"Free, independent" investment advice offered to employees

T

The Ghoul

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Apologies if this is the wrong forum, it seemed like the most appropriate.

I attended a talk on investing, organised through my employer and delivered by a financial advice company.

There were then followup, one on one sessions which i availed of. I asked if the advice was independent, I was told it was. I also asked who is paying for it, I was told that it was through an education initiative. I wasn't sure what that meant.

In the end, a particular equity based fund with an insurance company was recommended. The investment looks sound enough but in the information provided, it states that the insurance company would be paying a percentage of the investment amount to this financial advice company.

What would all of this say about the independence and validity or otherwise of the advice given?
 
On the use of the word 'Independent', the Consumer Protection Code states:

4.16 The term ‘independent’ may only be used by an intermediary in its legal name, trading name or any other description of the firm where: a) the principal regulated activities of the intermediary are provided on the basis of a fair analysis of the market; and b) the intermediary allows the consumer the option to pay in full for its services by means of a fee.

4.17 The term ‘independent’ may only be used in any trading name or other description of a regulated activity where the intermediary: a) provides the regulated activity on the basis of a fair analysis of themarket; and b) allows the consumer the option to pay in full for the regulated activity by means of a fee. Where a regulated entity does not provide all of its regulated activities in an independent capacity, it must explain the different nature of its services in away that seeks to inform the consumer. It must ensure that there is no ambiguity about the range of services that it provides in an independent capacity.
 
Well they are not going to advise you to use spare cash to pay down your debt or your mortgage as they would not be getting any commission on that.

You should point that out to your employer and suggest that the next time they invite someone in, that they invite a fee based advisor and that they pay them for coming it.
 
If you decide to take the advice and invest in the fund, you should contact other brokers and seek a better deal on fees.

Since you have decided on the fund in advance, you could benefit by dealing with an execution only broker.

Tip off your work colleagues to also do this.
 
That's right, I don't have a mortgage or debt so can't say what they would have advised in that case. I'm generally very sceptical about companies invited in to workplaces to give presentations on pensions and AVCs. But in this case I thought the advice might be more independent.

Just looking at more details of the proposed investment, the annual management charge is 1.5%. From what I've read on askaboutmoney, this would be regarded as high/too high.
 
The Ghoul said:
Just looking at more details of the proposed investment, the annual management charge is 1.5%. From what I've read on askaboutmoney, this would be regarded as high/too high.
Click to expand...
On the face of it, and in the absence of any further information about what the charge gives you, yes, it seems very high. I would be looking for an AMC under 1% but I'm on the execution only and passive index tracker spectrum myself.
 
@The Ghoul

I'm interested in what your expectations might have been here.

I'm assuming that you knew that the group presentation would be 'free' and I'm also going to assume that before you elected to avail of the follow-up that you were given a Terms of Business from the advice company that stated that you had the option of paying for advice by fee or from the product. Otherwise they couldn't really comply with the Central Bank Consumer Protection Code on using the term 'independent'.

You've now received advice specific to your circumstances and you've received a product recommendation, I assume with a named company and funds specific to your risk profile. I also going to assume that, at this stage, you've paid nothing for the meeting, advice and product recommendation that you think is sound.

So, was it your expectation that you would get 'independent' advice along the lines of a) This is what you should do and this is they type of product that you should buy. b) This is what you should do and this is the type of product that you should buy, If you want to buy that from us, you can do that and we'll recommend a company and funds. We'll charge you for setting that up and servicing it annually and that charges will be in addition to the advice we provided you with prior to product recommendation, c) This is what you should do and this is the type of product that you should buy. You can buy this from whoever you like and pay that other intermediary for setting it up and servicing it. We'll just charge you for the advice we just gave you. Would this tick the 'independent' advice box? d) Was your expecation something else completely and how did you think you'd pay for the'independent' advice? Seriously doubt that your employer is going to pony up €1,500 - €2,500 for each employee so that they can be happy that their staff receive 'independent' advice. Only for the employees to wander off into the product market and then buy overpriced products from another adviser.

Is it that the adviser is getting paid via the product that makes you uncomfortable? Is it the level of the AMC that's a concern? If so, have you asked if they will facilitate the transaction on a fee basis?

There is at least one question a week on Redditt looking for recommendations for a fee only adviser. I've yet to see a response. Not sure I've seen any on here either. They must exist, right?. Otherwise folk on here wouldn't be recommending that posters go and get fee based advice from advisers who don't sell products.

To be clear, I'm talking about financial advisers who do not hold agencies/place business with product providers and who never received commission/fees for any products. That't the 'independent' bar, right? There may be occasions when a product isn't a solution or accompany the advice but they're rare. Look at the Money Makeover forum - buy a pension/avc, invest in this/that, buy life insurance or income protection etc. etc.

'Independent' really is a strange old word in the context of advice. Folk could tie themselves up in knots thinking about where to get that type of advice and they probably still wouldn't be happy with it. We seem to have this expecation that individuals can be independent of their own opinions/biases that they've formed over a long number of years. I certainly can't do that. I can change my mind, but does that make my advice more independent?
 
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