Independent Financial Planning and Advice - Room for the little guy?

pocketdooz

After living in New York for a few years and now being home for nearly two years - I've noticed a real lack of independent financial advisers. It seems (and correct me if I'm wrong here) that the industry is dominated by the big banks and maybe life insurance companies. Also, there is a lack of online trading platforms here. Unlike in the U.S. and elsewhere there aren't online trading sites like Schwab and Ameritrade - I know you can open an international E-Trade account or Internaxx (sp?) but why do AIB, Bank of Ireland etc charge so much and have such a crap service.

Is there room / market / potential to set up an independent financial advisory firm in Dublin. And if so how would you market it? What would people require from a financial advisor? CFA's etc?

Thanks

ixus

It's an interesting topic, one I have given some thought to recently pocketdooz. I was thinking of researching the possibilty of developing a financial advice website recently that would also allow the user to access a diverse range of global products/assets. I wanted to bypass the Irish agencies where possible.

The two initial deterrants IMHO were/are recurring income (or do you advertise certain products then losing the independent status) and the market for such a set up. Are there that many people based in Ireland who would use the site/advice. As you can see here on this forum, the sample indicates that most people are only interested in Irish based products/shares and property. Are these people prepared or do they have the desire to educate themselves further in the investment field?

I think what would really change this would be if the government encouraged people to look after their own pensions i.e. trade their own accounts as a pension with tax incentives/reliefs to do this rather than have the government looking after everyone.

rugbyman

pocketdooz,


On a weekly basis i read letters from readers of newspapers looking for advice on what to do with a lump sum/savings.

jill kirby and colm rapple among others all say go see an independent financial advisor. One who charges you a fee rather than gets it from the institution to whom he directs you. It is even suggested that the fee charging person will refund the commission that he receives.

I live in a large provincial town and I am unaware that there are any such advisors here.

There are of course in house advisors who can only sell their own products, there are advisors who market a range of companies products and if you are lucky they sell you the best one, rather than the one with the highest fees. In the past this did not always happen.

Fee charging, completely fair advisors, hard to find.

However, whichever route one had taken over the last five or six years, one would be likely to have lost in either case.( other than putting money on deposit)

regards ,Rugbyman

pocketdooz

In Ireland, there is no financial education in school. I think this is criminal. Our education system is very good - far superior to the UK and the US - the only other countries that I know much about their education system. But the emphasis is on subjects which, although worthwhile (history, english, maths etc) do not help in the one aspect of life that is essential for the rest of your adult life - money and financial management. I think this type of education is essential and should be up there with Maths, English and Irish in school.

Having a pension, managing your money, understanding the dangers of leverage and debt financing and knowing the risks of stock and debt market investment are skills that are necessary to live a secure life. You can make a ton of money through computers, acting or whatever but if you can't manage your money you will very likely stay in debt or broke for your whole life. With people living longer now too you've got 20 years of retirement to think about too.

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The chances of the education system changing however are very slim. So, independent financial advisers are essential and can add value to help you plan for your kids going to college, you buying a home, retiring etc.

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The way I would structure an adviser firm would be on a fee basis. It would involve capital management and advice. Fees would be based on the return generated on your assets and the meeting of financial goals for your client.

i.e. No positive performance and no customer satisfaction = no charge and no fees.

If a financial advisory firm was structured that way would it be appealing ?

Smcgie

Little bit off topic but our education system is not way ahead of Uk. The UK are way ahead and N.Ireland are ahead of that again.

Sorry continue ... :-)

pocketdooz

Smcgie wrote: »

Little bit off topic but our education system is not way ahead of Uk. The UK are way ahead and N.Ireland are ahead of that again.

Sorry continue ... :-)

That's your opinion. Mine is in my post.

Let's please not turn this thread into a discussion of the merits of different education systems.

Thanks

pocketdooz

ixus wrote: »

It's an interesting topic, one I have given some thought to recently pocketdooz. I was thinking of researching the possibilty of developing a financial advice website recently that would also allow the user to access a diverse range of global products/assets. I wanted to bypass the Irish agencies where possible.

The two initial deterrants IMHO were/are recurring income (or do you advertise certain products then losing the independent status) and the market for such a set up. Are there that many people based in Ireland who would use the site/advice. As you can see here on this forum, the sample indicates that most people are only interested in Irish based products/shares and property. Are these people prepared or do they have the desire to educate themselves further in the investment field?

I think what would really change this would be if the government encouraged people to look after their own pensions i.e. trade their own accounts as a pension with tax incentives/reliefs to do this rather than have the government looking after everyone.

1. Yep Ixus - I think that would be a big problem - I'm not sure if there is a big enough market here in Ireland. However, given the financial upheaval of the past two years and the fact that there is no more easy money in property might lead the average person in Ireland to pay more attention to their financial security and debt levels.

2. I was speaking to somebody who knows about this type of thing recently - he mentioned that this is a popular request by a lot of people in the financial services industry but is highly unlikely to happen, politically.

ixus

pocketdooz wrote: »

1. Yep Ixus - I think that would be a big problem - I'm not sure if there is a big enough market here in Ireland. However, given the financial upheaval of the past two years and the fact that there is no more easy money in property might lead the average person in Ireland to pay more attention to their financial security and debt levels.

2. I was speaking to somebody who knows about this type of thing recently - he mentioned that this is a popular request by a lot of people in the financial services industry but is highly unlikely to happen, politically.

3. The way I would structure an adviser firm would be on a fee basis. It would involve capital management and advice. Fees would be based on the return generated on your assets and the meeting of financial goals for your client.

i.e. No positive performance and no customer satisfaction = no charge and no fees.

If a financial advisory firm was structured that way would it be appealing ?

1. Potentially there could be a shift but, I think it will take a little more time.

2. I think the government actually want to manage pensions to a degree. It's to do with state control and being incapable of seeing the bigger picture.

3. Yes, it would be appealing but, at what level would you be aiming your client base at? If it's high net worth, are you beginning to sound a bit like a hedge fund or wealth management company as are presently out there? If you're looking at the average income earner, or slightly higher, you would be spreading yourself very thin in terms of commitment to generate returns for every investor based on your advice.

Just initial thoughts that I've ran through myself. I do think this idea merits serious though pocketdooz. It's certainly something I've imagined myself doing in the long run.

Idu

I think your biggest obstacle would be the perception of Financial Advisors in the country now. As is usually the case in this country the public at large are looking for scape goats for what has happened and the government, banks and financial advisors are now the primary targets. In plenty of posts here you will see someone blaming everything on their "greedy and corrupt" financial advisor who never had their best interests at heart.

However these people are the ones who happily payed over the odds to use AIB/BOI/Irish Life etc and never thought it funny that they only seemed to push their own products. Sure the markets were up and they would never be down again was the prevailing attitude. Now that they've been bitten the resentment is there.

Obviously thats a broad generalisation and I wouldn't expect the man on the street to be more informed than their advisor but a little common sense would have gone a long way.

As for losing money regardless in the last 5/6 years as you said rugbyman a good financial advisor could have shifted your portfolio from equities to commodities in late 2007 and kept yourself quite financially healthy. Sadly most financial advisors dont have the knowledge to know and understand these things, IMO

I think that you hit the nail on the head with the 'education' observation.

Unless there is a gargantuan shift in addressing this issue at a curricular level, I feel that you may not get the critical mass of 'fee only' clients that may be required to make the business model viable.

If you have a fee only model and do not make product recommendations, the client may buy the 'wrong' physical product from someone else.

woodseb

i definitely think there is room for this in ireland, it's a debate i tried (and failed) to kick off here

http://www.boards.ie/vbulletin/showthread.php?t=2055563839

seems there were far too many people managing their own nest eggs with little regard to risk and diversification - something a decent advisor would have done for them

pocketdooz

Deleted User wrote: »

I think that you hit the nail on the head with the 'education' observation.

Unless there is a gargantuan shift in addressing this issue at a curricular level, I feel that you may not get the critical mass of 'fee only' clients that may be required to make the business model viable.

If you have a fee only model and do not make product recommendations, the client may buy the 'wrong' physical product from someone else.

Well, I would make product and asset allocaction recommendations - but the return generated would be based of the performance of those products as opposed to a fee-per-transaction from the banks etc.

pocketdooz

ixus wrote: »

1. Potentially there could be a shift but, I think it will take a little more time.

2. I think the government actually want to manage pensions to a degree. It's to do with state control and being incapable of seeing the bigger picture.

3. Yes, it would be appealing but, at what level would you be aiming your client base at? If it's high net worth, are you beginning to sound a bit like a hedge fund or wealth management company as are presently out there? If you're looking at the average income earner, or slightly higher, you would be spreading yourself very thin in terms of commitment to generate returns for every investor based on your advice.

Just initial thoughts that I've ran through myself. I do think this idea merits serious though pocketdooz. It's certainly something I've imagined myself doing in the long run.

Yep - I think a blend of how they generate revenue and a focus on providing advice to individuals and grow your business as they grow might work - Doesn't have to be high net-worth though.

DPablo

There doesn’t seem to be many options open to small investors here re: finding independent financial advisors.
I’ve been looking to get back into shares again, but there seems to be very little choice except for the high charge online stockbrokers linked to the banks and Sharewatch which has had very mixed reviews.
I’m thinking of trying Keytrade Banks trading platform which looks good and low cost, doing my own research and taking my chances.

I like the idea of your independent financial advisor being remunerated based on the investment returns, however I don’t think a small set up without the financial backup of a big company behind it would have the resources to produce good quality stock research and analysis.

I wish you well if you go down this road, however I think the market would be fairly small for this advice as most people don’t put much thought into their financial planning.

FernandoTorres

Anyone ever heard of the CFP qualification?:

http://www.fpsb.org/CMS/index.php?option=com_content&task=view&id=85&Itemid=111


It seems the Institute of Bankers and LIA are launching it in Ireland this September. Seems to be pretty big in the U.S/Australia.

HedgeHogging

This is interesting post. In response to DPablo, I'd imagine that research would not a problem. A Bloomberg terminal and subscription to a number of independent economic and financial researchers would be more than adequate. PocketDooz would this be what you envisage doing?

There are other issues I'd like to raise
1. The trading platform is a good idea in theory, however, would there be a market for it in Ireland? You mentioned that you lived in New York so you must be aware that the number of Americans who trade stocks regularly is huge. I remember reading the percentage before and unfortunately, cant find a link for it now, but i think that this is the reason tradings sites over there are so efficient and successful. Essentially, I believe the market in Ireland is too small. This said, I would be delighted to see a competitor enter to usurp the pathetic offering that exist at present.

2. On your financial advisor idea, I am still confused as to what exactly you intend to do. What level of management will there be of customer funds? If you are focusing on advice for individuals, would you recommend stocks/bonds/commodities etc for them to buy/sell and then refer them onto a separate broker who would take the commission or would you intend setting up your own brokerage? Additionally, would you pool a number individuals' money together creating a type of fund? Furthermore, would you be thinking of advising small business about pension funds because I believe, although I may be wrong, this a key component of financial advisors already. (and apparently a lucrative area)


Finally, Ixus I highly recommend you to set up that financial website. The information you provide on your thread here is really informative and provides a great insight into various areas. I find it particularly useful reading some of the random articles you post that I would not come across on a daily basis.