Video explains the difference between non advised, full commission sales v independent and restricted financial advice and different fee charge methods.
“Hello again. The subject for my video today is the different types of charges and costs for financial advice. If you’ve come to our website or if you're watching this video then you're clearly comparing financial advisory services and doing some investigation at this point. Now, let's consider the different routes to getting financial advice.
Is go direct to an investment company, to a bank, to an insurance company, to a pension company, going direct. But go direct, you are likely to not receive financial advice. No advice service, that’s what most of the banks and building societies insurance companies offer a no advice service. You buy, you choose your product, your pension, your investment.
The second [route], is independent financial advice. I’m an independent financial adviser, I'm a chartered financial planner. We offer you advice.
The third type is a restricted financial adviser. A restricted financial adviser will only offer you a certain range of products because maybe, they’re not qualified to offer a wide range, or they’re not unauthorised or they choose to only ‘sell one company or two companies types of product.
So essentially different types of advice or seeking advice:
1. Go direct or a non-advice sale,
2. Full independent financial advice,
3. Restricted financial advice.
Now, what I want to cover quickly is how a charge is made.
Where you receive ‘financial advice’, whether it independent financial advice or restricted financial advice, your financial adviser must quote you a fee. If it's a non-advised sale, remember I talked earlier about banks and building societies not offering advice? Where it’s a non-advised sale they can still take full commission. Staggering isn’t it? You can take full commission for a non-advised sale it’s ridiculous.
Now looking at the other side, where it’s advice, whether it is independent or whether it is restricted, a fee must be quoted. And that’s really getting to the ‘nub. of the discussion for this video.
Different types of adviser quote and charge in different ways and it's helpful to understand how they charge. We as financial advisers, we quote you set, fixed, monetary fees in round numbers, in pound numbers, pound notes, as it were; and that is quoted in writing to you. Other financial advisers what they [may] do, is they will offer you a percentage, they will say: ‘We will charge you a percentage upfront and then we will also charge you an ongoing percentage, a trail fee’. So the example that I give for that is you might talk to a percentage based adviser and they will quote you: ‘Right we charge 3% or 4% as an initial fee and we then charge an ongoing fee of let's say 0.5% pa’. Some maybe more, some maybe less, it’s the same with the way we quote our fixed fees, there aren't many advisers that quote fixed fees but, you know, sum may be cheaper than others. It very much depends on the service that you're seeking at the time.
But the issue for me is for you to understand that when you are comparing services. Know that if it's a non-advised sale: read the small print they can probably take full commission and look at what are they getting paid. That has to be in the quotation for the investment or the pension that you're taking out, before you take it out, so always ask them. If it's not there, ask them how much they getting paid.
Where its financial advice, whether it is independent or restricted, we all have to quote you a fee, some will quote percentages some will quote fixed fees. [And] I think it's wise for you to understand exactly what different types of financial adviser offer and make sure that you are comparing like-for-like. [Yeah], because you may be comparing chalk and cheese, where you are ‘going’, for this person is getting paid ‘X’ or charging me ‘X’ and this person is quoting me ‘Y’. But, make sure are you comparing the sort of services that you are paying for.
The danger for me is the non-advised, selling techniques where full commissions can be paid. You have no protection, you chose one investment or what pension you wanted but you possibly pay full commission.
Looking at the fee-based model make sure you do the numbers. If a financial adviser is quoting you an upfront percentage and then an ongoing percentage work it out. You know, if you got £100,000 to invest and they say: ‘we quote you 3% plus 0.5%. That’s £3,000 upfront and then half a percent, £500 per year. We quote set fees: to invest £100,000, we would not charge you 3%, £3000 we will not charge you that, our fees are lower and then we don't take an ongoing trail fee.
We offer you the option of an ongoing advice service but that's quoted in set fees. So just remember when looking at the cost of financial advice and comparing the costs of financial advice, look at what sort of advice service you're receiving: direct, independent, restricted advice, but then look good exactly what people are being paid: full commission, fixed fee or percentage fees.
If you’ve got any questions, as ever, please do contact me. Thanks very much for watching.”
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