Reply With Quote5% of what? 5% of the amount put in each year, so if £20k then £1k annual fee. Or 5% of the Total ISA value each year, so if you have a 500k pot then a 5% fee (25k) seems excessive and will wipe out most of your gains I woudl have thought.
Hi All,
Was looking for some advice from the more financially savvy amongst you.
I want to start taking advantage of mine and my wife’s ISA yearly allowances and put some money into stocks and shares ISA’s. I have been introduced to a IFA by a friend and he seems reasonable. He is suggesting this path and is asking for a 5% yearly setup/management fee which seems like quite a lot. Don’t have much experience if using an IFA so don’t know for sure if that’s normal/reasonable.
So, any thoughts on ISA’s in general as a path to go down and on the IFA fee piece?
Thanks!
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5% of what? 5% of the amount put in each year, so if £20k then £1k annual fee. Or 5% of the Total ISA value each year, so if you have a 500k pot then a 5% fee (25k) seems excessive and will wipe out most of your gains I woudl have thought.
5% of any amount is too much imo. Get yourself onto Vanguard and check out their funds - pick your level of risk, and job done. For a more depth advice read the lengthy investment thread in here. Plenty of tips for Isas and you’ll save most of the 5%
5% is taking the proverbial
Not sure actually, something I will check on. Even if it’s just 5% of the money I put in every year (if I max them out) it seems like quite a lot.Originally Posted by ViperStripes
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I have heard of Vanguard. I will do some investigation. Thanks!
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Feels a bit like it.....
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Even the sharks at SJP only charge 2-3%
How about 5% of the gains?
Forget the ifa.
Just had a chat with the IFA today and got some clarification. It is a £2k setup fee then they take 2% of the entire pot per year. The justification was that I can do a tracker type fund myself but they actively manage the fund to help avoid huge dips and crashes etc.
Still not 100% convinced to be honest......
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I’ve been looking at this myself, can’t you just DIY without an IFA?
Sounds like BS to me, a long term investment will naturally balance out dips won’t it? What return would they need to get you above what you could get yourself to cover their fees?!
How much are you looking invest?
What is your experience/understanding of investments/markets?
Some firms won’t invest less than £50,000 as the fees they charge don’t justify the expense. They will have to complete a Fact Find in detail, find out about your understanding of risk, experience, capacity for loss etc and complete a risk profiler, then research suitable products and funds. They will have to write you a detailed closure letter of your circumstances and also their recommendations. They have to be able to stand by that and ensure that the advice is appropriate for you. All of this would be a number of hours worth of work, they will have office costs, numerous PI costs, FCA charges as well as various technology costs. Contrary to what some people may think, it’s not cheap. In fact it’s very expensive to run a business nowadays.
You need to work out if the advice they are offering is worth it to you, just as they will have worked out what their worth is. I’m guessing that the £2,000 is 5% of two £20,000 ISA’s? I think it would be more reasonable to charge say 3%, but then I don’t know who they are and what they are offering. Is the 2% annual charge what they will get or the total charges including fund managers fees etc? That detail makes a huge difference. Also what funds are involved? Fund charges aren’t an issue if you get the returns involved, however if all you want is a tracker then charges are almost everything.
A lot of people find going it alone is appropriate for them, just as others think the opposite. It’s what suits you.
Finally what are you getting for your costs? Annual reviews, 6 month reviews? Do they offer an hourly rate instead? Can your fees be ad hoc instead of ongoing management? Do you need the advice?
Personally I’ve gone for the low cost option. Put my money into L&G tracker funds (just had notice the platform is moving to Fidelity but the funds stay the same). You can adjust what tracker funds for different levels of risk. As they are not “actively managed” the fund fees are low.
I have steered clear of IFAs as it eats away you margins - consider the compound 2% costs + the fund charges - you’d need make 3-4% just to stand still. If I did use one I’d go for a fee based approach.
Last edited by MartynJC (UK); 12th February 2021 at 14:42.
I'd never use an IFA personally. On speaking to some years ago I found I knew more than them. Rather like when we all go in watch shops.
Do the research - it's fun.
And who has the most interest in your money - you.
Cheers,
Neil.
Follow Warren Buffets advice to his wife when he snuffs it. Put most of the money into a low cost index tracker.
You might find the odd managed fund that will outperform it when their fees are taken out, but which one of the many will it be!
I use Fidelity for my trackers as its pretty much a fire and forgot other than choosing which ones for diversification.
I don't have the time, knowledge, skill to do all of the research in individual stocks to do it justice and have generally been the harbinger of doom when I do!
Having said that I do have individual Apple and Amazon stock but if either or both of those go belly up we will have a lot more to worry about.
How do you go about doing this, and what is a reasonable sum to start with.
I’ve gone with vanguard lifestratergy (I think it’s called) set it as 80% stocks 20% bonds I pay a direct debit to it every month and top up lump sums as and when it’s gained around 19% so I’m happy with that. The fees work out around £100 a year from memory. My plan was to leave it at that risk level for roughly 10-15 years and then look at lowering the risk. I’m in no way a financial advisor just did a bit of reading myself after a similar conversation with an IFA and their astronomical fees for what seemed very little benefit to me, I couldn’t work out how the IFA was even remotely worth it after fees etc for the amounts I was talking.
https://www.vanguardinvestor.co.uk/i...cks-shares-isa
Open account, use debit card to transfer funds up to £20k per tax year took me around 30 minutes to set up it really is that easy
Thanks for all the advice! I will do some research on setting something up myself. Didn’t realise there were tools to make it easy to do myself.
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I was exactly the same until I heard the IFA fees and decided it was worth looking at doing myself lol, once I found how simple it was for my modest savings I couldn’t believe the cost saving. Now if I was talking 100s of thousands yes I’d say it was worth seeking proper advice however as someone stated nobody else’s has as much interest in your money doing well as you everyone else just wants to take it for themselves.
Run away as fast as you can
Another vote for Vanguard here...
Cheers,
Adam.
£2k set up and 2% on top. Not a chance.
There's been studies which show that long term, active hedge fund managers rarely outperform the index and that there really isn't any justification for their high fees. I suspect this is applies to IFAs and the fees they are charging are just absurd. 2k set up to do what?
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My ISA is with iWeb, £25 opening fee, no ongoing platform fees thereafter. Invest in a fund once per year and it will cost you £5. HSBC FTSE All World has an OCF of 0.13%. Hard to beat this in terms of overall cost if you are happy with the equity exposure/risk and low frequency trading. Works for me.
Vanguard will likely be cheaper if you aren’t putting much in to start and/or are looking to make regular purchases rather than lumping your allowance in each April.
Edit: iWeb now has a £100 opening fee so that will change the equation.
I would highly recommend the below for background reading and getting yourself familiar with the concept. It’s pretty easy. Don’t go looking for the needle, buy the haystack!
https://monevator.com/index-investing/
The website has loads of useful information and it even shows his show and steady portfolio if you need something to start from. Best thing is not to overthink it too much!!
I've been using Vanguard Lifestrategy 80 as my S&S ISA for 3 years - low fees, good returns, excellent website and service - easy, easy - me happy!
How safe is one’s money in Vanguard? I mean, in terms of them going belly up?
This is a world which is totally alien to me so forgive me if this is a dim question.
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Look at sites like Questtrade. You can do your own investing or they will create an investment for you. Small percentage
Other is Wealthsimple.
Idea is for your investment to make you money. Not someone else
I do pay about 1,25% in fees on some of my investments but have no choice as they're the ones I want and have to pay the fund manager.
You can invest in bank stocks which pays dividends. Invest with moderate risk.
If you want safe. Look for investments with 0 loss. In Canada were have GIC's Guaranteed Investment Certificates. Great if you start investing when your in your 20's. Useless later in life due to very low interest rates. Original investment is safe and won't go down in value.
DON
Your money is only managed by them and held separately to their own funds. It doesn’t form part of the fund manager’s balance sheet and they must meet stringent standards set by regulators (e.g. the FInancial Conduct Authority).
So even if Vanguard/whoever go bust, get taken over, or close down, your money is about as safe as if it were sitting in a bank or building society account (investment risk aside of course).
Moneysavingexpert and Motley Fool website both have good basic guides to investment savings, and as others have said above, always look at the annual fees: usually a platform fee (charged by Vanguard, Fidelity or whoever) of circa 0.1 to 0.5% per year, and then an annual fee charged by whichever fund you choose to put your money in to (similar rates).
It’s actually fun to monitor how your money is doing via the provider’s app
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Thank you for the reply, I appreciate the explanation.
So, as a way to better cash ISAs it’s really just a matter of working out when the next absolutely ginormous crash will be then transferring funds in heavily after that.
Timing the market is pretty much impossible. In terms of what you're suggesting, how will you know where the bottom is?
A more achievable strategy at the beginning of your journey might be to make the leap with an initial investment, then invest a certain amount every month to smooth out market movements.
Haha yes...but it’s easy to know when you’re not at the absolute peak. I’d take that ;)
Thank you for the advice on the strategy, this does make much more sense. I wonder if I can dribble in funds from my existing cash isas though? Or if it has to be an all or nothing thing?
You should be able to contribute pretty much what you want, when you want.
Don’t try to time the market, if you had that level of knowledge you would be happy investing very differently.
Monevator has an interesting article on what to do with a lump sum. Pay it all in now or drip feed.
There is no real right or wrong answer. Time “in” the market is important as tour money isn’t doing much at the moment!
Be prepared for ups and downs along the way. As long as your mentality is the long term, for me it’s 10+ years then all of the dramatic ups and downs over a day/week/month start to really smooth out.
Does anyone use Moneybox stocks and shares ISA? I’ve been using it for a few years now and returns lately have been in double figures. Easy to set up, choose a risk level and also allows you to round up transactions and invest the difference. Vanguard forms about half of the value of the pot.
Yes I use as well but not as my main investment as the fees are higher than fidelity.
I use it for their round up feature. So if you spend 3.75 it pops 25p into the fund. Just like the loose change jar when I used to use cash. Remember that thing?!?
As you say the returns have been good but mine is 100% allocated to the world fund tracker so it depends on your account setup.
My experience of an IFA is the fees are negotiable. I’d only use one though if your are looking at comprehensive financial planning including pensions. I think you need to holistically look at your financial position. Is it more effective to pay off your mortgage or increase your pension contributions before looking at equity ISA’s?
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The way it was explained to me is that worry over the absolute best price stops you doing anything at all so it's better to just jump in because you're worried about 10 years in the future not next month. A book that got me thinking about investments savings etc and reading more is
I Will Teach You To Be Rich (2nd Edition): No guilt, no excuses - just a 6-week programme that works https://www.amazon.co.uk/dp/15293065...7DH25TGCJ0GFMM
Despite the corny title it was pretty good and set me on a good course to read more about things and actually do something with my money rather than just spending and saving in a normal savings account. A lot of it is stuff I feel should be taught to kids growing up about managing money, I didn't get that class because my parents didn't have move to save really our savings consisted of loose change going into a big whiskey bottle which got raided frequently lol.
I’m probably now the same as you were then.
Thanks for the tip, I’ve got some Audible credits and have downloaded the audiobook for the commute.
“Don’t buy loads of watches” better not be in there, although I secretly know it probably should be ;)
If you wanted a managed active service like the IFA is offering without having your face ripped off in fees, some of the big platforms now offer managed portfolio services. I dont know the ins and outs of all of them but AJ Bell for example charges 0.35% per annum with know upfront fees for what is basically a managed fund of low cost trackers
Just scroll down to the bit that says 'Managed Portfolio Service'
https://www.investcentre.co.uk/your-...ces#section-11
This is basically the cheap ish middle ground between doing it all yourself and letting the IFA do everything for you
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My advice is to do lots of homework before committing. Most people understand shares/ equities, but fewer people understand bonds and bond funds. I don’t claim to be an expert but I learned enough to manage my own savings and investments when I retired in 2010 aged 52. I consulted an adviser in 2006 when my dad died, I was looking to invest my share of the proceeds from his estate and I also had savings I’d accumulated. In the end I decided to go it alone, but I do remember one comment he made :’ there isn’t a gold pig out there waiting to be found’. Trying to get rich quick or make spectacular gains is a mugs game, it’s gambling not investing. All investments carry a degree of risk but some are way too risky for most people.
I’m a big fan of bond funds such as L&G High Income fund. If the income is compounded in accumulation units your holding will grow steadily at around 4%. Index tracker funds are OK, they do what they say on the tin, but they are mire volatile than bonds and they can be ISA’d. I would favour a fund that focuses on steady dividend payers which are less likely to give large capital gains but will provide a steady income stream that can be reinvested.
No matter how the advisers dress it up, there are 4 basic asset classes: cash, equities, bonds and property. Getting your head around this concept is a good starting point, if anyone finds the proverbial gold pig please let me know.
What about commodities then?
As others have suggested. The simplest and “safest” option just now.....
Open a Vanguard ISA account (They’re known for having the lowest fees of all, which was the founder, Jack Bogle’s primary aim.)
Put all of it in either VWRL or one of the Life Strategy funds.
Choosing how to enter is tricky. You could either put chunks in each month or whack the lot in in one go. Or, maybe just now, start putting chunks in and then if this dip that we’re all expecting comes, you could pop the remaining cash balance in in one go. It’s pot luck whatever you choose.
Then forget about it until you retire.
There is an ongoing discussion about the differences and benefits of the Life Strategy Funds and VWRL. From an underlying stocks perspective, the 100% LS fund and VWRL are pretty similar.
The LS funds are funds that have a single valuation point each day. The ETFs trade in the stock market like any other stock and can be bought and sold instantly. I’ve opted for VWRL, however, I opened an account for my wife and a junior ISA for my daughter, and the full amounts have been sat in cash, uninvested for about 3 months now. I decided to wait for this dip/crash and then go all in. May never happen though!
https://www.vanguardinvestor.co.uk/i...setf_fund_link
The other thing I’d highly recommend you (op) do, and anyone else thinking of using an IFA, is to read this book. It’s an easy read and will teach you all about how passive investing works and how the fees that IFAs and platforms charge, are best avoided where possible.
Paying for financial advice can be highly recommended and is often overlooked, but paying annual fees for someone to “manage” your ISA or self invested personal pension (SIPP) is best avoided.
Smarter Investing: Simpler Decisions for Better Results (Financial Times Series) https://www.amazon.co.uk/dp/02737853...P5WH6K202EB5BB
Last edited by mr noble; 13th February 2021 at 11:26.
Included with kindle unlimited as well so downloaded thanks for the recommendation I’ll have read
Turns out a couple of my watches have been sound investments, purely by luck and not planning I assure you lol. Any limited advice I can offer about what’s worked for me if our positions are similar feel free to shout a lot of it I was kicking myself about the money I’d wasted over the years through not knowing any different or apathy, however 18 months - 2 years on from reading that book were definitely in much better shape than we where.
Thanks, I will have a good read of things beforehand.
It's something I would like to have a go at and like you say probably not best to overthink it.
Thanks very much.
Can you just put money in when you want, say £500 at a time.
Yes , that's what I do. So long as you don't go over £20k you're fine.
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