Ask the Expert - then do the opposite?

Free advice – Is it worth it?

There is much chatter amongst the financial adviser community at present of 'RDR', that is, the FSA ‘Retail Distribution Review'.
It means many things but a few of the items being legislated upon financial advisers is fee charging instead of commission and a higher level of qualification. My clients will be aware that I already have the level of qualification being set so that causes me no issues and I have had fees instead of commission as an option since the year 2000.

Some financial advisers are lobbying their MPs AGAINST RDR whereas I warmly welcome RDR.
As can be read on my website (http://www.iangreen.com/approach.php) I provide the ability to purchase as much or as little guidance and advice as a client wishes.

Two recent direct quotes from clients when asked what I do for them in terms of financial planning:
“I just point them in the right direction" or I "hold their hand from start to finish"
I offer specific project fees, investment management based fees and if requested, hourly rates for some work.

For me this approach came about when I decided (at the turn of the millennium when first setting up my own business) that it didn’t make commercial sense to have my company income dictated by a third party – ie product providers and their commission.

So RDR is due to be implemented in 2012 and until then, unfortunately, many financial advisers still give the impression that a commission generating product is somehow ‘free’ to the client. For over a decade now I have been at pains to point out to clients that even if they opt for me to be paid a commission (which sometimes works out cheaper and/or better value) it is not ‘free’. The cost simply is bundled into the product.

Which brings me to the title of this blog. I remember reading an article a few years ago by Toby Young, spectator columnist and author of ‘How to lose friends and alienate people’. He told how three times he had sought the ‘free’ advice of acquaintances or ‘friends in the city’ who were ‘experts’ in their field.
* He consulted an economic analyst regarding interest rates for his mortgage – he followed their free advice – and lost out
* He consulted a currency speculator on whether he should be paid in pounds or dollars for the rights to his film – he followed their free advice – and lost out
* He consulted a friend who specialised in securitising debt regarding an overseas deal buying a property from a bankrupt firm - he followed their free advice – and lost out.

Toby Young ended the article light heartedly saying that sharp eyed readers would notice that despite his losses he kept going back to ‘friends in the city’ for ‘free advice’. He ended by stating “The truth is, I’m too mean to actually pay a financial advisor to give me some proper advice. However, even someone as innumerate as me is beginning to realise that this is a false economy”

So if you are in the market for financial advice, don’t ‘lose friends and alienate people’ by following Toby’s example. Don’t even try to obtain ‘free’ advice from a financial adviser. Consult an adviser and pay a professional fee for professional advice. Because you’re worth it!