By Sam Kelly,
REGULATION: Before your appointment it is essential you check the regulation of the firm you are speaking to. Chorus make this as easy as possible – our licensing information and details are listed on all our articles, advertising, business cards, email footers.
Via our website’s ‘Regulation’ tab, you can directly visit our listings on the websites of the UK FCA, the Spanish DGS and CNMV to see details of all our various licences and permissions.
There should never be any confusion or doubt as to how the firm you are speaking to are regulated, and there is never an excuse not to display this clearly on all literature. If you can’t find licence numbers and verify them yourself, simply walk away.
FEES: Your advisor should always tell you very clearly how they are remunerated and give you an exact breakdown of all fees. Ensure you have the following fees confirmed before signing anything:
- The investment vehicle or ‘wrapper’, for example a platform or bond (Quilter PLC, Novia Global, Lombard International, Prudential, STM Life etc), will normally be structured in one of two ways: No tie-in, but a set-up fee payable to your advisor which should be declared, or an annual fee that is tied-in for a set number of years, with your adviser declaring how much commission they will receive from the product provider. Prices can vary hugely from company to company, even for a seemingly identical product.
- An annual advisor fee – this covers servicing and portfolio management and is a fee paid to your financial adviser from your funds.A fully licensed, qualified and experienced adviser should be able to act as both your financial adviser and portfolio/fund adviser. Be wary if you have 2 companies appointed for these roles as this can add substantial fees each year.
- The fees charged by each individual fund in your portfolio – be VERY wary of this fee. Fair annual fees for the highest quality, FCA regulated funds are between 0.2% and 1.2% per annum. In Spain we regularly see clients unwittingly paying as much as 2-3% per annum for the funds recommended by their adviser.This may be because your adviser is receiving commissions you aren’t aware of, rather than choosing them because they are high quality. This is one of the greatest risks to any investment portfolio, and if you aren’t aware of the true costs of each and every fund in your portfolio you should insist on your adviser confirming this in writing, accompanied by a fact sheet or key information document.
So, before you sign anything or agree to pay any fees, ask for the total annual % of your proposal to be confirmed in writing (by email is fine – but again, are those regulatory details in their email footer?).
Ensure the ‘wrapper’, adviser fee and fund fees are detailed, along with confirmation of the total annual fee of the proposal, ie all charges added together. There is no excuse for not willingly providing this information in a clear and easy to understand way, and in my experience, when this doesn’t happen, it may mean they are trying to hide fees from you.
Ask for fact sheets for the underlying investment funds – these should clearly display annual charges, and preferably a 5+ year track record. We would expect recommended funds to be consistently outperforming their benchmarks.
If you don’t understand what any of the above means, it means you don’t properly understand the proposal, because your adviser hasn’t explained it to you in a simple and clear manner. If that’s the case, you should probably contact me after you finish reading!
I do often feel that as Brits we are too afraid to offend, and this can really cost us. Your entire financial future is potentially at stake when you sign up with an IFA. Never be afraid to ask questions, and never fail to do your own due diligence, and seek a second opinion on any recommendation being made to you. This is simply too important for you to take any chances.
Chorus will always consult for free, and you will only commit to fees once all details are confirmed and you are happy to move ahead with a proposal. We only recommend regulated solutions, and these always benefit from a 30-day cooling off period, during which time you can cancel in full without paying any fees. This is how confident we are that we will only ever recommend what is right for you.