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Alistair Cunningham: The difference between estate agents and IFAs

Wingate Financial Planning financial planning director responds to Martin Bamford’s piece posted online yesterday.

Alistair Cunningham MM blog

It is four years in February since I bought my house. I’ve not had a letter, email or phone call from the estate agent since they handed over the keys to my house.

In that time, we’ve had another child and despite having four medium sized bedrooms I’m concerned as to whether the house remains appropriate.

We’re also concerned about the secondary schools, and although our daughter was only four when we moved in here, I gather the local state school is poor. My estate agent did not discuss with me that in due course the house may no longer meet my needs.

My estate agent was a likeable enough chap, I’m not sure of his qualifications but his appearance was smart, he was enthusiastic and his tie was fastened with a knot of such majestic proportions it would make a professional footballer jealous. We didn’t have a debate about who was more qualified than who, as I don’t care about his qualifications anymore than I care about the qualifications of the guy who washes my car, or delivers my groceries – there’s a limited space for negative outcomes.

When considering which agent would be responsible for dealing with the sale of my old property, I used principally only one criterion – who I felt I trusted. Price didn’t really come into it. I’ve spent so much time telling clients and prospective clients that price isn’t everything that I believe it. Unlike a lot of financial planning advice, it was simple for the agent to quantify the value he would add (a higher selling price).

I’m aware that cost is pretty irrelevant when you consider an agent charging 1 per cent of a property that sells for £200,000 is patently worse value than the agent who sells the same property for £210,000 but charges 2 per cent. I have no way of predicting this so need to have faith that they’re acting in my best interest. In financial advice, in a world of variable performance; cost is about the only certainty.

I didn’t haggle, and wouldn’t want a special deal. After all, if he has two identical properties on his desk, for example mine and my neighbours, and I’m paying 1 per cent, with my neighbour paying 2 per cent, I’ve misaligned my interests with his, and potentially given an unnecessary conflict of interest.

I didn’t ask for other opinions, I didn’t check websites, most of the agents would bear the cost of an initial meeting and that gave me the chance to ‘take them for a ride’ and see how we got on. I looked at a few websites, and clearly most couldn’t touch those on the ‘Right Move’ service, but I know big is not always best and went for a local firm who knows our area. At most I was bound into a three month contract, and, unlike most financial advice, if I didn’t get the service I wanted there was no cost or other disincentive to move after three months.

Meeting with the estate agents gave me a chance to compare their propositions, and despite the various nuances and assurances each gave me that they were ‘different than other agents’, it seemed simple to me as a layperson: they’d sell my house, ideally find me a new one, then manage the process.

It may seem obvious to some, but there are other significant differences between IFAs and estate agents:

Few agents (apart from letting agents) are in the fortuitous position they can build a business which offers a recurring service that we value enough to pay for.

Selling a house is traumatic, and choosing an agent does require a great deal of trust, but does anything else come close to the advice we give; dealing with an individuals entire worldly wealth – and outside of this – discussing their hopes and ambitions, worries and concerns, their health and familial relationships?

Much of the ‘risk’ of the purchase of this property has been passed to someone else – the solicitor for the conveyancing, the surveyor for the structural soundness. I have zero comeback on the estate agent for the suitability of my home initially, let alone on-going. As a financial planner with no long stop I have a potentially infinite liability for the services and products my clients buy; outsourcing has little effect on this – I’m responsible for the DFM, Platform, etc.

Unlike our world, if an unscrupulous agent does rip their clients off (I’m not imaginative enough to think how this is possible) other agents don’t have to pay levies to bail out the crook.

Any professional worth their salt aims to provide a valued service, and to build trust in what they do. But comparing an IFA to an Estate Agent is no more meaningful than a comparison with any other professional service. The cost, risk and regulatory burden of running an IFA practice is high: and rightly so, we have more power and responsibility than most other professions, and should be sensitive to this.

Alistair Cunningham is financial planning director at Wingate Financial Planning

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Comments

There are 16 comments at the moment, we would love to hear your opinion too.

  1. I think you could also apply this to the attempts to compare us with solicitors and accountants when ultimately they provide a transactional service.

  2. A very good article and response to the unfortunate column penned on here yesterday.

    Thank you!

  3. message to Money Marketing. Can you explain why my comments never appear .?

  4. WOW ! What was all that about?
    Alistair. Don’t get involved. That’s a lot of hot air and a waste of your time responding to Martin Bamfords pure and utter nonsensical idiotic garbage.
    Money Marketing must be scraping the barrel with these 2 articles.
    Come on MM get back to what your good at!

  5. You wont have had any letters or correspondence from your estate agent because they are continuing to make any money from you!!! Equally the bloke that sold you you tele hasn’t been in contact to check it is now able to get digital pictures!

    Grow up! Dont financial advisers keep banging on about how much they are looking after their clients ‘for the long haul’ and not just the short term!!!

    You seem to have completely missed the point of the original article it was all to do with how you compare your charges with another profession – the fact that it was estate agents is here nor there – get over it and sell some more products and look after the clients you are supposed to be looking after (after all you are continuing to charge them aren’t you???!!!)

  6. Anonymous | 18 Jan 2013 2:50 pm

    Grow some and use your name.

    The whole point of this article was to point out it is impossible to compare one ‘profession’ with another.

  7. on a snowy, cold and windy january morn another man takes a pop at a financial advisor in the ghetto. we are in the ghetto alright.

    agree with the author wholeheartedly.

  8. MOTM @3.28 Historically speaking,compared to the alternative,a ghetto was preferable.
    But we do appear to be considered unworthy of general decency afforded to other citizens in our so called democracy.
    Vote UKIP.
    I do agree with the author but I am considering whether an estate agent’s lot is a happier one than mine.

  9. @Sean,

    And the point of the article was NOT to compare one profession with another, it was too compare the charging structure and how you sell your charges in different professions!

    I completely understand why everyone is getting so upset – no one wants to be compared to an estate agent!!! But everyone seems to got the wrong end of the stick. IFA’s charge in a similar way to estate agents, estate agents charge a percentage fee and so do IFA’s, so the point was how do you explain the worth of a percentage to a punter!

    The other problem of course is that IFA’s get all uptight because an estate agent has the audacity to charge 1 or 2% on a £200K sale but an IFA is quite happy to take 3% minimum on the same value investment! (and again i reiterate, estate agents dont continue charging!) That is comparing IFA’s with estate agents!!!

  10. Ignoring ongoing charging an estate agent has absolutely no liability for any sales he makes.

  11. Nor does a television sales person and the point of saying you have had no contact from an estate agent when your circumstances have changed is?

  12. Theres alot of “anonyous” write in. I wonder if they are related to Nic Cuccuti or do you think it is him or her? Hmmmm I wonder

  13. The difference between estate agents, television sales people and IFA’s is that estate agents and television sales are selling PRODUCTS, IFA’s are selling ADVICE! You either want a tele or your house sold and you make a simple choice – yes/no, if you need to make sure your husband/wife/children are looked after when you are gone or you need to make sure you have sufficient income when you retire you seek ADVICE about what is the best option. I know what tele i want because it is either really big or enormously big, i don’t know what life cover i need or what is the best pension option so i see a professional and if it turns out they gave me duff advice i have recourse, if I bought a tele that is crap that’s my problem and i can always get another one i cant save up the money i have put away in a pension for the last 25 years or say to the life company ‘sorry i didn’t mean to get that decreasing term policy i wanted a lump sum, but the DTA was cheaper so i went for that’.

    Along with responsibility comes responsibility, if you want to charge for advice then you take the consequences. And by the way i would far rather trust an IFA than any estate agent any day!

  14. Perhaps it’s the estate agent that’s missing the trick here. An annual ‘benefits statement’ updating the client on the local property market, Ofsted reports on local schools, number of playing fields earmarked for supermarkets, etc. might generate a regular flow of new instructions.

  15. Just by the way. When using a smart phone to write a response the blogg changes the name to Anonymous

  16. Aren’t you both mates (AC/MB) and tweet / message between eachother on a regular basis ? If you crave attention so much perhaps you should have considered a life on the stage. If my adviser spent as much time on things like this and endless tweets about how fantastic he is i would show him the door. What a load of nonsense.

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