Reply With QuoteIt might be in might not. I pay mine .34% ongoing but without knowing of what, nobody can judge. Think I paid an initial fee of about £3000 but that was for a FS transfer which was obviously complicated.
I have been considering whether I need an IFA, and have an introductory chat with one tomorrow. What I am really struggling with is the sheer cost of them. £1500 ‘commitment fee’, 3% upfront plus 1% annually.
What can I honestly expect to get for such a huge outlay, especially where it’s a percentage of what I have already accumulated, and where I’ve already had reasonable stocks picked by an adviser already?
To give background, I’m 38 and I’ve inherited a varied portfolio of shares and unit trusts - not disclosing the amount but it is currently at 3x my salary, with a yield of probably around 5%. The yield is guesswork on my part as I have only had them for a short while. I also have a single work pension that’s currently 2.5x current salary, and a mortgage of 2x salary, but interest on it is a pittance so I’ve no plans to pay it off quickly. Cash savings and my own ISAs and shares of about 1x salary.
So assets are 6.5x salary, liabilities of 2x salary, total pension contributions at 25% of salary plus tax relief.
What can I realistically expect an IFA can add, versus me just running my existing portfolio as I’m doing already?
Thanks
It might be in might not. I pay mine .34% ongoing but without knowing of what, nobody can judge. Think I paid an initial fee of about £3000 but that was for a FS transfer which was obviously complicated.
A bad one, no but a good one is worth every penny and more.
With the amount of training and qualifications/assessments that they have to do these days, there are very few bad ones around any more.
Agreed but make sure they are a genuine IFA not a FA or “wealth manager”Originally Posted by Dave+63
What distinguishes IFA, FA and wealth manager?
Sent from my iPhone using Tapatalk
Independence to advise on any product, rather than just the best tied products available to the FA (although to add you can be a Wealth Manager, or even a Chartered Wealth Manager, and be completely independence too).
Im on the board of an IFA business, and I used to regulate the industry - I’ve seen some very good, and some very poor IFA’s in my time.
There is a lot of more information available to the average person these days, so a lot of the mystery has gone. That said some software is prohibitively expenses to an individual, which might be available to your IFA. Modelling can be very useful, and is used a lot more to predict life events and scenarios that you may experience. A very good IFA could be worth it - but you only have to look at the TZ investment threads to get an idea that everyone thinks differently.
On the face on it, and without much to go on, £1500 + 3%, plus 1% sounds a little high to me though.
Last edited by Omegamanic; 16th July 2020 at 21:43.
It's just a matter of time...
There is an old joke in the world of finance. - "Which one is the odd man out, a trustworthy IFA, an untrustworthy IFA or Father Christmas." The answer is obviously the untrustworthy IFA as the other two are figments of the imagination.
IFAs seem to be people who failed an earlier career, became an IFA by passing a dead easy exam and then they totally look out for themselves rather than the client. They have to make a living and the fees are what really drives them.
I put them on the same level as double glazing salesmen, egotistical, unnecessary and untrustworthy.
I think it depends what you want an IFA to do.
For complicated pension transfer issues, with so much potential risk I can see the benefit of paying for a skilled specialist.
If it’s just managing an investment portfolio, even a large one, I can see no benefit in an IFA at all. They aren’t investment experts, and even expert fund managers don’t always beat the market. The fees look like taking a slice of your portfolio for nothing. At the end of the day, you have to decide your own timeline and risk profile. My personal view is to continue to learn by managing my own investments. If I really couldn’t be bothered, there are plenty of inexpensive index trackers and well regarded active funds. I’m a great believer in my own research and decisions. This stuff really isn’t rocket science
Dave
Sent from my iPhone using Tapatalk
Thanks for that. The fees do indeed seem high as I’m already invested in a diverse portfolio anyway. I have heard anecdotally that some will immediately move people to other providers as if to justify their fee - it’s unlikely to simply maintain the status quo as that isn’t adding obvious value.
I will see what the guy says, and may go back to just doing my own thing and being responsible for my own investment decisions - good or bad.
Sent from my iPhone using Tapatalk
Another no here.
I know everything is relative, but for me it would be about the size of your assets. If I inherited £25/50K i'd just stick it in a low cost tracker - Vanguard LS or similar, some small cash and Premium Bonds. Keep it simple.
If it was £100K+ slightly more complicated but i'd want to diversify into emerging markets, S&P 500 tracker, property funds, small amount of maybe gold / bitcoin. Possibly some individual shares? If it was £500K-1m - i might need some help, that's the way i'd look at it.
Agree with this. One of the most valuable aspects of using an IFA is the planning and “what if” scenarios. The software packages are impressive and have certainly helped me get piece of mind. Reviewing where you are each year is useful but as said an IFA isn’t an investment expert (nor do they purport to be) but can recommend where to invest based on attitude to risk.
You seem to have a really good handle on your finances and I'm sure you could manage them very well on your own.
No one has more invested in your money than you, do you really need to give a stranger a load of money just to "churn" your investments?
Cheers,
Neil.
If it’s done properly there shouldn’t be a need to “churn”. An IFA isn’t there as an investment expert but to help financially plan. Some people need one some don’t. I had to get one to facilitate a FS transfer but there are some good ones out there that aren’t just interested in a fee.
For what it’s worth I feel I get good value for money - my total charges are less than 0.8% and that include IFA and fund charges. Some portfolios/insurer funds/personal pensions are only available through IFAs.
Good advice. I would only bother taking advice if it was beyond my ability to drip feed it into tax free wrappers like ISAs. Would focus on paying off mortgage and any debt first anyway.
[QUOTE=Mick P;5480650]There is an old joke in the world of finance. - "Which one is the odd man out, a trustworthy IFA, an untrustworthy IFA or Father Christmas." The answer is obviously the untrustworthy IFA as the other two are figments of the imagination.
IFAs seem to be people who failed an earlier career, became an IFA by passing a dead easy exam and then they totally look out for themselves rather than the client. They have to make a living and the fees are what really drives them.
I put them on the same level as double glazing salesmen, egotistical, unnecessary and untrustworthy.[/
Most IFA’s nowadays are very well qualified, go through a ridiculous amount of training, ongoing compliance and monitoring. They also choose it as a career and it’s very hard work but you get a lot of satisfaction out of it and yes it can be financially rewarding but no different than any career. I don’t expect someone like you to understand that Mick, as like your post here, you’re very ignorant and rude, which is clear in the majority of what you post. There are a few IFA’s on here and what I’ve read they always come over as genuine and informed.
OP I’m in quite a good position to give an opinion here as I’m an IFA of sorts - I am but I’m winding down and don’t take on clients. The majority of my wealth is from outside business interests and nothing to do with financial advice. I still look after a few wealthy individuals as well as some loyal clients who have been with me from day one. Mainly IHT and trust work plus clients with over 250k to invest.
I think a good IFA earns their money by advising on all the areas that most people just wouldn’t consider. Small things like specific ideas on making your will, especially when there is children from previous marriages, to running through business plans and ideas, advising company Directors on Relevant Life Plans for example and generally being able to offer suggestions on a multitude of things. IHT and BPR are big issues nowadays. I’ve never advertised, don’t do any high risk areas like final salary transfers, yet have a lot of business clients, some of them worth tens of millions. They want someone who they can bounce off, get feedback, views and even play devils advocate. That to me is where a good IFA adds value. Managing some ISA’s and collectives worth 50k probably isn’t value for money nowadays unless the fees are low.
FWIW OP those charges seem high to me. Maybe they can justify it, but I’d see that as very expensive. If you are committing a fee at the outset for them to establish your overall picture, then taking 3% on top to switch the investments to their agency is taking the .... Especially as they will be getting an ongoing fee. If it’s over 100k of existing investments then 1% seems a lot fairer. That said I don’t know what they are going to be doing for that, so maybe ask for a detailed breakdown of what they are going to do.
Last edited by Devonian; 17th July 2020 at 15:02.
I was chatting with my brother the other week (a reasonably successful IFA) and his advice was to put spare cash into a passion rather than paying down the mortgage.
Whilst it feels like going against the grain, the tax incentives on putting money in a pension and the very low mortgage interest rates actually make it a very sensible decision.
There are other benefits too but I’d zoned out by then.
Depends. Given what the lifetime allowance is and what the annual limits are on paying in, depending on what your income is, paying into the pension may not be possible or advisable.I was chatting with my brother the other week (a reasonably successful IFA) and his advice was to put spare cash into a passion rather than paying down the mortgage.
Whilst it feels like going against the grain, the tax incentives on putting money in a pension and the very low mortgage interest rates actually make it a very sensible decision.
There are other benefits too but I’d zoned out by then.
As covered very well above, things have moved on considerably and bad actors within the industry have for the most part been pushed out, the RDR seen that move along further (although I’m not convinced removing commissions actively helped the consumer in most situations.
The good thing that an IFA or Wealth Manager does is look at your assets/income/lifestyle/events and provide some insight in to how, and how much you should look to place into each area, whether that be life insurance, tax free savings such as ISA’s, bonds, equities, trackers, mortgages, pensions - what type, etc.
Just going in and asking which tracker funds should I put £100k in probably isn’t the best use or value.
As I said above, I’ve seen some bad IFA’s (increased commissions at almost any cost types), but very few of them. Most were fine, and some were excellent.
There are regulators and ombudsmen around the globe these days, and it has been that way for some time - so they are held to account. A dodgy IFA isn’t going to last, as after a few large claims/pay outs they aren’t going to be able to obtain meaningful Professional Indemnity Insurance to meet the conditions of a licence, so...
It's just a matter of time...
The mortgage is really negligible at the moment - the investment return on any overpayment far exceeds what I pay in interest.
I am beginning to think that I won’t get much extra value from an IFA, as I can create and manage my own strategy to move into more tax efficient vehicles than just shares - and especially not at 3% of the portfolio value. Nothing that he said really scared me or seemed particularly alien, so if anything it has made me realise I can plan things myself and engage advice only if required as opposed to paying an annual fee.
Sent from my iPhone using Tapatalk
I have moved from knowing nothing about pensions, investments and long term planning a year ago to feeling confident about planning for the future financially. It's involved a lot of reading and although YouTubers are a mixed bunch (!) I've learnt a lot from this guy - Ramin Nakisa - videos. He's measured, balanced and very watchable about personal finances.
https://www.youtube.com/channel/UC9O...Uss7xj7s1P5XGw
I also went from novice to confident enough to sack off my FA and move my pension, ISA and savings into my own management.
I follow this book to a T and read a few other blogs and websites like “This is Money”.
Smarter Investing: Simpler Decisions for Better Results (Financial Times Series) https://www.amazon.co.uk/dp/02737853..._L-YeFbG8MPY7H
I suggest reading that book and seeing how you feel afterwards.
Personally, my experience has been very positive of my IFA. I guess the question might be.....do you have the confidence to manage a seven figure investment through the global turmoil of the last six months, and still end up at just over par? Mine did. So, do you? Btw, your quoted rate is way over.
And how does your position pre and post look?
Funny, that is my immediate experience of procurement managers.
Me too, grant videos, I move to vanguard SIPP in February Just before crash I’m 20% up for 2020
Same here, but also do you have the confidence over the next 12 months! Happy with my IFA just for a reality check and modelling scenarios.
So how much have you paid to be "just over par" for the last six months? If you'd invested in Vanguard Lifetstrategy 40 you'd have been level over 6 months & it would have cost you 0.22%.
https://www.vanguardinvestor.co.uk/i...ce-performance
Surely if your adviser was so good he would have told you to sell up at the beginning of Feburary & start buying back at the end of March & you'd have made a fortune? Why does just maintaining par deserve a substantial reward?
If you'd simply stuck your money in Fundsmith you'd be looking at an Annualised Rate of Return of 18.1% for a charge of about 1%. If you aren't in Fundsmith have you thought about asking your FA why not?
https://www.fundsmith.co.uk/fund-factsheet
Have you ever worked out in actual £ how much a year you give to your adviser?
To highlight what a huge effect charges can have on investment values SJP has come under more scrutiny this weekend with articles in both the Telegraph & Sunday Times (paywalled):
https://www.thetimes.co.uk/edition/m...says-gb2993p6s
https://www.telegraph.co.uk/investin...s-firm-admits/
"Assuming 5% a year growth, a fee free £1m portfolio would gain about £3.32m over 30 years. But invested in SJP roughly 1/3 of this would be eaten up in SJP fees, a further 1/3 would be lost growth due to the the fees being taken each year, leaving 1/3 profit in the fund to the investor."
Posting Permissions