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Allianz GI: only 7% of consumers will pay £100 for advice

by Michelle Abrego on Feb 11, 2013 at 10:57

Allianz GI: only 7% of consumers will pay £100 for advice

There is a huge mismatch between the amount advisers are planning to charge in the retail distribution review (RDR) world and how much clients are willing to pay, according to fund group Allianz Global Investors.

A survey by the provider found that 86% of advisers planned to charge between £100 and £200 an hour for advice, but that only 7% of clients surveyed would be willing to pay this much.

One in four clients would be prepared to pay up to £50 per hour for advice, but only 7% of adviser would be prepared to work for this rate.

Allianz GI surveyed 200 adults aged between 50 and 70 year old and 166 financial advisers.

A further 21% of consumers would be willing to pay between £50 and £100 an hour but again just 7% of advisers would be willing to work for this rate.

The survey also found that 32% of consumers surveyed would not be prepared to pay for advice at all.

Nick Smith (pictured), Allianz GI head of retail sales, said the survey results were concerning.

‘In the run up to the RDR there was a lot of speculation about an ‘advice gap’ - in other words, a discrepancy between what investors are willing to pay for advice, and what advisers are willing to work for. As the dust starts to settle, our research points to a really significant mismatch in expectations.’

42 comments so far. Why not have your say?

Michael Brown

Feb 11, 2013 at 11:50

If they want advice they are having to pay for it. After all is that not what RDR has caused?

Pay penuts and you will get monkeys.

Perhaps the survey refelects the questions that were asked and not what should be asked?

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Richard Ellis

Feb 11, 2013 at 12:06

A survey of 200 clients? Sample size too small to mean anything IMHO.

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Smithling

Feb 11, 2013 at 12:09

Pointless statistic.

If only 7% of people are willing to pay between £100-£200 then those are the people that can afford an IFA.

I'm not prepared to pay over £100k for a new car, but that's because I can't afford it, not because I don't want it.

32% not prepared to pay for advice at all. Again, I believe this would be the people that take the bus to work.

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John Burchett

Feb 11, 2013 at 12:14

All depends on how the questions were constructed but if they won't pay the going rate for advice then they will have to make their own decisions. RDR really has nothing to do with this.

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Mitul Patel

Feb 11, 2013 at 12:16

surveys are useless - its the value the client perceives in real time that is the true test

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Hickky

Feb 11, 2013 at 12:17

Were the people surveyed just at random? Did they already have a relationship with a financial adviser? Did they have any money? Did they percieve any need for advice?

Did all surveyed advisers only work on an hourly rate or would they consider percentages or flat fees?

Just what does Alianz want to prove by commissioning this survey?

Perhaps it wants to promote a direct to client offerring shortly and wishes to have a flawed survey to back it up.

How about asking the same sample how much per hour they would pay an accountant, or a lawyer. I bet the results would be similar!

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Mike Humble

Feb 11, 2013 at 12:25

According to Age UK's recent Later Life survey, there are more than 21 million people in the UK aged 50 or over. 7% of 21 million gives a large number of potential fee paying clients. Enough for us all?

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Charles Rickards

Feb 11, 2013 at 12:36

I agree with Michael with regards to you get what you pay for. However, do you always? The sample was 200 people, so 14 people would pay. If the 200 are representative(Which I doubt!) then Financial advisers have nothing to worry about.

But I expect that the questions used where asked to get the results wanted and as such are probably not reliable.

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John Waith

Feb 11, 2013 at 12:46

I have lost two potential clients because they didn't want to pay my fees and I have 130 who did - and I am not cheap.

These surveys are a waste of the paper they are written on and a total waste of our time.

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Jonathan Kirby

Feb 11, 2013 at 12:50

Hourly rates are meaningless.

We quote a price for the work and have had nobody refuse or query the amount yet, but then our charges have been 'RDR friendly' since before RDR was (ill) conceived.

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Luxemburg3r

Feb 11, 2013 at 13:11

Seems to me the survey suggests the public may not think financial advisers are worth £100 an hour.

I understand Level 4 is about the equivalent of the first year of a degree course. Would you pay a trainee accountant or solicitor £100 an hour for advice?

Of course, many advisers may actually have the experience and knowledge to hold much higher qualifications, but for some reason they haven't taken the exams. Unfortunately, until you have the qualification, we will never know.

The public may cynically assume that advisers with the minimum qualifications only bother with the minimum qualifications to allow them to practice. After so many financial services scandals the public may be entitled to think that financial advisers would really, really want to clean up their collective act. Minimum qualifications the equivalent of a Masters Degree may go some way to giving the public some confidence.

The longer we hear "I've been doing this job for twenty years and haven't had a complaint", the longer we hear that as code for "I can't be bothered to take any more exams". I'd rather take advice from an adviser who takes his career seriously.

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James Clancy

Feb 11, 2013 at 13:16

I have always said that the biggest problem with the RDR is the client reaction to RDR itself, especially in relation to how we will be paid.

While the regulators have always stated that they want a vibrant and profitable adviser sector post RDR

They forgot the vast majority of the UK public are they wiiling to pay for it.

Since 1994 I have run a fee-based practice. Granted, a vast majority of my income was and still is derived from commission received against fees otherwise chargeable.

The client recived a detailed time ledger of income received( Commission? Retiner Fee) and the timeI spent on managing their affairs.

The system worked and was equitable to both parties.

Personally, over the next few years there will be downward pressure on fee income.

The approch we should be taking is to ask the clients what they are willing to pay for and then agree a service around the conversation.Provided it is explained to them they agree the service level is confirmed in writting.

Instead of asking are you willing to pay £100 for advice.Would it not be far better to ask.

Are you willing to pay your adviser fees for an agreed service level.

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Hickky

Feb 11, 2013 at 13:17

say there are 30,000 authorised advisers left in the industry. 21 million over 50 and 7% will pay, thats 3 million. Thats 100 each. Then there is 6 million 35-50, and 7% will pay means another 14 per head. Add to that the numbers who will pay, but need a little convincing and you are soon up to 200 per adviser. What conclusions should be drawn from this survey?

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James Hurdman

Feb 11, 2013 at 13:44

Never mind the conclusions of the survey Hickky, the conclusion that I would draw from your comment is that you can't do maths. 21 million x 7% = £1,470,000.

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Hickky

Feb 11, 2013 at 13:51

@ miniscule country in Northern Europe with cheap petrol.

You are mistaken when you try to make an equivalent to the first year of a degree course to the new minimum requirements for financial advisers. When doing my first year at Uni, I could breeze FUEs using my prior A levels. You could not pass the current examinations doing A level economics and law, blimey, you do not have to be able to spell or write in English to pass A levels.

The point I make is: is examination the proper way to assess an individual's attitude to treating the client fairly and ethically? Is being able to recognise areas where you may need further advice on specific parts, then obtaining that specialists input, sufficient. The job does not work in a vacuum and it would be arrogant of me to assume I know everything I need in all areas of financial advice, but I know probably 95% of all I need to know and feel I know enough of the odd circumstanses where I need to consult someone with specialist knowledge.. Examinations tend to exam the more obscure areas the further advanced they go, and tend to be specialist, therefore have little practical application in the day to day job. If you specialise in any one area, then it is appropriate to take additional qualifications, such as long term care or pension transfers, trusts etc.

If you really believe that increased qualifications means a more honest and ethical adviser, then you have not lived in the real world.

It is the rip off merchants and fraudsters who are more interested in lining their own pocket than their client's welfare,who need censuring. Actually, I prefer them to spend some time in Jail. In there, they should make good friends with Accountants who feel it is better to line their own pocket with client's money than pay the Government, by recommending untested relief schemes to their clients. A Trainee solicitor or accountant would not be allowed to recommend these schemes, however are often charged out at over £200 per hour. Good value perhaps?

P.S. It is not my spelling that's at fault, it's the keyboard!

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Hickky

Feb 11, 2013 at 13:53

@ James

Opps, specialist advice needed!

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Michael Brown

Feb 11, 2013 at 14:08

@Hikky

We are one here and I don't mean that laterally!!

I have just lost a client to a "retired IFA" who transferred the plan, I reviewed and amended every 90 days to a plan with Friends Life. No doubt paying 7% commission is what review service? Nothing. What trail? Nothing and the comment he gave to the client we can do better. God he did not even get the detials of the plan and the performance of the plan! At least this shylock has gone away and I suppose in a couple of months no more will disappear to this type of adviser?

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Terry Murphy

Feb 11, 2013 at 14:19

Would you pay a builder an hourly rate? A doctor? Your dentist? Plummer? I certainly don’t like paying accountants or solicitors hourly rates. So why would you pay an adviser an hourly rate? Most people want fixed fees, I certainly wouldn't feel comfortable paying anyone hourly rates! So get it right when doing the surveys and get a different result. "how do you want to pay for the advice, a fixed fee or hourly rate? Do you mind that your adviser gets paid for advice given? Especially now that most things are explicit and providers are not piling on their hidden fees! you may even end up with a cheaper product

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James Clancy

Feb 11, 2013 at 14:21

@ Hickky

Opps What do you mean by specialist advice needed.?

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Smithling

Feb 11, 2013 at 14:28

@ Luxemberger

I've met plenty of people with a Masters in various subjects who I wouldn't trust to walk my dog, let alone give me advice in their specialist field.

Staffordshire NHS? Doctors

Libor fixing rate? Bankers

Goverment as a whole? Politicians

Ambulance chasing legal firms? Solicitors

Some of the most qualified professionals in the country are listed above. If you honestly think that advanced qualifications are an indication of integrity, honesty and ability then you are deluded. They are a bonus and a sales tool, not a stamp of quality.

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Luxemburg3r

Feb 11, 2013 at 14:38

@Hickky

I would expect a professional adviser to act ethically and fairly and consider recognising areas that require further advice as being central to the job he is doing for me.

However, before you get a chance to show me if you are any good at your job, I would like to know you are qualified in the first place. I don't think that is an unreasonable expectation.

If Level 4 means you are a general practitioner who will refer me to a properly qualified specialist when you can't provide the expert advice, that is just fine with me. I accept I will have to pay higher fees to the specialist, but presumably I could establish he/she is a specialist because he/she will have the requisite qualification?

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Michael Brown

Feb 11, 2013 at 14:46

@Smithling

But what exams do prove that you have studied and passed and do not use the rue "I have XXX amount of years" with all the expirience that comes with this.

I have yet to find a level 4 adviser that has not gained anything from studying and taking any exams.

@Luxemberg

I wish the general public shared your views. Unfortunately they are usually driven by costs. As an industry much, much more needs to be done to show the worth of financial advice. Unfortunately people are aware that if they need an accountant or solicitor they have to pay where as financial services, thats free is it not?

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Luxemburg3r

Feb 11, 2013 at 14:51

@ Smithling

The subject is not about honesty, integrity and ability. Some of the most able people on the planet are investment bankers and unfortunately, as a group, they have have been shown to lack honesty and integrity.

On the subject of dishonesty and lack of integrity, let's not forget that financial advisers were responsible for endowment mis-selling, pension mis-selling, UCIS mis-selling etc., etc.

The subject is about whether or not the public will make explicit payments for financial advice. While some will, it seems the majority may not. One of the reasons they will not pay is because they do not (yet) place a value on that advice and that is probably because they do not trust financial advisers.

Now, whose fault is that?

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Luxemburg3r

Feb 11, 2013 at 15:04

@ Michael Brown

I agree the public are driven by costs. But there is more to it than just the actual price to be paid.

The emotional side of the equation is whether it appears to be worth paying for the advice and it is about time the industry in general got its collective heads together to persuade the public just how crucial it is to take advice from a properly qualified adviser. And, being able to physically demonstrate, through qualifications, that you know what you are talking about to the great British public is a pretty good place to start.

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Michael Brown

Feb 11, 2013 at 15:08

@Luxemberg

Whilst I understand your comment to say that FA's were responsible for all the miss-selling is a bit to far.

One has to consider the "legal" people trying to make money out of investments started over many years before.

Yes there were miss-sales but there were also allot of good sales.

Where the public perception comes from is the daily sheets who peddle the dirt in order to show they are doing a good job in finding faul when in many cases there were not. I have clients who were sold PPI and thank goodness they were as it got them out of trouble. Now they can claim and be given compensation!

In over 20 yeasrs I still await my first case of a pension, endowment and I did not do UCIS mioss sales.

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James Hurdman

Feb 11, 2013 at 15:11

Luxemburg3r, the public have to make payment for financial advice, otherwise they don't receive it. I could guess that a mechanic at a Volkswagen is worth £40 an hour, the reality is that they charge much more than that and if I want to use their expertise then I have to pay for it. The reasons why most people won't pay for financial advice is because they perceive that they can't afford it (although I would challenge this perception). There's is just a disconnect between what they guess financial advice costs versus what it actually costs. This will fade as consumers more become aware and this is why this survey is pretty pointless.

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Michael Brown

Feb 11, 2013 at 15:12

@ Luxemberg

Absolutly, the industry has failed to grasp the importance of "advice" for clients. The troubkle being the negativity given by the press is also at fault here.

I am both Chartered and Certified and last week a person rang for advice with regards to the 3 pension funds in the words " these are crap, can you sort them". On explaining the costs I am yet to recieve the return phone call. They are not aware of all the business costs that we have and think they are none!

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Hickky

Feb 11, 2013 at 15:37

@ Grand Duchy

1 You may expect an adviser to be ethical and fair, but is that what you always get? Be suspicious of everyone who wants to take your cash for services. Lawyers, Accountants, Salesmen, Bankers, etc. It is so sad I have to state this, but the attraction of lodsamoney has often taken preference over ethics.

2 I certainly do show my qualifications to clients, both in the reception and as a card in my wallet. I also have some specialist qualifications as well, certificated if you need to know. But does that make me an ethical and trustworthy adviser? Only you can tell me that!

3 You may have to pay a higher hourly fee to the specialist, or a lower one sometimes. Being a generalist you have to know a huge amount about a lot. A specialist may only know everything about a small subject. There may not even be an exam in the specialist's subject. Anyway, what you need to know is that any liability for unreasonable advice rests with me, not with the specialist, as it is me that gives you the final advice.

With your comments regarding endowment, pension and UCIS miselling, I agree with some of the argument, but most endowment sales were fine, and pension misselling to SERPS, with the fullness of time, is beginning to look like it was in most client's best interest after all.

You are right, it is a question of trust, but at least the worst of the cowboys are disappearing (about time). However if you don't wish to to trust an IFA, who do you trust?

a The unregulated firm on the 'net who promises 7% no risk ethical oil investment?

b The nice guy who phones you up with an unbelieveably good investment in a firm in Deluth Georgia that is bound to double in two years?

c Your bank, who, now it doesn't give ffinancial advice, will sell you a 3 year, no exit, bond at 2.4% before tax with no questions asked.

d Your local estate agent perhaps, always willing to recommend a suitable property for investment.

e 'nvest your money in this fine Skoda, sir' can be heard along the A 13 (Essex or Luxemburg)

So you do it yourself, have no-one to help you. Read a few books but don't quite understand. Try to ask some detailed questions from an IFA but find you have to pay for time, so don't go there.

Pick a few funds and buy direct for 3% B/O spread. Some good ones, some poor ones. GOOD LUCK!

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Michael Brown

Feb 11, 2013 at 15:46

@Hikky

Quiet day like me?

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Luxemburg3r

Feb 11, 2013 at 15:59

@ Michael Brown

One of the positive features of RDR is that it has re-aggregated the food chain.

For me it has properly separated financial advice from investment advice, which historically had been delivered as one charge because it suited product providers (historically the financial adviser paymasters) to be opaque. Now I should be able to see explicitly what the wrap costs, what the funds cost and what the advice costs and I can have an intelligent conversation with an adviser about the cost of financial and investment advice.

The greatest challenge facing financial advisers today is persuading clients to pay you for your advice. In the past the public thought they were paying you for a product sale and for too many advisers it was convenient to leave it that way.

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Luxemburg3r

Feb 11, 2013 at 16:05

@ Hickky

I agree. I think I have already said pretty much everything you have.

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Hickky

Feb 11, 2013 at 16:07

@ Michael

Yup

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Usually found sitting on the fence

Feb 11, 2013 at 16:36

Some good points about the validity of the survey and qualifications etc.

It's all about timing. At the right time, under the right conditions, paying for advice will be very acceptable. That is providing the advice adds some benefit/value. Therefore most people will have no apparent need to see an adviser of any sort, as they will not believe they have enough to make it worth their while. So where they may have popped in to get a wealth check up, with the free "save more, spend less" advice and the commission driven insurance sell... Insured individuals will be fewer and farther between.

The key, which I am sure most of you already know, is to pick visitors up off the floor and give them a strong and sweet cup of tea and an encouraging word of understanding, after you tell them your charges. Then release them back into the wild and hope your act of kindness (the tea) brings them back to you when they have something of value to care about enough to pay your fee.

At some point, there will be financial advice drop in centres on the high street. Probably attached to coffee houses or cash converter shops!!

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Jonathan Kirby

Feb 11, 2013 at 16:38

@Luxemberg3r

You mention endowment miss-selling.

We keep records of maturities and for the chap who paid £26.64 per month for 25 years from 1975 and received £49,069 and a surplus of £36,069 over his mortgage amount was that miss-selling?

Move on 9 years and £21.64 for 25 years same company came in at only £11,409 a shortfall of £590 on the mortgage amount.

Was he miss-sold at the time - no way.

Endowments still looked a very good bet at the time he took it out but the world changed.

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Luxemburg3r

Feb 11, 2013 at 17:34

@ Jonathan Kirby

Pure endowment versus low cost endowment?

Regardless, you can't ignore the fact that the public perception of financial advisers is that they are not worth paying. If you don't change that perception you will go out of business.

Those who use financial advisers know and understand the value. Its the others, your future clients, you need to worry about.

A friend of mine went to an SJP seminar the other evening. He went because he had received so many invitations in the past, he finally gave in. He was very impressed. I mentioned that SJP is not independent. He said, "so what", he had never had an invitation to a seminar from an IFA.

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philip spierling

Feb 11, 2013 at 18:11

To busy working,,

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Ian Plymouth

Feb 12, 2013 at 08:33

Whilst the sample of 200 is very small, the results mirror that of the 1100 clients Hargreaves Lansdown surveyed.

It is charging fees to new clients that will be the measure of this, not advisers switching existing long standing clients to the new structure.

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Jonathan Kirby

Feb 12, 2013 at 09:56

@Luxemburg3r

Low cost endowments in each case with Standard Life.

Perception may be a problem for the industry as a whole but we have been established nearly 50 years, have a loyal client base and, as stated above, long before RDR was dreamed up decided that value for money is paramount so whenever we recommended a product took no notice of maximum commissions or 'what we could get' but tried to make the arrangements fair to both our client and ourselves.

Unfortunately, due to the cost of remaining authorised and the additional time even simple tasks take RDR has resulted in an increase in our charges for many clients compared to last year.

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Jonathan Kirby

Feb 12, 2013 at 10:07

@Luxemburg3r

PS - although we do take on the odd new client, at nearly 63 years old, I think my client bank will see me out!

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Michael Brown

Feb 12, 2013 at 10:19

@JK

We are getting old are we both not and yes my clients will see me out.

Luxemburg does have a point though with regards to our offering.

The general public should be aware of costs that we face. I have told my clients this year of our 100% rise in FSA fees and nearly 200% rise in PII costs and that were absolutely staggered.

Our professional body has much work to do.

The issue that we really face is a matter of size. We are all mostly small and do not have the funds to action ourselves. Bit like the thumb in the dyke wall. The real question is how do we overcome this issue or do we "batten down the hatches" and die with our client bank?

As for the future that will mean less IFA’s again and less choice for the clients. Where are they to go? Nowhere as the options are closing down.

The implications of RDR are here right now and what a great job by the FSA, I do not think so.

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Julian Stevens

Feb 12, 2013 at 10:22

I never propose hourly-rated fees to clients. I tell them what I'm going to do, how much it's going to cost and for how much of that cost they're going to have to write a cheque upfront. In the early days, nearly half would ask if they could think about it and get back to me (which, of course, they never did). Nowadays, virtually all just ask to whom should they make their cheque payable and the balance (most of the total) is facilitated by adviser charging. What's the problem? And, equally to the point, who cares about a survey of 200 people when we don't even know what questions were asked and how they were framed?

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Jonathan Kirby

Feb 12, 2013 at 10:52

@Michael Brown

I totally accept the point about perception.

What I would say is those who know what we do are happy to pay as Julian says above.

The sledgehammer of RDR has made life very difficult though.

Last week when I rang a client regarding an unrelated matter he said could he pop another £1,000 in his ISA.

Even on execution only and using email in preference to post the cost in terms of time spent is way in excess of anything that it is reasonable to charge so we end up either upsetting a valued client or charging a nominal £30.

I can't believe in the their wildest fantasies about what happens in the IFA world this is what the FSA intended.

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