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FSA survey reveals 'free advice' myth alive and well

by Daniel Grote on Dec 19, 2012 at 08:12

FSA survey reveals 'free advice' myth alive and well

Nearly half of consumers who receive financial advice are unaware they could be paying for it through commission, according to a survey by the Financial Services Authority (FSA).

The regulator's survey of 2,000 people found that 49% were unaware of potential commission payments, The Independent has reported. Just under a third (29%) said they would pay a fee for financial advice while a third of those who do not currently receive advice thought it was free.

The FSA said: 'In response to the survey's finding the FSA has put the record straight by pointing out that advice has never been free. Consumers have always paid for the advice they receive, but they often didn't understand the mechanism through which they paid for it.'

102 comments so far. Why not have your say?

robert c

Dec 19, 2012 at 08:27

are these the same people that think compare the market or go compare are charities?

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Alan Powell

Dec 19, 2012 at 08:27

Am I stupid here it says "While a third WHO DO NOT CURRENTLY RECEIVE ADVICE thought it was free". Well if they do not get advice then it would never have been explained to them or is it saying they have done business the adviser has not gone back to advice them and did not explain the remuneration scheme, a bit confused

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Incompetent regulators via mobile

Dec 19, 2012 at 08:31

The FSA is telling porkies.

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Gillian Cardy

Dec 19, 2012 at 08:33

They are the same people who should have had commission clearly disclosed to them, and they are the people who, if getting advice from an adviser describing themseves as Independent, should have been given the option of paying for thier advice by way of a fee - which would if nothing else have led to a discussion which highlighted the costs of advice and how to pay for it, even if in the end they still opted for the commission route.

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Ian.Green

Dec 19, 2012 at 08:34

IFA survey reveals MAS 'free advice' myth alive and well

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Nick

Dec 19, 2012 at 08:37

Just under a third (29%) said they would pay a fee for financial advice while a third of those who do not currently receive advice thought it was free.

Bet these where the same people!

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Alasdair Sampson (FinServ Solicitor)

Dec 19, 2012 at 08:37

No, I don’t think the FSA is telling porkies as such.

It’s the questions that are loaded.

What would interesting to know is how the FSA picked the sample of consumers they asked, and what it was they asked.

If you know the answer you want for a specific purpose – and here the purpose is clearly that FSA are correct to ban commission an convert to fee charging – then it is relatively easy to set the target and the question.

Unfortunately, politicians and the public who live outside the surreal world of financial services, still actually believe these people.

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Boston

Dec 19, 2012 at 08:38

It would be interesting to know what questions were asked and demograph of those in survey. Agree with Alan - asking for an opinion that they probably have no knowledge about is stupid and shows how out of touch with reality the FSA are to put any weight to the results. Could it be they back the results as that's what they need to support RDR?

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Alan Powell

Dec 19, 2012 at 08:39

So Gillian you are saying that the part that says they are not currently having advice should have been told?? Have they been sold a product with no advice given or thought about or never had advice so why would they have been told in the first place. Over the years I know Banks use to say there was no commisssion as the advice was free because they were paid a basic wage but never come across an IFA saying it but not saying they have not. It just seems yet again the Banks are the biggest culprits but the IFAs get the hammering

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Anitaki

Dec 19, 2012 at 08:40

...........and how much did the survey cost?

Did they get the "required outcome" they were looking for, due to loaded questions?

Who set the questions?

Who asked them?

'More questions than answers' already.

. . . .Could NMA get some of these answers??

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Peter Hurley

Dec 19, 2012 at 08:42

I have just done a survey. I asked 2000 people who had never used a Solicitor and 37% said he would have blue eyes!

How is anyone informed about the advice process by asking questions of people that have not used it!

I am going up the pub.

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Paul Richardson

Dec 19, 2012 at 08:45

Ian Green - spot on ....

Just Google Money Advice Service .....

''Free, Unbiased, Independent Advice - Money Advice Service'' ........... confused by consumers !

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Alan Higham via mobile

Dec 19, 2012 at 08:47

The FSA also believes that the consumer can distinguish between advice with a recommendation that they Pay a fee for and advice without a recommendation consisting of information and guidance which they are only obliged to have a commission disclosed to them for.

I would suggest this survey shows just how unlikely it is that consumers will be able to tell the difference.

My only beef With the RDR is that the FSA have allowed people who do not give advice to be exempt from it.

FSA regulation is encouraging consumers to buy complex products such as annuities without advice. It is clear that the majority of consumers do not have the financial capability to make the correct decision without expert help. As a result we find that nearly 1 in two customers would make a serious Mistake which would reduce the income they have to live on in retirement for the rest of their life.

Meanwhile the companies who take the commission for delivering non-advice make profit margins close to 80%. The exploitation of consumers ignorance and relative weakness in the marketplace by those who are more knowledgeable and powerful to result in disproportionate gain for the supplier relative to the outcomes for the consumer is exactly the reason why we have a regulator in this industry. For the FSA to allow this situation to persist is a gross dereliction and negligence on their behalf. Should there be any material consumer detriment that occurs over the next few years until the situation is fixed then the costs of putting it right Is likely to fall on those who try to do the right thing.

The current regulatory system in financial advice is therefore not fit for purpose and needs an urgent rethink.

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Yellow Monkey

Dec 19, 2012 at 08:47

I recently had a client who was sent out a company feedback form, to which he commented that his adviser (me) had not explained charges to him!

Paper trail is vital as I had produced a charge comparison report and table for the client via email prior to advice taking place, in which he replied to the email thanking me for a clear and concise explanation on the charging structure and how it applies to him.

Clients can simply be forgetful at times! or are trying to pull a fast one!

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Anitaki

Dec 19, 2012 at 08:47

IFA survey reveals:

1) FSA out of touch

2) FSA out of control and unaccountable

3) FSA bosses do not know the difference between 'importance and 'self-importance'

4) FSA will always spend money unnecessarily when gIven any opportunity

5) FSA still going after the wrong targets

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Hugh Jars

Dec 19, 2012 at 08:53

As usual the 'Survey' leaves us with a lot more questions than answers.......

Where did the 'consumers' receive the advice, - IFA's or Banks?

How good a memory did the consumers have?...on a scale of 1-10 ?..... as you can't simply generalise on the quality of advice delivered, judged by what consumers recall from the 'point of sale' which can be a 3 hour process in total with more information to retain than pretty much any other transaction /event the consumer will face in the whole of their lifetime...

Bollocks survey with too many unanswered questions, carried out on too few numbers in the sample group to have any credibility

Quite encouraging that 29% would be prepared to pay a fee for advice ??? just a case of setting your fee levels right really.

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Anitaki

Dec 19, 2012 at 08:56

Another survey gave the figure that nearly 25% of the population are RELYING on winning the Lottery to fund their retirement.

The way that the FSA has acted suggests they feel this figure should be higher, 'cos there won't be anybody left to give them free advice. A very high percentage of the population are going to have a shock when they get to 65

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Phillip H

Dec 19, 2012 at 09:04

Who gives a sh**. Get on with it

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Hugh Jars

Dec 19, 2012 at 09:08

@ Alan Higham ///spot on mate.... you quote; -

As a result we find that nearly 1 in two customers would make a serious Mistake which would reduce the income they have to live on in retirement for the rest of their life.

I've just helped a client buy an annuity with a 'small pot' of £41k.....

He contacted me at the 11th hour, having looked over annuity comparison sites, and been through all of the MAS Unbiased / 'free' / help, in the belief that an IFA wouldn't be interested, in helping on a 'such a small fund'' - (his words)

He had quotes for annuity for his 'personal pension' and about to go ahead with an application via an online site.....

Turns out when I went through his paperwork, it was immediately obvious he didn't have a PP.....it was an Aegon S32,..... and on simple enquiry from us to Aegon...we establish he had entitlement to 47% tax free cash....not the 25% he was about to embark on...

Was he happy ? ..... was he happy to see us earn £366 Commission ?

You bet,

Now then...the ' Unintended consequences' will see an awful lot of small pot transactions...without advice....and even if the online annuity firms...discover a similar situation...can they / will they open it up to advice, at the expense of them losing out commission for an 'unadvised transaction' ?

Well I'd like to think the FSA will have a process for checking their advice... sorry Non -Advice....

How can the man in the street be expected to understand all the bollocks....advice ? / non- advice ?.

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John Boy

Dec 19, 2012 at 09:08

Continuing a theme of 2012, Keep Calm and Carry on getting Shafted!

Advice will only be given to the elite (in wealth terms) in years to come because they will be the only clients who can afford to pay our regulatory bills for us. Another example in the now daily tripe from the FSA illustrating if proof were needed that they dont understand what they are regulating so cannot be fit for purpose.

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Shane Barr

Dec 19, 2012 at 09:09

dont believe everything you read

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Sam Caunt

Dec 19, 2012 at 09:11

Through their regulatory regime and focus on product, the FSA do not recognise advice. Period. RDR, FSCS and FSA levies, fee block all tailored to product and ignores advice.

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John Boy

Dec 19, 2012 at 09:12

Well illustrated Hugh, the madness of it all when I can be hauled over the coals for exceeding my permissions with regard to occ pensions, but compare the meerkat types are completely exempt from responsibility.

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Gillian Cardy

Dec 19, 2012 at 09:16

@Alan Powell - I was reponding to the very first post - and not the two which appeared while I as still composing my thoughts!!

Obviously people who don't get advice (either because they don't go to see any sort of adviser because 60% of the population only has a bank account and a savings accotunt and have no available resources to invest, OR because they are execution only clients) would not have had that conversation.

That still leaves a lot of people unaware ... and tied companies having to disclose commission equivalents has been a rule for years now - and if people are still not disclosing properly, whatever their regulatory status, then it's hard to argue why the FSA should not want greater transparency in the market place.

Oh - and I've asked for a copy of the survey and results as it doesn't appear to be published inline yet - so instead of us all descending into a very unfestive and uninformed quagmire, we can actually have more Christmas light than heat on the subject.

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Jonathan Kirby

Dec 19, 2012 at 09:20

As an organisation, when you have wasted £2 billion (and counting) and actually made matters more confusing, caused countless redundancies, taken away good long standing trusted advisers from their clients and delivered less protection for consumers, there is only one thing to do.

Start the PR bandwagon to try and justify the totally unjustifiable.

I have been waiting for this type of rubbish to be issued and at least they are predictable.

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Richard Arnold

Dec 19, 2012 at 09:29

Best not to react as most IFA,s instinctively know what is both real and true.

All will be revealed over the months ahead.

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Knowledgable insider

Dec 19, 2012 at 09:34

Its really so simple...the FSA need to be seen to be busy so every few years they come up with yet another overhaul of the advice system. This shows the Government that they are up to the job and keeps them in employment and bonuses. If the government had even half a brain they would ask...but does this new initiative mean that all past ones were plain wrong? If I employed someone who kept changing their original plans over and over I would show them the door if only to stop them wasting my money and time! These people at the FSA are only here out of self interest they couldn’t care less about clients and even less about the advice process. The Government are the ones to blame for all of this - they had the opportunity to put this right but preferred to allow it to continue.

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sol trader

Dec 19, 2012 at 09:35

If they wanted to be more balanced and were not trying to hound advisers out of existence, they might like to have a look at

the "free financial product" myth

the "free online, we rebate all our commission, this isn't advice" myth

the "free compensation for all (including foreign companies), FSCS" myth

the "Free Financial Regulation" myth

the free "financial magazine, I don't have to worry about my circulation or advertisers" myth

the free "guru, I don't have any ulterior motives" myth...

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Julian Stevens

Dec 19, 2012 at 09:39

Anecdotally, it's well known that the most enthusiastic peddlers of the free advice myth are the banks, commonly adding to this a warning that advice from an IFA will result in them [the customers] being charged a fee.

Clearly, commission disclosure in its current format hasn't worked, which is why not only do I support the move to Adviser Charging but (IMHO), the FSA could and perhaps should have gone further in banning the use of percentages. The format of our new Payment Menu (based on the template provided by our network, so I know it'll be compliant) is very little different from our existing one. Apart from the substitution of the words Adviser Charge for the word Commission, hardly anything's changed. Why, for example, should the cost of advising on and arranging an investment of £100,000 be double that for doing the same as for an investment of £50,000? There may be a bit more work, granted, but not twice as much.

If the most important element of advising on and arranging a portfolio of investments is the former, shouldn't at least a third of the overall charge be payable up front?

And shouldn't advisers ~ if advice, as opposed to a product sale pitch, is what they're really providing ~ be required to present to clients their recommendations and statement of charges in writing at least ten days before the presentation and completion of any application forms?

Frankly, on the issue of Adviser Charging, I think the FSA has been pretty soft, too soft in fact. If intermediaries are permitted merely to call 3% + ½% an Adviser Charge instead of commission, then precious little may actually change.

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Ian Lees

Dec 19, 2012 at 09:49

Not everyone knows the FSA are icompetent, and are Liars. Misleading the public by regulators is no more treasonable than MP's claiming false expenses. I would put money on the fact that very few people know that when they purchase a product through an insurance company direct - how much commision is paid or the actual costs. With RDR around the corner - and under the PROHIBITION OF ADVICE by David Cameron ( also known as " the face " from hiv ah goat news fur ewes - scottish version) and his jolly beggars at the FSA who walk into £ £3 Million salaries at Libor fixing bank - Barclays. With Bank of Scotland now identifying businesses with turnover of less than £ 2M - as " Micro Businesses ", welcome to the " Reality of Recession ", under this Government - the tardy world conservatism ( with blame being turned on the Liberals e.g Mr Clegg ) - clearly the commoners are revolting and under conservatives it is advice by the Few for the Few . Has anyone heard form an insurance company in the last few years ? What are they up to ? When I worked ( and I was not th eonly one ) at Scottish Widows and they forged my signature on my annual appraisal, stole my pension fund and have a reputation for destroying peoples pensions - I wrote to Mike DRoss ( CEO ) to confirm my opinion that " he had run the company with all the applumb of an incontinent trapeze artist " . Whilst that applies to the directors of those gen erals sitting on the fence of "sloppy widows" - it would be too light a phrase for the consrvatives . It is interesting Scottish Widows refuse to provice me with an agency - yet I sold the scottish widows agency element of my business for more than £ 35,000 - and that was just one insurance company - with the 2.5% renewals . I fear for any adviser who sells his/her business for £ 35,000 e.g 3 times turnover - jeesie peeps !

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Duncan Carter 2

Dec 19, 2012 at 09:52

Just a thought but with only 12 days to go until the RDR which has cost countless £millions takes effect, what actually is the point or value in this survey?

And is it 49% of the 29% or 29% of the 49%, of those who don't take advice anyway but may or may not have been included in the survey?

..................................................yes minister!

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Tony Clarkin

Dec 19, 2012 at 09:55

Glass half empty conclusion; a third of those who do not currently receive advice thought it was free.

Glass half full conclusion; two thirds of those who do not currently receive presumeably realise that it's not free.

Key unanswered question: Do the two thirds who know it's not free believe it adds value??

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Philip Dodd

Dec 19, 2012 at 09:57

"49% unaware of POTENTIAL commission payments" - is this survey skewed towards repeat/trail commission, as distinct from initial forms of remuneration?

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Philip Wise

Dec 19, 2012 at 10:00

Just to confirm, Mr FSA, advice sometimes is free.Consumers havent always paid.

I dont charge my dad, I dont charge partners in our accountancy practice. Sometimes I dont charge relations of important clients.Sometimes I just feel sorry for people. I dont take commission on these people's products.

Advice has been free in the past, and it will be in the future. So, it's not a myth.

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Gillian Cardy

Dec 19, 2012 at 10:05

@Philip : nice!!

@everyone else : I am waiting for the FSA to send me the survey so we can answer all the incisive observations about sample (maybe they randomly found everyone's dad) / exact questions / breakdown of results etc.

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Alistair Hinton

Dec 19, 2012 at 10:15

Some interesting points here, especially from Gillian Cardy and Julian Stevens (of whom the latter is not, I think, especially well known for coming to the defence of FSA!).

The consensus, unsurprisingly, is that the survey has been of little or any value and thus disproportionately expensive to conduct, given that it remains unclear who commissioned it, who prepared it, who selected the participants and on what basis, what the precise questions were and, lastly, how usefully conclusive any answer would be if it came from someone who had not sought financial advice in the first place.

Whilst what FSA seeks to persuade that it tells us is thus woefully lacking in credibility, the entire exercise does perhaps beg the question as to what its outcome might have been had it been commissioned, prepared and conducted and its results and conclusions published by a different organisation that ought equally to be trustworthy and capable of undertaking it!

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Alistair Hinton

Dec 19, 2012 at 10:17

@ Gillian Cardy:

Do you genuinely expect that FSA will comply with your request?(!)...

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Kate Brookes

Dec 19, 2012 at 10:36

What's that old saying, 'Lies,damned lies, and statistics'

How long has commission disclosure been around? How long have clients been receiving in writing an exact breakdown of charges in the Suitability Letter? I also disclose all this verbally as well. 1st question most clients ask is 'how much do you charge'. In a survey of 100% of my clients, you will find they all know they are being charged for advice. What more can we do? Perhaps the FSA would like us to put a neon sign in the window of the office saying saying 'We charge for advice'. it would look very nice next to our Christmas Tree.

Why don't the FSA go concentrate on people like the on-line annuity company, who clearly state on their website that they 'do all your paperwork for free', one of my clients pointed this site out to me, and I rang them. They confirmed that they do receive commission from the providers, but nowhere on their site does it state this. Neither do you get any advice. So in effect you are paying for............nothing. Bet that won't stop post RDR.

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Adam Grant

Dec 19, 2012 at 10:41

What will happen when some poor beggar after realising he couldn't now afford to pay for financial advice (whereas before it was as good as free(!)) goes out and buys an off the shelf annuity from whomever, then by chance speaks to a friend of a friend (who just happens to be a financial adviser (whether he be bancassurance, tied, multi tied, WoM or IFA, (oops sorry, restricted or IFA)) who tells him that as he has high blood pressure, high cholesterol, smokes and drinks that he could have got 25% more income (example!) if he had let him deal with it,...

Would this poor beggar be able to sue the FSA for not treating him fairly,...?

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Anitaki

Dec 19, 2012 at 10:47

@ Gill

IF the FSA don't respond to your request, and also ask them the supplementary questions l suggested, put in an FOI request, and let's see if they still feel they are so superior that they don't have to reply to that either

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Richard Hardy

Dec 19, 2012 at 11:11

Is this survey not just an attempt by the FSA to justify the removal of commission as a method of paying for advice as consumers were "unaware they could be paying for it through commission"?

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Knowledgable insider

Dec 19, 2012 at 11:11

When it comes to charging why is it not mandatory that the regulation charge be identified so that the client knows exactly what these monkeys are costing him - this should also be included in execution only ....I wonder why the FSA has not insisted on this as they appear to wish investors to see EXACTLY whet they are paying for.

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Ian Lees

Dec 19, 2012 at 11:43

Advice has never been " as good as free ". It is paid for out of commissions taken out of the contract over the term of the contract. With indemnity commissions the insurance company takes an amount ( Usually undisclosed ) to cover for the possibility the contract will cease - but pays it up front as an amount. The reckless and ruthless companies like Scottish Widows use their influence to " Stop paying Commissions ", as part of their unreasonable strategy - to force Independent advisers to do as they are told e.g. churning policies such as pensions endowments whole of life etc . , on behalf of insurance companies - to provide misleading new business figures - or to increase bonuses to the Directors and employees of insurance companies. Put simply to assit in fraudulent trading - which is not in the customers/policyholders interest. In the past the insurance companies have hidden behind " advisers " claiming it was advisers who were to blame - and in some cases they are correct - and in my opinion these are in the minority. Scottish Widows provided the incentive of increased commissions to those advisers who would " accomodate them ", in their quest to purchase new business - paying commisions of up to 150% plus to the normal and accepted Lautro Rates. Scottish Widows were paying up to some 8% commissions on lump sums - ask Nastywest Bank ( and SWF " special relationship with the Robbing Bank of Scotland sometimes known as RBS - apprently it was known as " Fred the Shred " and the " Shroud" - at scottish widows ( the hoodey ). Scottish Widows and Standard Life abuse their positions - by the use of agency and commissions to force advisers to comply. When I asked Standard Life for the charges of their EPP's - they withdrew my agency terms to new business ( including Fidelity ). Let the Buyer Beware ! Such are the activities of these, " Stalinist Freak Control Merchants ", except to call them " merchants " is a misleading . The CII claim " insurance is based on Trust " - clearly as the insurance companies are CII sponsors this is misleading and certainly NOT THE CASE !

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l'ifa passeport en provenance de France

Dec 19, 2012 at 11:54

Ian

Chill ! give one of the wrap providers a call , transact etc

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Ian Lees

Dec 19, 2012 at 12:00

Free Advice to the . . . accountancy partners ? . . . . and his Dad ? . . . .and some relatives ? all sounds a bit fishy ? I wonder how much information is taken - full disclosure of information to give Independent and unbiased advice - or restricted information provided by those secretive accoontants and his relatives - to be able to dish out free opinions and free unqualified advice based on half the required information ? a sales person or a pub adviser often incorrect and usualoy biased or skewed !

With regard to the FSA " recent survey ", these are only " statistics ", based on the quality of information gathered - and if it is aythiong like Gabriel - it is BOUND TO BE FLAWED ! Failure to gather correct information or incoherent information gathering from the FSA survey - of 65 Million people in the UK ? I don't think so ? Did any phlebs, or commoners or the lower and middle clkasses respond - given the way the Con servative government is taxing them ? Our MP Anne Main ( who doesnt live in St Albans - but claimed for her daughters flat - does not have a clue what is going on and had to write to the Treasury select committee - who worte back suggesting we write to the FSA - just after Hectors House had collapsed and he joined Barclays Libor rate fixing team . Now that is Team work ?

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Alistair Hinton

Dec 19, 2012 at 12:05

@ Knowledgable insider:

It's worthwhile point and a nice thought, but FSA could quite reasonably get out of this responsibility on two counts - firstly, that the regulatory charge is not imposed on the particular product or service that the client purchases from the adviser and in any case its levels are unrelated to the levels or charge that the client pays to an adviser and, secondly, the client only pays the adviser and the adviser in turn pays the regulatory charges - and I shudder to think what most clients would think if they had to stump up the cost of any fines imposed upon the adviser by the regulator, for these are regulatory charges as well!

That said, I do accept that the existence of diligent written commission disclosure requirements might be seen by those obliged to make them as less than compatible with the regulator's lack of obligation to publish its own charges although I can also see the possible argument that some advisers might consider the regulators' publication of their charges to constitute a breach of confidence and that they are no more their clients' business than are, for example, the bank charges that their businesses pay.

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Graeme Laws

Dec 19, 2012 at 12:06

No sign of the research on the FSA website. I've asked the press office where I can find it. I'm going to guess that it will not be hard to pick holes in it. I'll let you know, if Ms Cardy doesn't get there first.

I'll lay odds that the term 'financial advice' means everything and nothing to at least 75% of the population.

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Ian Lees

Dec 19, 2012 at 12:16

@Le Ifa - already chilled and thrilled that when the Scottish Widders refused the agency I discovered Co Funds etc., who were d . .d . . . d delighted to acceppt the business sloppy widows turned down. Wrap providers, and what ever they charge . . . . . are one of the great discoveries of the last century . . . . one of the greatest benefit for consumers - providerr providing clear charges , great service - and the reason why companies like standrd life are now following on and setting their own ione up - before they then are involved in increasing their charges . This is what they call the" Lure ", at Nationwide building society. Lassooo them with a cheap rate, then tighten the Noose - and those left will pay the higher charges for whatever reason. Those wraps who choose an insurance company for their administraion e.g scottish friendly . . . discovered early on how poor the admin is. I moved millions of sloppy widows money - and continue to do so. To the extent that Scottish Widows employ a woman to identify money form inurance bonds etc., leaving scottish widows and she contacts the local TSB branch manager and adviser - and alerts them .. . so that they can contact my client . . . and provide " competition " for me ( and others ) - this is the way of the sloppy widows business strategy . This demonstrates to me - I am being rather successful in destressing our clients from the dismal administratio and lack of professionalism and lack of integrity at scottish widows and theor owners edinburgh based bank TSB .

Dissappointing that the Government nor the FSA - are aware of this - do not care about this - and are happily engaged on destroying Micro Businesses - and the people they employ. IT is even more dissapointing that Dave Cameron is too busy texting the ginger one, LOL - rather than be bothered to " run the country " or assist busineess to look after their clients - or develop existing good quality businesses - who are committed to advice - committed to provision of good wquality services - to be rubbished by the reckless and ridculous and incomeptent authority for financial services - the FSA - the Governernment Quango !

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Gillian Cardy

Dec 19, 2012 at 12:26

I have been informed that the Independent was given some advanced information before the publication of the full survey on Friday.

The base sample is around 2,000 - this is generally accepted to be a statistically significant number.

In relation to the published number above : it seems that the survey is saying that 49% of respondents who agree with the statement that "I believe that financial advice is free" already receive financial advice.

And strictly speaking it doesn't say that they WOULD pay fees for advice - all it says is that that number of people say that people pay for advice by paying an upfront fee (as opposed to a monthly fee or nothing or don't know).

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Phil Sipocz

Dec 19, 2012 at 12:32

I wouldn't worry too much. These same people have probably never heard of the FSA or what they do or how much of our/their money they waste.

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Gillian Cardy

Dec 19, 2012 at 12:41

@Alastair Hinton : QED.

Why shouldn't they have done so??

The full report will be published on Friday and results other than what is already in the public domain are embargoed until then ... I have therefore limited my comments to clarifying the answers relationg to the already published results.

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Jonathan Kirby

Dec 19, 2012 at 12:43

@ Gillian Cardy

I'm surprised that the Independent didn't also get the response to the TSC report on RDR a few weeks early as well.

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Green Eyed Monster

Dec 19, 2012 at 12:50

@ Knowledgable Insider

@ Alistair Hinton

It is not possible to quantify exactly to clients what the regulatory charges are because unlike VAT there are too many variables, not least because the FSCS can ask for money any time it wants.

We disclose as follows:

"Our fee rates include all the usual business expenses of premises, staff, taxation etc but also a range of regulatory expenses incurred to protect your interests. These include charges for Regulator's fees, Investors Compensation fees*, Professional Indemnity Insurance premiums and Money Advice Service fees. These fees are relatively predictable and are usually adjusted in April each year.

* Investors compensation fees are unpredictable, often requiring additioinal payments within the year depending upon what immediate compensation is due to be paid to clients of failed firms. Currently we are able to absorb the additional fees and defer your fee increases to June each year."

Many new clients express surprise at the way things are done in financial services, but we have found this disclosure does help when asking for fee increases!

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Phillip H

Dec 19, 2012 at 13:06

@Green Eyed Monster. I genuinely think that is wonderful if you do that. I don't believe that you do but what a great idea

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sol trader

Dec 19, 2012 at 13:12

to Gem - I might amend this to

"..range of compulsory regulatory expenses....claimed, but not necessarily proven, to protect your interests nearly as well as I do..."

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Alistair Hinton

Dec 19, 2012 at 13:16

@ Phillip H:

A gratuitous response, surely? - and one which might for all I know be wholly undermined by a perusal of Green Eyed Monster's website if he/she has one and if such disclosure statement is published thereon.

It also strikes me as a good idea in principle although at the same time it is as well that no such disclosures are compulsory.

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Jonathan Kirby

Dec 19, 2012 at 13:16

@ Green Eyed Monster

The one proviso I would put on such disclosure is that by pointing out that firms fail so bluntly, are you not inadvertently putting doubt in client's minds as to the viability of the industry as a whole?

I remember many years back when Barratts the builders were having problems with their 'new fangled' timber frame construction, one of their traditional competitors ran a lot of ads and sent out press releases rubbishing timber frame methods.

The whole thing backfired though as it ended up with people simply not trusting new properties however they were built.

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Alistair Hinton

Dec 19, 2012 at 13:18

@ sol trader:

I cannot help but suspect that a disclosure document thus amended might risk inviting considerable regulatory interest of the kind that might be thought of as rather less than welcome...

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Philip Wise

Dec 19, 2012 at 13:31

@ Ian Lees

For the avoidance of doubt, it is full, regulated advice which I give, and sometimes I do it for free (I make a big fat loss when I do this, so I dont do it very often).

I'm not the only person out there that does this. "Free advice" is a fact, not a myth. It isnt commonplace, but some people do get free advice, so the FSA is just wrong when they say "consumers have always paid". They havent.

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Knowledgable insider

Dec 19, 2012 at 13:34

A number of years ago a well known stockbroker friend of mind introduced a regulatory levy on all deals placed with his firm - a wonderful idea that helped with the regulatory finmancial burden. The FSA could hardly complain could they? Given that they want more transparency AND it will focus investors minds as to what a high cost they are paying for these incompetent people at the FSA.

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Phillip H

Dec 19, 2012 at 13:36

@ Alistair, yes that one was completely free of charge (or is that a myth?) ;-)

I tried finding said website by checking the FSA register to get a firm name but unfortunately "Greed Eyed Monster" is neith active or inactive ;-) again!

Perhaps my post was a tad rushed. Should have read "can't believe it" as I think one would have to a bit ballsy to put something such as this.

Would be happy for the poster to prove such punchyness however and he/she would have my eternal admiration

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alan mcintosh

Dec 19, 2012 at 13:40

Off course a third of people thought financial advice was free,as they have never taken advice from a quality advisor before!

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Richard Arnold

Dec 19, 2012 at 13:58

I had an engineer visit and fix the washing machine. He disclosed his labour cost and the parts were extra. I had no idea he made a profit on the parts he replaced.

However I did get what i needed.

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Nick Bamford

Dec 19, 2012 at 14:27

In my experience free advice is worth exactly what you pay for it

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Gillian Cardy

Dec 19, 2012 at 14:48

Doing something / anything for free may be questionable from a commercial point of view, but I doubt you could question a Chartered and Certified financial planner's advice just because they elected not to charge for it.

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Michael Both

Dec 19, 2012 at 14:57

In a recent FSA survey,

50% of the respondents said they had no idea why they were answering

25% said they thought number 3 had the best voice

13% said it was too expensive

14% said the policeman's nephew was a pleb for not getting off his bike, uncle

and the remaining half couldn't make the figures add up.

100% of such surveys are made up.

Happy Christmas everyone!.

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Nick Bamford

Dec 19, 2012 at 15:03

@ Gill Cardy

All advice can be "questioned, even that from a Chartered or Certified Financial Planner (go and ask FOS I am sure they would question if asked) If it is worth providing it should be worth being charged for. I agree though what kind of strange business model would give away the most valuable thing it does for free?

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Mike Turner

Dec 19, 2012 at 15:12

Says a lot about the promotion of RDR and consumer awareness campaigns. They have obviously had little to no effect.

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Gillian Cardy

Dec 19, 2012 at 15:15

@Nick : my point precisely - the rate at which it is provided, anything from zero to infinitely large does not (as you suggested earlier) make it "worth what you pay for it".

Just because Philip advises his Dad without charging him does not of itself make the advice wrong or worthless. A lot of professions give pro bono advice. The clients may not value it as much as if they had been asked / forced to pay, but its quality is independent of its price.

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Green Eyed Monster

Dec 19, 2012 at 15:15

@ Nick Bamford

The original reference to free advice was in the context of business partners, family and friends.

Your comments suggest you would not make similar exceptions. Is this the case?

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sol trader

Dec 19, 2012 at 15:42

Just found myself giving unintended "free advice". Set up (my first) SIPP in september and agreed 0.5% annual review "fee" with client. Client has now, unilaterally (without advice) added regular contributions. Turns out this automatically switches off any previous agreement which was for a "fee" not for "adviser charging" (ah semantics). Client has dutifuly signed a new "adviser charging agreement" but this leaves me out of pocket for the September to December pro rata.

I wonder if the lack of payment actually means I did not give the client advice? Can I tell the client the regulator is responsible for this period as they created this mess? Can you be responsible for advice you haven't been paid for?

Confused.....you will be

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Duncan Carter 2

Dec 19, 2012 at 15:47

I think GEM is making the point that he does favours for friends and therefore makes no direct charge to them on a quid quo pro basis

Ultimately someone always has to pay and so the 'free' advice is subsidised by the clients of the firm as a whole.

MAS works on the same basis

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Nick Bamford

Dec 19, 2012 at 16:47

Hi Gill

I think we are going round in circles here. In Philip Wise's example he clearly pointed out that it wasn't "free"he stated "I make a big fat loss when I do this, so I don't do it very often" So it wasn't free, Philip paid for it.

As Duncan Carter said "someone always has to pay and so "free advice" is subsidised by clients of the firm as a whole"

IFAs know that there is always a cost involved in delivering advice.

@ Green Eyed Monster, correct no exceptions otherwise it means i am requiring someone else to pay for the advice to those people.

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Philip Wise

Dec 19, 2012 at 17:22

Well, I told my dad that my advice wasnt any good as it was free. He said that it was my mum's fault for being too soft on me.

So, after a bit of a ruck, I got him to pay up, and now I get the house and some cash.

Thanks Nick. Just hope that Martin doesnt read this...

Happy Christmas

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John Brady

Dec 19, 2012 at 19:02

Sorry, I dont believe that anyone thinks advice is free.

Sorry, I dont believe anyone has not had commission disclosed to them for about 15 years, except by banks

Sorry, I dont believe any IFA these days walks out of a clients house and the client doesn't know how much is being paid and where it's coming from both initially and ongoing.

The problem is that clients choose not to be interested, they dont give a damn, they certainly wont remember.

Just ask your clients next time you see them "How much do you pay me ?"

They wont have a clue, but that doesn't mean it hasn't been disclosed.

Everytime my clients ask for some help, I do it and they ask "Are you doing this for free" the answer is to remind them of the 0.5% adviser fee/ commissions that they are already paying.

Next financial review they haven't a clue how much is being paid again.

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Anitaki

Dec 19, 2012 at 19:41

@ John Brady

I regret to find you wrong

I know of somebody (not earning enough to pay income tax, but with loads of inherited capital) who has been sold a single premium investment by a well-known non-independent bond flogging operation, and she was NOT made aware of the massively high initial commission and charging structure. She sincerely believeD that the advice was free, and the "charming man" (who didn't charge me anything for his time), had come along and "helped her"(!!) simply because her friend (also retired with little income) had one already.

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Ian Watson

Dec 19, 2012 at 22:59

Nick and Gill,

I agree with you both . . . it is a case of how you personally draw the line, but would ask . . . what is the difference between me giving (my Dad) some advice about annuity options, whether to buy a holiday home in Manchester or Malaga, or if a Ford is better than a Ferrari ?

I would not charge for any of that.and would not consider myself as giving anything away, or making a "loss".

The calculation of profit or loss on advice is ( not easy and ) related to the :

1. amount charged to the client minus

2. an allocation of the original cost of gaining the knowledge minus

3. the extra cost of providing that advice ( travel, reporting, communication)

If you choose not to add on No 2, and there is no 3 as I am in the pub with Dad already, and he doesn't want 73 page report, then there is no loss even if I choose not to charge anything.

Nick, or anyone else, did you never get any free advice from your Dad ?

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Gillian Cardy

Dec 19, 2012 at 23:20

The difference is free to deliver (clearly not) or free at the point of delivery, as in without charge to the client.

The benefit of being a father and son business must be that advice is neither sought nor given in either direction as both are equally well-qualified to answer their own questions!!

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Green Eyed Monster

Dec 19, 2012 at 23:48

But apart from Martin, if any other relative needs advice Nick - by his own admission charges them. His rationale is that if he did not charge them the advice would be rubbish!

You wanta da good advice you writeeda cheque ( with a sicilian accent)

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Green Eyed Monster

Dec 19, 2012 at 23:51

Sorry, silly accent

No offence to our sicilian amigos

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G Grant

Dec 20, 2012 at 09:22

@ Green Eyed Monster

I am reading a book at the moment 'A history of the Sicilian Mafia Cosa Nostra' by John Dickie.

I would advise a quick read of it and draw your own coculsions in some of the similarities in the the workings of the orginisations. Or is it just all orginisations have a similar internal workings.

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Kate Brookes

Dec 20, 2012 at 09:53

I'm glad someone mentioned the pub. Apparantly there is another route to free financial advice that I had overlooked to mention yesterday. The bloke down the pub. He's the one who will tell you all IFA's are rubbish and going to rip you off, and Naaaa what do you want one of them for? I did have a client who took advice from the man in the pub, he came back 6 months later needless to say, having attempted to do it all himself.

Another free advice giver that I do come across is 'the brother in law'. He crops up too. Must check with the 'brother-in-law' first. He's usually 'something' in the city. (cab driver?)

Then there is the Daily Mail, who recently published an article depicting a shark, in relation to ' annuity intermediaries who charge you for doing your OMO.' Not even sure who they were referring to there.

None of them tend to mention MAS though......interesting.

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PD Off

Dec 20, 2012 at 09:54

The Mafia is an organisation who believe that they are beyond the law and think that the laws of the land don’t apply to them. They extort more & more money by threats of taking away your livelihood if you don’t pay the protection money that they force you to pay.

They work on the premise of fear telling their victims that they “should be very afraid” and threaten that they will come after their victims for the rest of their lives.

Eventually their victims give up their businesses as they eventually find they are only working to keep their oppressors in a style of luxury that they could not afford themselves..

But at least the Mafia have a code of honour

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Knowledgable insider

Dec 20, 2012 at 10:35

@PD Off

And Like the Mafia who pay off high officials this lot have the Government ensuring that they are immune from prosecution for their 'protection racket'.

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Alistair Hinton

Dec 20, 2012 at 10:49

@ Knowledgeable insider:

That's not strictly true, actually; FSMA200 grants FSA statutory immunity from liability to damages arising from prosecution for actions carried out in the course of the duties with which it is charged. This means that it is still possible to instigate legal action against FSA and, if successful and the Court directs that FSA take remedial action (and FSA either declines to appeal or loses a subsequent appeal), FSA must do so otherwise it will be in contempt of Court. What it is immune from is therefore not legal action per se but damages; the exception to this is in cases of Human Rights Act breaches or acts of bad faith, for which FSA is liable for damages as awarded by a Court. I accept that this situation is far from satisfactory and that there is no obvious reason why FSA (and its successors) should enjoy this privilege, but that is what it is for the time being.

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Knowledgable insider

Dec 20, 2012 at 11:08

@Alistair Hintonthe

As the FSA is immune from damages in the event of their losing a court battele what would be the point in expending a great deal of money to take them to court and risk financial loss. As I said they have effectively been provided protection by the Government.

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Alistair Hinton

Dec 20, 2012 at 11:37

@ Knowledgeable insider:

Whether or not there would be a point in doing this would depend on the circumstances of the case; whether or not a great deal of money need be spent on mounting legal action against FSA will depend upon whether a law firm would take on such a case on a CFA basis, the only risk attached to which is that CFA is designed only to fund costs when a case is lost, not when it is won, so there might in theory be a possibility that the litigator has to meet all or some of those costs if the action is successful, although I imagine the risk here to be a small one in that, should a Court find in favour of the litigator and against FSA, it would almost certainly award costs against FSA.

I should perhaps stress again that the above applies only in cases which do not involve Human Rights Act breaches or acts of bad faith on the pat of FSA, where a Court can still award damages.

That said, please understand that I am neither arguing with you nor seeking to defend either FSA's position or the Government endorsement of that position (and it's not just the present Government either); for the avoidance of doubt, the Act should be changed in this regard and I can see no reason why it should not be.

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Graeme Laws

Dec 20, 2012 at 12:37

As I suspected: the FSA press office confirms that this was three questions in an omnibus survey. Omnibus means that there are lots of passengers (questions) on the survey bus. It also means that respondents are required to deliver opinions even if they don't haave any.

The FSA hasn't answered my supplementary questions, but it hardly matters. This was a waste of money. It tells no-one anything. More analysis on the crude numbers will probably be done. It will still tell no-one anything.

The test before embarking on research should always be: what will I actually do when I get some results? If the answer is 'nothing', why bother spending the money.

What the FSA have not and will not research properly is the extent of customer understanding of 'financial advice' and adviser status. I suspect such research, properly conducted (not some crude general questions thrown at an omnibus) would show something close to total confusion, much of it caused by the FSA.

In the meantime, if the FSA really did do a press release on this nonsense, it is just one more example demonstrating their spectacular incompetence.

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Knowledgable insider

Dec 20, 2012 at 13:05

Will somebody please tell me why they have embarked on a survey when they have already decided what they are doing i.e. RDR whatever the outcome is? This is clearly a case of damage limitation as they already suspect that January 1st will be a disaster for all not least the poor clients....but will the Government do anything????

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Shane Barr

Dec 20, 2012 at 13:24

No point in a survey, waste of time, answers are usually rubbish depending on how the question is asked and in any event once the FSA decide they are going to do something.................

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Duncan Carter 2

Dec 20, 2012 at 13:27

@KI

Unfortunately the Government doesn't need to do anything and therefore won't.

A structure has been created that is non-governmental in nature, without any real liability or accountability. The government will only act if an election is imminent and votes are at stake, which they are not.

Graeme's observation is substantial.

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Ian Lees

Dec 20, 2012 at 13:29

It is a Governemtn department and FSA Rules thing ! a survey on a survey - to see if the survey has been conducted in any appropriate manner - has taken into account a realistic number of people - who the FSA has failed to alert to the changes - current governemt practice.

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Gillian Cardy

Dec 20, 2012 at 14:10

It may be a "baseline" survey - they will repeat it regularly to see if there are trackable changes in consumer understanding and behaviour ... a number of their research projects work like this ... so they will want to see improvements in the numbers over time ...

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Ian Lees

Dec 21, 2012 at 12:39

If the FSA "research projects " - work in this way - this is not a commercial or valuable survey - in any way , shape or form ! It devalues the services on offer from Independent advisers - into the gutter of misinformed collection of date, biased and in low numers - as to be of any worth to any reasonable person. To use the proceeds of corrupt biased and ill informed information as the FSA base line - to cover up their negligence their incompetence. This survey is neither relevant nor accurate nor does it provide any substance on which the FSA bases their criticisms - against advisers.

Where have all the fines paid to the FSA gone ? or are they just a " paper transaction " which like the FSA surveys - have no meaning !

I ownder if Hector will take his new found bonuses, on top of huge salaries at Barclays along with the other directors and employees ? Perhaps like Jimmy - He can fix it for them ?

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Graeme Laws

Dec 21, 2012 at 13:43

Ms Cardy has missed the point. The survey tells us two fifths of five eighths of diddley squat. Tracking will tell us.....?

No responsible researcher would draw any serious conclusions from ths work. The FSA have absolutely no idea, and almost all the research I have seen them commission has been suspect.

Someone has to take them on. But who?

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Julian Stevens

Dec 21, 2012 at 14:10

More like two thirds of four fifths of five eighths of F.A.

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Knowledgable insider

Dec 21, 2012 at 14:32

@Graeme Laws

Nobody has the will due to the way they have been set up....the incoming Government had the opportunity and I personally know of senior Tories who were intending to. Alas wimpey Cameron preferred the staus quo...however if he had any idea of the mass defection that will eventualy occur away from his party he might act as hes not a conviction politician but a 'blow with the wind' one like Tony Blair.

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Anitaki

Dec 21, 2012 at 17:23

@ Gill

I agree with Graeme. Sorry, but you have lost the plot with this. Stop digging

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Shane Barr

Dec 21, 2012 at 17:34

In the overall scheme of things what does any of this really matter ?? (this was not what i had originally typed).

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Gillian Cardy

Dec 22, 2012 at 12:08

Never one to stop digging just because someone else, especially someone I don't know (I think) tells me to, when did I say I agreed with the survey, its principles or its cost?? When did I say that I thought the questions (the full survey has not been published yet) were fair / valid / reasonable / asking the right questions??

The question was - what is this survey for?

If we are discussing reading questions and answers properly then may I humbly suggest I have not missed the point but given my opinion regarding the rationale and background for this piece of research.

If you would like me to answer a different question then ask me a different question.

And TNS-BMRB who undertook the research ARE responsible researchers. A full report condensed into 2 sides of A4 and then quoted from a prrss release re-printed in the Independent and then re-printed here is, whatever your view on the results, unlikely to be an accurate summary of their work.

They did the research we liked in February (IFAs more trusted than bank advisers etc) ... so they can't be all bad.

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Graeme Laws

Dec 23, 2012 at 16:37

My point was that three questions on an omnibus tell you nothing of practical use. Tracking a year later will tell you just the same. There is nothing wrong with omnibus stuff at some very general levels. The numbties at the FSA are the problem. Whatever you may think, the term 'financial advice' simply cannot be researched unless the researcher first explains what it means.

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John Brady

Dec 27, 2012 at 15:20

No more product flogging is the answer.

Go see a client, tell them what it will cost and then send them the report along with your bill.

If they take your advice they can deal directly with the recommended provider.

If they dont do anything, you've been paid for advice given.

Transactional business is the way forward, totally emotionless, clinical and making the customer buy what you've advised them to do without you having to spoon feed it to them. The adviser does nothing else but give advice and bills the client directly.

How easy will the job be if we actually do what we are supposed to do and what were supposed to do only.

See a client, do the fact find, attitude to risk, Client ID, introduce the Client Agreement and Service Proposition, leave the client, do the research, then make your suitability report, calculate the bill and send them together.

Suitability report says Do this, do that, do the other, here are the websites you need to complete the business if you wish to proceed,whether you are going to proceed or not here is my invoice for advice given.

If you want me to complete a review next year here are our costs for a review, these costs are subject to change by the way. If you do not wish to review your circumstances our company cannot be held responsible retrospectively for advice given that could have been changed if we had been kept up to date with your personal and financial circumstances..................Job Done.

It's a rough guide around where I think as a profession we should be going.

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