Sunday, September 21, 2008

Paying for Financial Advice

If you need to get financial advice in respect a pension or investment product then it is worth bearing in mind that there are a few options open to you. It is probably best to explain these by way of a few practical examples.

Case 1.

You want to buy a low-cost product, that you have researched, on an 'Execution Only' basis (no advice) but you do need some help with selecting funds, general information on the risks involved or the tax implications of the transaction.

It would be prudent to contact a few advisors and ask them how much they will charge, per hour, for their advice. I am not aware that your local bank or building society will be able to provide you with this service so you should seek a recommendation on an advisor, from a friend or family member. You should make it clear at the outset that you are not in the market for a product recommendation. Expect to pay in the region of €150 - €250 per hour for this service.

Case 2.

You know you need to start a pension or want to invest some money. You need someone to guide you through the process and make a recommendation on a suitable product.

If you go to a Bank or other Tied Agent, they will be able to offer you this service. However, they will be restricted to offering you a product from the one company that they are 'tied' to. The remuneration for this service, in the vast majority of cases, will be paid for out of the commission generated on the sale of the product. There may also be more suitable products on the market that do not have to be brought to your attention.

If you elect to go to a 'Multi Agency Intermediary' or 'Authorised Advisor', you will get broader advice on suitable products and you should also be able to negotiate whether you want to pay for the advice/product recommendation by paying a fee, having the advisor paid from the commission generated on the product, or a combination of both of these.

Case 3.

You just need some general advice on financial planning but you do not want to buy a product from the advisor.

It is possible to get a vast amount of information, for free, on various financial discussion forums on-line. If you cannot find what you are looking for there, you might be able to avail of a 'free' consultation from an advisor. 'Free' consultations do not generate any income for the advisor so be aware that a product recommendation may be forthcoming, at some stage. Alternatively, you should be able to negotiate a fixed fee, for the advice.

It is important that you define what type of service that you are looking for, from an advisor. This should determine the method of remuneration that both you and the advisor are agreeable on. You should read the advisors 'Terms of Business', as this will give you details on the 'Remuneration Policy' that they operate.

Don't be afraid to negotiate on fees or commissions.

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