PRSA for One Euro!

Re: Seeds

Alan,

Out of interest, have you noticed any changes in recent years in terms of people asking about commission?
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I've always disclosed all commissions/fees and believe or not most people don't dwell on the issue.
> 5% of what.

With PRSA's and the ability to switch the adviser is gambling that the contributor won't switch to another PRSA in the near future. What happens IF the Late Late Show or Joe Duffy discusses that fact that you can avoid paying 5% of all your contributions in fees by switching to an execution only PRSA?
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The adviser gambling the client won't switch? Yes and no. If the client runs and takes out an execution only PRSA he/she is purchasing something different i.e. the client becomes responsible for his/her decision that they policy they take out best suits their needs and also has to pay for any ongoing advice in the future should they need it.

If my own client takes out a policy through me and subsequently wants to go execution only I will facilitate for a fee with the understanding that each time he/she needs advice I will charge for it.

Again, it all boils down to advice and whether you feel that advice is worthwhile at a cost.

If not - Do execution only basis
If so - Do on fee or commission basis
 
Execution Only

The market for self-directed advice is so tiny it hardly warrants the amount of space it gets. Discount brokers get MASSIVE free publicity in the media, especially the Independent, but the acres of coverage translates very poorly into business done. The numbers are really really small.

For the model to work and make a valuable business that can be sold on at a premium, rather than a lifestyle business, one major player has to emerge. The problem is that anybody can cut fees and commissions, its easy, and take a flyer like Belinda in this segment, crowding it, as it is becoming. There is no entry barrier and the sector encourages mavericks, a positive danger to everyone including themselves.

Nobody I'm aware of has committed serious capital other than Solomon.com which failed dreadfully, and blew €1.3m. Quinns spent even more. The rest don't spend Christmas because they simply don't have the bucks. These are idealistic sole traders, but that doesn't translate into clever business people, or a model that will survive long term.

Rest assured that the day a genuine success emerges from the boneyard that already contains Quinn's and Solomon, the big boys will move in and simply grab it.

As a business person I wouldn't invest in this sector, and instead would buy a long established business with strong goodwill operating in the upper end of the market, leaving the lower end to direct sales forces, counter staff, tied agents, and even discount players. In ten years I'd expect the self-directed market to have grown but only by a tiny amount. I'd still go with the equity market view and its not investing in discount players in the personal finance sector.

Because it doesn't work - sorry folks. You can AAM about it all you like but that's the reality.
 
Re: Seeds

Alan,

the client becomes responsible for his/her decision that they policy they take out best suits their needs and also has to pay for any ongoing advice in the future should they need it.
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Let's assume someone comes to you and gets a PRSA. perhaps following lengthy discussion, perhaps not. And they agree to pay a 5% contribution fee.

They have now decided through discussion with you that a PRSA is for them. They've worked out a contribution level that suits them.

They then realise subsequently that if they move to an execution only service, there is no penalty for moving the PRSA and they can avoid the 5% fee.

What further advice specifically related to the PRSA would you expect them to receive in the future that would convince them to stay?

If they came in for other general financial advice, perhaps to buy other products, presumably you'd be charging them separately for that. So the 5% ongoing charge for ongoing advice would presumably only relate to advice about the PRSA. Yes?

I'm not saying everyone will do this, I'm just interested that financial advisers would sell PRSA's on this basis, given the risk. With other products where there are surrender fees etc, I can understand there would be a level of comfort that people aren't going to start switching. I don't understand this approach with PRSA's though.

-Rd
 
The Light

Ah Daltonr, you begin to see the light finally, even if by accident. The model doesn't work.

You've correctly exposed the weakness of running execution only and advisory under the one roof, which is a silly strategy. Good shoppers will take "free" adive fro one and use it elsewhere, and why not. If operators are stupid enough to give it away, and then sell below cost, they deserve what's coming.

You might find it ugly, but Dallers we're on the same side. Ugh.
 
5%

"What further advice specifically related to the PRSA would you expect them to receive in the future that would convince them to stay?"

If I were a client I would expect ongoing advice on
A) The investments I make e.g. most peoples attitude to risk changes as they get older and their funds build up.
B) Funding advice, on how to achieve the end goal
C) Is the policy I have taken out still the most appropriate.

"I'm just interested that financial advisers would sell PRSA's on this basis, given the risk"

When a client comes to me and he/she says they want advice they rarely turn around and say I'm confident of going it alone. Those that do go alone normally do from the outset.
 
My Crocodile tears for you Laser

Laser,

Congratulations. You're a supreme example of the Irish knocking mentality in action and worth more because you're not at all antiquated.

You abominate the successful execution only operations, you loath them, you despise them, you detest them...

Its clear to everyone that you've obviously lost business to the model that doesnt work. Keep it up you give me so much more energy! Thanks :)
 
Re: My Crocodile tears for you Laser

Ralph,

General remarks like you posted could lead to a personalised squabble between yourself and Laser which would cause this thread to be locked.

Can I suggest that the best approach is to not even engage in discussions like this. I'd suggest you follow the example of others and simply ignore Lasers posts.

Just like any community If your first posts on AAM tend to be personalised attacks on others, then you are likely to find your posts ignored by the bulk of AAM members in the long run, even if you begin posting interesting points. Remember, first impressions last.

If there are specific points in a post that you take issue with, you can quote them, and point out where you disagree.
I also note the you are an Unregistered Poster, which is in itself not a problem, however Unregistered posters get a little less leeway when it comes to questionable posts. Registered users have the ability to edit their posts afterwards.

Regards,

-Rd
 
Opinion

"Its clear to everyone that you've obviously lost business to the model that doesnt work"

Would be most surprised if this is the case unless his/her office is next door to LABrokers.

In fairness to Laser I actually think the advice given on this thread has been quite accurate and should be heeded by Belinda. The problem everyone seems to have Laser is that there is a strong chance of being chastised for having an opinion thus leading to his/her advice been treated with scepticism and unfortunately also leads to threads sometimes becoming nasty and abusive. I do wish he/she would adopt a less confrontational approach because there is some good stuff in there sometimes.

Anyhow, my belief, the "execution only" market is very small. This end of the market has established players who have been given fair deal of press. However the model only works if volumes are high and it is difficult for a new player to achieve the critical mass required.
 
5%

If an "Independant Financial Advisor" was to do his job correctly in relation to PRSA's should he not dispense the best advice for his client as this is his Job.

If this is the case he would have to tell them to go to a discount broker otherwise he is not giving the best advice.

If you asked a car dealer which was the best model of car to buy he will always tell you its the one he is selling.

Is the term "Independant Financial Advisor" misleading along with the rest of the jargon that goes with the pension industry.
 
Re: Opinion

In fairness to Laser I actually think the advice given on this thread has been quite accurate and should be heeded by Belinda.
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The real irony with Laser is that at no point did I or others disagree with the contention that advisers should be paid. Of course they should. I said repreadedly that I'd pay quite high fees.

I did (still do) have an issue with the method of payment for advice (flat fee v's percentage of contribution), but I think that could have been talked through in an intelligent way, as I think it just has been with Alan.

Laser seemed to interpret a discussion about Execution Only services as a major attack on financial advisers.

If his concern is that AAM encourages people to understand their finances and possibly get into a position where they can use Execution Only services like Stockbrokers, or even PRSA brokers, then he may have a point. I don't think AAM should apologise for that, it's here to assist and educate. Not everyone will become financially fluent, but those that decide to shouldn't be subjected to abuse by a financial adviser calling them skinflints.

Ironically, anyone who does get financially fluent, and starts accumulating a bit of wealth will soon see the benefit of paying for financial advice, even if they have mastered specific things like share picking.

The tactic of going in feet first and insulting AAM regulars, and then misrepresenting their views over and over, was bound to turn people off, even if some of his other points made sense. Hence apart from checking his posts to see if they need moderation, they now go unanswered.

First impressions last. Particularly if no effort is made to correct them.

-Rd
 
Re: 5%

If this is the case he would have to tell them to go to a discount broker otherwise he is not giving the best advice.
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I wouldn't agree POAP. Although I see where you are coming from. If an adviser tells you to go to a discount broker, he has given you advice. He may have put in a bit of time coming to the assesment. He may have also told you how much to contribute and how much to expect on retirement etc.

He should get paid for that. It's just a question of how much. And how he should be paid if after going to a discount broker, but you go back to the original adviser later for more advice.

I'd prefer to pay the adviser for his time and effort, rather than pay a %. It sounds like you'd prefer that too.

As Alan pointed out it may be hard to convince people that the advice is worth a couple of hundred euro, although I think if you show them the long term effect of 5%, people would be convinced pretty easily.

Funny how people will shop around for the best rate on a credit card, but seem unconcerned about a couple of percent here and there on a mortgage or a pension.

-Rd
 
Round in Circles.......

POAP, I'm wondering if you are taking the michael.

If an "Independant Financial Advisor" was to do his job correctly in relation to PRSA's should he not dispense the best advice for his client as this is his Job.
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They should and generally do.

"If this is the case he would have to tell them to go to a discount broker otherwise he is not giving the best advice"
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Aye carumba. You miss the point. You assume that the off the shelf product the discount broker has on offer on an execution only basis is the best advice. It may be for someone that DOES NOT WANT advice. Do you go to an ADVISOR if you don't want advice?

Again and I feel I am beating my head off a brick wall here, if you DO WANT advice you go to an advisor who you pay for it. How you pay for it? By paying a fee or a commission. Advisors aren't a charity.

"Is the term "Independant Financial Advisor" misleading along with the rest of the jargon that goes with the pension industry. "
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In my view, no. The industry is heavily regulated. IFRSA do file checks on brokers to ensure that (a) the clients circumstances have been documented and that (b) the broker can show that the best advice was given.
 
Missing the Point

In an effort to freeze out my comments you ignore the central contention continuously. AAM enthusiasts are correct to pressure for reduced fees, but incorrect to assume that this works outside of the tiny community AAM represents. Consequently imposing your philosophy on the market in general is dumb.

Belinda asked if his/her 1 Euro idea was workable. None of you have told Belinda that its off the wall, because to do so would mean admitting that the cosy consensus on AAM since the start that the planet is moving or can move en masse to bypassing advisors is unworkable in reality. And don't think that you haven't said so.

Time and time again you have put forward token fees/commissions to advisors, underplayed the sheer amount of time required to fulfill face to face meetings and regulation, and occassionally commented in a prejudical and intolerant way towards people who make a living, essentially proving why your view of the world is wrong.

You don't tolerate me, not because of the style excuse, but because you can't engage in the debate without losing it, not because I'm in any way smarter, but because your position is daft.
 
Have you read the thread?

"None of you have told Belinda that its off the wall"

So far, both Observor, myself and your goodself have told Belinda that it is a very difficult business model to make work.

Off the top of my head, I can't remember anyone on AAM recommend the business model.

"You don't tolerate me, not because of the style excuse, but because you can't engage in the debate without losing it"

You seriously believe that it’s not your style that has alienated some of “the usual windbags with dumb and simplistic answers”?
 
Re: Have you read the thread?

So far, both Observor, myself and your goodself have told Belinda that it is a very difficult business model to make work.
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I think I said that if she's going execution only then she should charge a fee for that. The almost free PRSA might be an interesting publicity stunt but it should be time limited.

It sounds to me like her €250 was not for a detailed financial advice service, it was just for a slightly more hand holding style of execution only service.

I don't know why anyone would expect me or anyone else to tell Belinda whether the business model would work or not, we're not financial advisers. Alan, if you point out problems with it then Belinda should take that advice seriously.

On the other hand the general reader can only suggest whether a product or service sounds attractive. That's a valid piece of information for Belinda to try to gather. It's up to him/her to find a way of delivering it.

I'm still not convinced that on PRSA's the 5% fee is justified. I understand the arguments for it, but I still have reservations. I actually think that specifically on PRSA's the 5% fee is bad for both client and adviser.

But we can agree to disagree on that. At least it's been well and truly thrashed out. People can make up their own mind, which is what it's all about anyway.

-Rd
 
Not Over yet

Not a chance that this will go away. The Pension Survey in the Independent today smashes the case being put forward by the skinflints.
 
Re: Not Over yet

according to new research, the rich don't like to be flash with their cash
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Good link. Not sure if it counts as New Research though.

Thomas Stanley wrote about it in 1996 in The Millionaire Next Door. And again in The Millionaire Mind.

It does tend to apply more to consumption though. The wealthy have no problem paying for professional services such as accountants, financial advisers etc. "Some people" don't seem to be getting that message. But, what can you do?

One of the things Stanley points out is that the wealthy tend to consume at a level equivalent to an average household with as much as a third less income.

High income households that can't accumulate wealth may be consuming at a rate equivalent to an average household with an income more than twice as high as theirs.

If you've got a Merc or a Beemer in the Driveway, and can't figure out why you have very low net worth, check out either book.

-Rd
 
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