Independent financial advisers,
are they independent?
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How can independent financial advisers be independent if they are paid by commission?
You may or may not know that independent financial advisers are often paid by commission rather than, as with many professions, on an hourly basis or on a fixed fee basis. A commission can be quite considerable, leaving many to question the independent nature of independent financial advisers if their advice is influenced by what is known as the commission bias.
Commission for a financial adviser can be very good
An example we recently read about would be seven per cent commission. If this was on something like a £200,000 investment there would be a commission of £14,000, which is obviously far in excess of the few hours financial advice, if that is what is termed has been given.
The Financial Services Authority, the regulatory body
The Financial Services Authority (FSA) is proposing moving away from this commission based payment and we can see why many independent financial advisers will be against such a recommendation. Equally, we are advised that some are for it.
What does independent mean in the surveying world?
Whilst the Royal Institution of Chartered Surveyors (RICS) considered the question of independence we feel it is only the Independent Surveyors and Valuers Associations (ISVA) that truly grasp the nettle and very much promote the client first philosophy.
Conflict of interest in the surveying world
The conflict that can arise in the surveying industry comes about where the surveying companies are owned by the mortgage company, or the insurance company, or the estate agents. We feel this conflict is particularly unacceptable where the surveyor, or valuer as they more commonly are, is meant to be acting for both the lending institute and the purchaser of the property (the new mortgagee). We have spoken previously about companies using panels and would reiterate that often the only other surveyors on their panels are those with reciprocal agreements to give them appropriate levels of work or commissions back.
Reciprocal agreements in the property world
In our experience, this tends to work on several levels, with the larger mortgage companies having agreements with other large mortgage companies and the building societies having agreements as well. Unfortunately, this system works for the mortgage companies rather than the fee paying client. We would particularly steer you away from advice from estate agent owned surveyors, especially where, for example, they have mortgage valuation work and then, say for a reduced extra fee, they will also carry out a building survey. They will tend to be using valuers to carry out the valuation (often known as general practice surveyors or valuations surveyors) rather than building surveyors. Whilst you may be tempted by the saving the quality of advice may be reduced.
Independent estate agents, do they exist?
Whilst we are talking about independent advice we would also mention that many estate agents are tied up with mortgage companies and mortgage products. Interestingly, the mortgage companies and insurance companies look on the estate agents as a place in which they can sell financial services. We have come across the practice of putting the financial service adviser (because they are certainly not independent in most cases) at the front of the office, so they are the first person you meet and therefore you get to know them before passing you onto the estate agent, and therefore can be reintroduced to you at a later date when assessing your financial situation or your financial needs, or should we say selling financial services to you.
More financial advice
Interestingly, most financial service providers or advisers only give advice on a limited range of products that they are meant to advise you of. However, it soon gets forgotten in the mass of other information that you get from them. Even financial advisers that recommend a range of products will often be selected from a panel of mortgages, these are mortgages that they have deals with. These may give you, the purchaser, the financial advantage and in most cases they certainly will give the independent advisers a commission.
You may find these articles of interest:
Independant Financial Advisors pt1
Independant Financial Advisors pt2
Mortgages Aren't they interesting?
Valuation the same, Snap
What Is An Independent Survey?
If you truly do want an independent expert opinion from a surveyor with regard to valuations, mortgages, mortgage companies, surveys, building surveys, structural reports, engineers reports, specific defects report, structural surveys, home buyers reports or any other property matters please contact 0800 298 5424 for a surveyor to give you a call back.
If you have a commercial leasehold or freehold then you may wish to look at our dilapidations website at www.DilapsHelp.com and for Disputes go to our Disputes Help site www.DisputesHelp.com .
We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).
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