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Peter Herd: When free is not quite as it seems

Essential IFA managing director Peter Herd says online adverts offering free financial advice are no more accurate than banks’ claims to be offering the same service

Peter Herd MM blog

If you are in need of financial advice, you will probably go to the internet and put into a search engine “free financial advice”. But is financial advice ever free? Or is any attempt by IFAs or banks and building societies to offer free financial advice in fact an attempt to hide charges within products to give the illusion of free advice.

The only places that you can get free financial advice is from charities or Government-run organisations like the Citizens Advice Bureau, the National Debt Line or the Money Advice Service. But even then it should also be remembered that these services often provide information only and their advice is either specialised in debt management or limited to information only when it comes to pensions and investments.

The FSA recently carried out a mystery shopping exercise of six high-street banks. During the course of this review, one of these banks was referred to enforcement as some of their advisers stated that: “You do not pay us a penny for the advice.”

The major problem here was that the product being sold had a charging structure and the bank was receiving commission from this product.

But it is not just the banks which have presented themselves as offering free financial advice.

I recently reviewed a Google advert for free financial advice by a well-known lead- generation firm.

It is clear that the FSA needs to start taking action against some of these adverts as they are misleading.

If you were to click on this advert, you are then taken through to a page where you are asked for your contact details for your “free consultation”.

It is obvious that this company is selling the data on to IFAs for a profit and it is also obvious that the IFAs will have to charge for their advice at some stage.

So how is it that the advert for “free financial advice” is allowed?

It clearly breaches both the Advertising Standards Authority rules and the FSA’s rules on misleading adverts?

We have seen an increased level of lead-generation companies operating online and the FSA needs to take action against these companies as they clearly do not possess authorisation from the FSA to offer financial advice.

In my opinion, these companies are confusing consumers as many of them are totally unaware that their data is being sold to third parties.

Essential IFA does not claim to give free financial advice, we are a charging service and offer a high standard of customer service and good unbiased independent financial advice.

We will offer all new clients a free initial consultation, where we will assess a client’s needs and then give a quotation of how much the advice for their particular situation will cost.

Our minimum fee for advice starts at £250 and if a client is looking to invest funds in equity-linked investments we charge 3 per cent of the investment as an initial charge.

Also, a 0.5 per cent fund-based ongoing maintenance charge that gives clients unlimited phone advice and entitlement to one financial face-to-face review together with ongoing expertise and recommendations for that investment.

These charges are typical of the industry and clients should be aware that there is no such thing as “free financial advice” within financial services.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Richard Wright 1st March 2013 at 2:48 pm

    Peter, your a man with too much time on his hands. Wouldnt your time be put to better use by actually servicing your clients. Your like a dog with a bone. We put this hogwash to bed a couple of weeks ago, so ill spell it out for one final time.
    Anyone can come to me for FREE no obligation advice. If I make recomendation to the client and they do not go ahead with the recomendation they walk away and pay no bill. They have had the advice so therefore its FREE!!!!! Now a child could understand that, goodness knows why you dont, bur really Peter that actually is in anyones world but yours FREE ADVICE.
    My clients like my approach because there is no pressure on them whatsoever, but they are also aware, before they sit down with me, that if I arrange a product for them there is a charge which is generally built into the product, which I will receive.
    Im sorry Peter but you are highly annoying, I suggest you get on with something consructive rather rubbing other advisers up the wrong way.

  2. Someone once phoned me up and asked me for free mortgagr advice

    When I gently told them that my services were not without costs they declined to even agree to a FEE FREE no obligation meeting to discuss their needs.

    when we get rid of this idea in the publics mind that we don’t deserve to get paid for our professional advic and services then and only then will IFAs be viewed as true professionals.

    Richard is entitled to work for nothing, I certainly won’t

  3. @Richard Wright, I am sorry but I disagree with you and agree with Peter. I don’t always agree with Peter as he knows (not that we have met, but he did call me after we disagreed on an MM article before)
    Personally Richard, if you give free advice which you only charge for if YOU implement, I think you are mad and missing the point of RDR as if you give free advice and the client then goes direct, missing you out without you being paid YOU are still liable for that advice. I often do not invoice until implementation, but my fees separate out research, advice and implementation so I can invoice if I am concerned the client may want to self implement, which I am happy for them to do with anyone including Hargreaves Landsowne if they want.

  4. Peter, your skills and knowledge put the rest of us to shame.

    Even I, a qualified financial counsellor with distinction passes in money mentoring and nihilistic planning, must bow to your superior cognitive exertions.

    In fact, I am recommending you to the FCA as a regulatory coach who can knock them into some kind of shape.

    Chartered or chartist, I ask.

  5. It may be that Peter’s business model works based on the type of potential clients he is looking to attract.

    I note that his office is housed within an industrial complex so the certificate of professional standing which is proudly displayed on the first floor window probably doesn’t attract that much passing trade.

    Some things in life are free with the majority being worthless. Peter’s view of our world is one of them.

  6. Of course you can have free advice.

    I often give free advice to clients because not everything has to have a price. It may have a value to the client but there are many clients who would be terminally put off seeing their adviser if every conversation, letter and phone call came with an explicit cost.

    You’d better start living in the real world, mate.

  7. @Mr Herd, I recall you pontificating about advisers bein g wrong here and doing that wrong over there and, apparently, you knw all the answers and must be really successful.

    How come then you have time to pen these inky rants about where we are going wrong.

    Surely it’s bad enough with the feckless regulator issuing edicts and such without having a level 5 johnny-come-lately adviser giving it large?.

  8. @Richard Wright…so someone walks in off the street and says he has 50k to invest. You probably say (assuming no loans bar mortgage) to maximise the ISA allowance and consider something else. Do you document that and give a full report with justified fund selection? Or is it just verbal? If it’s the latter, you’re mad because it isn’t really advice is it? It’s a mere suggestion. Remember, If iit ain’t documented, it never happened.

    But there are people who’d happily talk and make suggestions for free. Nothing wrong with that for them or the prospect. It is not really up to us to question another’s business model…but free advice will never really have “value” in the client’s eye. It’s just human nature.

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