One in four Britons say they have received poor financial advice and the source most quoted is IFAs.
According to an omnibus survey of 125,000 people conducted by YouGov in July, of those who received bad advice, at least 32% of these saw an IFA, and 28% went to high street banks while the remainder had received bad advice from family and friends, colleagues, accountants and lawyers, as well as brokers.
That said, the research does not make any distinction between categories of financial adviser and all are labelled as IFA in the survey, as it is argued consumers do not know the difference between independent, whole-of-market and multi-tied advisers.
When asked “what problems were there with your IFA’s financial advice”, of the 9% of those surveyed who said they had poor advice from an IFA, the open questions response revealed almost six out of 10 (58%) found investments failed to reach their target, a quarter (26%) said investments were unsuitable for their circumstances and a further 23% alleged the IFA had only proposed investments which would earn them the highest ‘fee’ (commission).
At the same time, four out of 10 (40%) who were advised by an IFA also said they were not told how their personal risk is measured.
Such findings are being highlighted by alternative investment firm Arjent, which argues while almost half of all UK consumers (46%) have used an IFA – as defined by the omnibus survey – less than one in 10 were offered the option of investing in investments which “can yield potentially more consistent returns”, says Gregory Perdon, head of alternative investments at Arjent.
"I am always shocked at how many of our new clients have never been told about the opportunity to include alternative investments such as low volatility hedge funds in their self-administered pension plans,"
Arjent’s ceo Tony Woodward says the firm – which targets high-net-worth, institutional investors, corporates and investment intermediaries – is keen to work with the IFA community and help them diversify their clients portfolio risk.
"Many of the financial advisers who are recommending traditional 'off- the- shelf' pension and investment products are doing an inadequate job at educating their clients as to what alternatives exist in the marketplace and what risk management measures can be put in place," says Woodward.
Fay Goddard, deptuty director-general of the Association of IFAs, says the government's removal of the distinction between 'independent' and other types of financial advisers has removed the clarity consumers might have previously had about the advice given by financial advisers.
"We were getting to a point where there was clarity between independent and tied advice but the depolarisation changes have muddied the waters and it was bound to be confusing to the public. It doesn't help when the FSA lumps everyone together as advisers and it is probably pretty true that consumers don't know the difference [between independent and whole-of-market and multi tied advisers].
"If there is a systematic problem through all distribution channels, we need to know, but unless there is clarity and segregation, it is always the bad news which gets picked up and tagged to good financial advice.
"IFAs must keep stressing the independence, whether they are independent financial advisers, independent financial planners or independent financial consultants," adds Goddard.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7968 4571 or email [email protected].IFAonline
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