances are critical.

 

[Steven Barrett]

Interestingly enough it is the independent financial advisor who is pushing me towards a structured product. I bumped into the BOI financial advisor a few days ago when I was in the bank and he echoed your comments above - stay away from structured products primarily because too much of it is invested to secure the capital guarantee.

I thought I could provide a link to the details of the product (Protected Income Bond 2) from Blackbee.ie but you have to register to access the details. I will review my hardcopy brochure again to see if I can identify potential downsides as identified above. However, I agreed with Dub Nerd that even if these 'catches' don't exist the product cannot guarantee my capital AND expose me to decent equity returns as well.

Thanks guys.

You can email it to me at steven@bluewaterfp.ie and I'll have a look at it for you.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[Steven Barrett]

Again, thanks to everyone who contributed to this thread. I listened to what you said and addressed your frustrations on my blog on my website.


Before Christmas, I asked people on the askaboutmoney website what their gripe was with financial advisors. It is very important that I know what people think so I can fix the way I run my business instead of doing things that I think people want, not what they actually want. So, here is the list and what I have done/ am doing to address these issues.

Lack of Shopping List with prices
I have created a list of the [broken link removed] that we charge and put it up on my website. It is not exhaustive as I cannot provide a price for the work without knowing what it involves.

Past Reputation
There are a lot of financial advisors who are highly qualified and who work in the best interests of their clients. Look for testimonials on their websites to see what their clients think of their work.

What do you do?
My website, [broken link removed] , gives comprehensive details of everything we do. I take a three pronged approach to what I do:

1. Life Planner - I identify where you are now, where you have come from and where you want to get to. What are the things you would do if money was no object? What worries you and keeps you awake at night?
2. Financial Planner - I identify all the resources you have available now and in the future. I also identify the resources you might need to make available for you to achieve the goals that you told me about.
3. Financial Advisor - If you need a financial product, I will advise you on which is the best one for you. This may involve [broken link removed] and [broken link removed]or insuring risk.

What's the difference between fee based and commission based?
Fee based means that the advisor may be paid by fee, commission or a mixture of the two. Commission based means they will only be paid by the commissions paid by the product producer. Fee only means they do not receive any commissions from the product provider.

Whether it is fee or commission, an advisor should be up front with you on how much he is being paid and by whom.

Do some specialise?
Yes, some do but not many. For instance, one advisor specialises in ex pats living in Ireland.

I specialise in company directors and self-employed who are in their 50's and want to maintain their lifestyle right up to retirement and thereafter.

Some advisors don't know what they are selling?
It is up to a good financial advisor to read all the terms and conditions of any product they recommend to a client. There are so many hidden bits, especially in protection products, that is may make a big difference if you don't get the right product.

When it comes to pensions and investments, each provider offers 6-8 contracts. It is impossible to know the ins and outs of each one. I chose the ones that are most suitable to the way I do business. If a new contract is launched, I will analyse it and see if it is any better than the contracts I currently offer.

Some advisors aren't qualified
As well as having 15 years experience in financial services, I am a Member of the Irish Institute of Pension Managers (MIIPM), a Qualified Financial Advisor (QFA) and a Certified Financial Planner (CFP).

Are they working in my interests or their own?
Unfortunately, this is a very common question. This is most common when people get financial reviews. If a fee hasn't been agreed at outset, the advisor will always find that you need a product so that he can get paid for the work he has done. If a fee is agreed, he won't have to try to sell you something to get paid and you will get honest, impartial advice.

If you have any questions, please contact me directly at steven@bluewaterfp.ie

Steven Barrett

19 January 2015

 

[Steven Barrett]

What I find most strange about the whole area is the idea that if a client comes into the office with €10k to invest there are lots of rules and regulations about the products that can be offered.

If a client comes in and says they want to borrow €100k to buy a property there is no regulations and this is even worse where property is syndicated by advisors completely unregulated.

As a rule if think that clients are suspicious of people who provide advice for "free" ie whose commission is paid by the insurance company.

Joe,

If someone comes looking for advice on 10k, they are being advised on a regulated product, so all the rules apply. If they are going into an unregulated product, the advisor must make it clear that they are advising on an unregulated product. That means they can't give out business cards or use letterheaded papers which has "Blueater Financial Planning is regulated by The Central Bank". You will find most advisors don't do this and it is impossible for the client to know that they advisor they have gone to for many years is acting as an unregulated body (do most people even think about regulation when speaking to advisors?).

What might reduce the selling of these syndicated properties from a sales point of view is that your standard Professional Indemnity Insurance doesn't cover the sale or promotion of syndicated property deals. So, unless the company gets specific cover, they are leaving themselves wide open financially if they get sued.

I also agree on the "free" advice. If it is made clear to a client that they can pay by fee or commission and the differences between the two options in respect of management charges etc, then they can make their own mind up.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[galwegian44]

Past Reputation
There are a lot of financial advisors who are highly qualified and who work in the best interests of their clients. Look for testimonials on their websites to see what their clients think of their work.

Steven Barrett

19 January 2015

Great post Stephen, it's good to see a Financial Adviser/Planner actually ask the public what type of service they want. In relation to 'Past Reputation' I'm not a big fan of Testimonials as I've never seen a bad one on a website yet. Personally, I would prefer to see some Case Studies of what you did for particular clients and the process you used. For example, a SME Director comes into your office to set up a self-employed pension and knows very little about the process and the charges involved. How would you approach this initially, through to setting up the pension, choosing products etc

Also, blog posts on the current products that you feel would be good investments because of economic changes i.e. will the proposed EU Quantitative Easing program drive up European equity prices so products in this area should be favoured? Are there ways to take advantage of the weakening of the USD againg the Euro. If we assume oil prices have hit rock bottom what products are available to enable us to take advantage of an increase over the next 12 - 24 months?

Thanks.

 

[monagt]

Joe, I also agree on the "free" advice. If it is made clear to a client that they can pay by fee or commission and the differences between the two options in respect of management charges etc, then they can make their own mind up. Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

I sometimes wonder If one pays the fee, could he also end up with a commission based produce with the advisor assuring him/her that "all things being considered, at the end of the day" this is the most appropriate product..........so he pays twice

 

[Steven Barrett]

I sometimes wonder If one pays the fee, could he also end up with a commission based produce with the advisor assuring him/her that "all things being considered, at the end of the day" this is the most appropriate product..........so he pays twice

You could, very crappy advisor if that happened. People don't really understand about allocation rates and management charges, so they wouldn't check having a higher allocation or lower management charge on their policy. I've never heard of it happening but I wouldn't be surprised if it happened, especially when the recession hit.

Great post Stephen, it's good to see a Financial Adviser/Planner actually ask the public what type of service they want. In relation to 'Past Reputation' I'm not a big fan of Testimonials as I've never seen a bad one on a website yet. Personally, I would prefer to see some Case Studies of what you did for particular clients and the process you used. For example, a SME Director comes into your office to set up a self-employed pension and knows very little about the process and the charges involved. How would you approach this initially, through to setting up the pension, choosing products etc

Also, blog posts on the current products that you feel would be good investments because of economic changes i.e. will the proposed EU Quantitative Easing program drive up European equity prices so products in this area should be favoured? Are there ways to take advantage of the weakening of the USD againg the Euro. If we assume oil prices have hit rock bottom what products are available to enable us to take advantage of an increase over the next 12 - 24 months?

Thanks.

Thanks Galwegian.

No, you won't get testimonials on websites for the pure reason that I own the website and I wouldn't put bad reviews up there. People can put reviews on a company's Google+ page though.

I will look at doing some case studies too over the next number of weeks.

I believe in asset allocation over tactical allocation. There are too many events that alter prices, that I think it is impossible to achieve long term growth by trying to exploit the market all the time.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[Daveymarie]

My biggest gripe is wasting time with financial advisers who do not know the products they are selling, have little knowledge of the markets they are recommending and cannot discuss future prospects even at a basic level. I, (like most people on this forum) try to be proactive and knowledgeable about my financial planning and it is extremely frustrating to talk to qualified financial advisors who obviously know little about the financial environment beyond the top superficial layer.

I talked to three advisors recently regarding pension planning and one had absolutely no idea, he just parroted the info on the data sheets that he presented to me and could not even answer some basic questions. The second person had a better understanding and was more experienced but really struggled to advise me or explain the differences between the various products. Interestingly this person was a previous winner of the Champion Sales Advisor/Consultant – Financial Services category of the Irish Sales Champion Awards - go figure! Any discussion regarding general observations/trends (e.g. the USA Equity market is way overvalued and should be avoided) was met with a blank stare. The third advisor certainly seemed competent and most definitely knew way more than I did (I spent a few weeks researching on the internet, including AAM) but was tied to the BOI.

Now that the pension has been started I would like to withdraw my savings from minimum paying deposit accounts and look for a better return but the thought of hitting the financial advisor trail again is really putting me off.

Any recommendations?

Thanks in advance.

If you started your pension are you happy with this?
What do you want from your investment and what do you expect from your financial adviser?

 

[galwegian44]

If you started your pension are you happy with this?
What do you want from your investment and what do you expect from your financial adviser?

Hi Daveymarie,

I'm looking for an independent financial advisor who I feel understands my risk profile (I would say that all I talked to achieved this) and then presents the full range of potential products to me with advice on the pros and cons of each product within my profile. I would also expect them to be able to answer all my questions without having to revert to the fund manager or a technical person within the company. I'm looking to feel confident that my financial advisor is knowledgeable and has my best interests at heart.

Everyone I've met so far have been extremely approachable, I've been treated in a very professional manner by all but the level of knowledge about products has been inconsistent across the board. Maybe my expectations are too high, I do know that I can be quite demanding and ask for a lot of information but we are dealing with my financial retirement so I make no apologies for this.