Independent Financial Advisers fees vs Novice Investor!

bigfreddiel · 29 November 2011 at 10:57PM

roves1 wrote: »

You are paying people to advise you and manage your money, and they are losing your money instead, while pocketing the fee.

Lesson Learnt?

I still think that IFAs should be paid on results ie if their advice results in a gain for their client they take their 3% of the gain - if its a loss then the fee is zero! Simple and fair - after all you wouldn't be happy if your car broke down after it had been seviced would you!

fj

Aegis · 29 November 2011 at 11:38PM

bigfreddiel wrote: »

I still think that IFAs should be paid on results ie if their advice results in a gain for their client they take their 3% of the gain - if its a loss then the fee is zero! Simple and fair - after all you wouldn't be happy if your car broke down after it had been seviced would you!

fj

That would be a ridiculously bad deal for IFAs, as they'd all be going bust in years where markets crashed and would be receiving next to no income in the years where markets went up, though they'd be expected (presumably) to offer ongoing servicing for those incredibly low fees.

Ultimately you pay for the set up and servicing of your portfolio, together with ongoing advice as to the best way to contribute further to your investments or to withdraw from them. You aren't paying the IFA for specific returns on your portfolio unless your entire mandate is to put the money into cash accounts, which would be a waste of your money.

dunstonh · 30 November 2011 at 12:54AM

I still think that IFAs should be paid on results ie if their advice results in a gain for their client they take their 3% of the gain - if its a loss then the fee is zero!

A number of problems with that
1 - Positive periods typically outnumber negative periods. So, charges would likely go up
2 - What you propose would see an IFA earn in one year what would take 6 years to earn currently. Get two good years and they earn in two years what currently takes 12 years. Get a sustained growth period like we saw for nearly 5 years and an IFA can earn in that period what would take 30 years currently.
3 - It would encourage risk taking
4 - It isnt remunerating the IFA for the job that the IFA is doing.
5 - It would create uneven cashflows which places an increased risk on efficiencies.

darkpool · 30 November 2011 at 9:29AM

Linton wrote: »

Try looking here

In case maths isnt your forte, an increase of 88% over 5 years is just over 13% per year.

so why do you choose this fund? there are thousands and thousands of funds, and you choose one that has done well. why not choose one that has lost money?

darkpool · 30 November 2011 at 9:31AM

dunstonh wrote: »

The problem with that is that no adviser gets 3%. The industry typical amount is 0.5%. There is a move towards 1% on smaller amounts but 0.5% is the more common norm.

but the total fees are likely to be nearer 3% than 0.5%. ie the investor is likely to be paying nearer to 3% each year.

Lokolo · 30 November 2011 at 9:45AM

darkpool wrote: »

so why do you choose this fund? there are thousands and thousands of funds, and you choose one that has done well. why not choose one that has lost money?

Because you posted earlier saying in a very sarcastic manner "oh if you can get 13% returns then I'll invest with you", so Linton found a fund with exactly that.

You seemed to think that 13% a year wasn't possible, well, it is as Linton has shown.

darkpool · 30 November 2011 at 9:53AM

Lokolo wrote: »

Because you posted earlier saying in a very sarcastic manner "oh if you can get 13% returns then I'll invest with you", so Linton found a fund with exactly that.

You seemed to think that 13% a year wasn't possible, well, it is as Linton has shown.

i just don't know what showing figures a well performing fund shows? i could get figures for a duff UT and say that was the returns you could expect.

everyone accepts that some UTs perform well, but some people also accept that overall UTs are not worth their annual fees.

Ark_Welder · 30 November 2011 at 11:44AM

darkpool wrote: »

but the total fees are likely to be nearer 3% than 0.5%. ie the investor is likely to be paying nearer to 3% each year.

The document that you are now using is so old that it pre-dates the requirement for fund reports to disclose one of the major costs that the document is estimating, namely transaction charges.

One page 13 the document states:

Implicit costs are those that come out of funds under management
directly, and are currently not disclosed. The principal component of ERImplicit is the cost associated with trading shares.

From some up-to-date documentation:

http://fsahandbook.info/FSA/html/tailored-FNDMGR/COLL/4/5

Contents of the annual long report

COLL 4.5.7 Rule01/07/2011

(1) An annual long report on an authorised fund, other than a scheme which is an umbrella, must contain:

(a) the accounts for the annual accounting period which must be prepared in accordance with the requirements of the IMA SORP;

http://www.investmentfunds.org.uk/assets/files/industry-guidance/20101014-IMAsorp.pdf

IMA SORP 2010

3. Reports

Transaction Costs

3.35 Transaction costs treaded as capital (paragraph 2.65 and 2.66) for part of net capital gains/losses. For purchases and for sales the total before and after transaction costs should be disclosed in the notes. The notes should also show the amount of each type of transaction cost making up the total.

So the 'undisclosed transactions' described in the February 2000 document are largely the very same transaction charges that can now be found in funds' annual reports. So an up-to-date method of determining costs would be to use the transaction charges actually reported rather than relying on obsolete graphs that are based upon the use of estimated data from the years 1987 to 1998.

Perhaps if the 'evidence' in your post had been made 12 years ago, it might have had some relevance

Totton · 30 November 2011 at 2:34PM

darkpool wrote: »

but that's just a variation of the "perp high income has done well" argument. no one disputes that some UTs do well, but I also think some UTs are complete dogs.

you have to look at average UT performance to measure the value they add. using your reasoning the national lottery is a good investment because some people win it - yet most people lose.

Not so Darkpool, I don't play the lottery :-)

No I don't have to consider average fund performance when deciding whether to invest in a fund, what a silly idea. Perhaps the 'average' can be used if one wishes to argue the merits of active over passive but even then the argument is poor, the real research goes deeper than some average line in the sand that tells me little compared to performance.

Regards,
Mickey

Totton · 30 November 2011 at 2:40PM

darkpool wrote: »

so why do you choose this fund? there are thousands and thousands of funds, and you choose one that has done well. why not choose one that has lost money?

Probably because some folk understand that you don't need to look for an average fund :beer:

Independent Financial Advisers fees vs Novice Investor!

Comments

Confirm your email address to Create Threads and Reply

🚀 Getting Started

Categories

Is this how you want to be seen?

Get our FREE Weekly email full of deals & guides - and it’s spam-free