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Relationship with IFA's

I have always been wary of referring to clients to IFA's because of the miss selling problems over the last few years and wondered
What arrangements had in place.

Do you refer clients To one particular IFA?
Do you receive a referral fee or commission from them?
Do you just let your clients make their own arrangements?
Do you also receive reciprocal referrals.

I have an opportunity to do something with my cousin who has also recently left a large company and works under an umbrella
Body doing wealth management style planning.

I was just wondering is it better just to refer to each other and no money change hands or what other do really
And should you split your referrals around or just to 1 company.

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25th Feb 2013 23:39

Quality IFA's can be very useful but......
From my experience a good IFA can be a very useful contact in maintaining a good accountant / client relationship. have helped clients do a number of transactions recently (mainly via SIPPS) which have been both tax efficient and advantegous to the clients immediate requirements.

However, remember that you are recommending a person to your client. If the IFA is poor / selling focused it can leave clients with a bad taste and potentially ruin your relationship.

We did have a joint venture set-up for around 18mths which earnt quite significant sums in commission. Unfortunately, our JV partner never paid us anything so needless to say it isn't used any more. What we do now is each partner tends to have their own prefered partner IFA. Although each has a formal introducer agreement in place we only refer as and when clients show a need. It is not something we market as such.

We have a section in our engagement letter to cover such arrangements.

Finally, in terms of income we tend to get between 20-25% of the IFA's fee. However, I must stress that given our previous experience (where our hard work just made money for someone else!) income is very much second to helping the client.

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26th Feb 2013 01:34

IFA

 

An IFA will be a major asset to you as an accountant in practice, and I have been struggling to find one.

Firstly I would never refer clients to an IFA who wasn't my client as the likelihood is that the IFA will have other accountants on their books and then you will not benefit from a cross referal system.

Secondly I am not sure how you can be a good accountant and not stray in giving good financial advice. For example if you are looking to reduce company profits you may suggest a pension contribution, explain the tax reliefs and the potential drawbacks cost etc, and then you are stuck because you can't give further advice, unless you want to run into trouble with the FSA (or whatever body it is now) This also applies to wealth management, so having a good IFA next to you is nothing but a benefit and in my opinion essential.

You should definitely take up the option to do something with your cousin and grow two businesses together.

In terms of commission I am not a great believer in commission because you get greedy and it blurs your judgement in whether you are providing objective advice. Cross referals will more than pay back any investment of your time.

If your IFA is no good your clients will soon tell you, although following the banning of commissions on many financial products I am very optimistic the level of advice now will be of much higher quality than it used to be.

Hope this helps best of luck.

 

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26th Feb 2013 08:26

Commission

Given you fiduciary relationship with the client, you have to account to the client for any commission received which means at the very least receiving informed consent for the retention of commission.  Informed consent will need to mention amounts and a general catch all eg hidden in a terms of business does not work.  An interesting point is whether the retention of commission was an offence under the fraud act in the same way the retention by a football manager of a large bung would be.  the relevant section, concerning abuse of position is 4.2 of the fraud act 2006 and reads A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.  I await a prosecution!

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By Old Greying Accountant
26th Feb 2013 08:43

I am with Peterdell

Clients need financial advice, I am not and have no desire to be authorised so I have a client IFA to which I will refer if asked but do not take commission.

Generally though I find referals are for mortgages more than investments.

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By Glennzy
26th Feb 2013 09:15

Wary of Commission

I was wary of the commission route. When I was last in practice (Pre 2004) a lot of our clients got involved in the buy to let boom, and we used a guy to arrange the mortgages who earned big money on self cert style mortgages. I think some of the mortgages have since turned bad and i know a few people were taking action against the advice they were given.

My cousin was one of the first extra clients I signed up since starting up again so will give it a go and see how it works out. He is arranging a SIPP for me at the minute and the client is very happy with the approach. He is also setting up a new business and signing up a lot of new work so the arranegment should be mutually beneficial.

I have no interest in becoming FSA approved and will be happy with client referrals as thats my business.

 

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Reciprocal arrangement

I have an IFA as a client, I'm also his client and we could be considered 'mates'.

I refer work to him and he refers it to me. This is a reciprocal arrangement and no fees exchange hands.

I value his work and he values mine and the relationship works very well - I must admit I do better out of it.

Unless you 'know, like, trust' (BNI quote) the individual why would you want to refer them to your clients? IFA's are often overtly pushy and could send out the wrong signals to clients.

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By Sarah P
26th Feb 2013 21:36

Wish I could find one
I need a good IFA to refer work to.

I've met a fair few but none that I really like, let alone trust!

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By Old Greying Accountant
26th Feb 2013 21:53

As an aside ...

... with the withdrawal of commision based selling of pensions the IFA's will charge for setting up the mandatory schemes, the employer is not obliged to pay this so the fees will be taken from contributions until paid.

So, I am sure many employers whose low paid employees opt to have the scheme will take months or even years before any value starts accruing in their fund as the employer is unlikely to foot the bill!

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26th May 2014 03:35

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26th May 2014 03:38

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16th Aug 2015 16:06

Engagement letter for cgt calc
My IFA has asked me to prepare a cgt calc for his client. Any thoughts with respect to client engagement letter/letters of engagement? Must I insist on a direct relationship with end customer or is it ok to just provide cgt calc for IFA to use with his customer. Spoke to my institute who suggested:

SCENARIO 1:Basic calc on numbers provided, no personalised report (eg just anonymised taxpayer 1, taxpayer 2). Almost as if it's an academic exercise......should be fine having agreement just between me and IFA
SCENARIO 2: Personalised (named, NI number eg suitable for self assessment submission), reviewing allowable costs, clarifying capital expenditure vs, say, revenue type repairs for investment property. In this case should insist on my direct engagement with client. Part of problem was risk that info/advice could get muddled if passed through 3rd party (IFA) and could end up with negligence claim etc if all went wrong....

Annoyingly my situation lies somewhere in between. But regardless, does anyone have a similar experience to share and how did you resolve it?

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