IFA advice...good, bad or indifferent

HarryFlatters · 8 October 2016 at 12:12PM

My first post here so please be gentle with me

Really don't want this to be another I have £....... but this is inevitably going to involve asking for advice on top of your thoughts on the IFAs recommendations, I have tried to read through previous threads but am still not clear in my head how to proceed.
If I could give a brief financial summary, Mr & Mrs, mid 50s, no mortgage or loans, no dependents, £130k in pension pot (not currently adding to this) and 500k currently in easy access assets, approx 100k of this within ISA wrappers, this is primarily as a result of a recent downsize in property size.

Both in manual roles and aiming to only work part time for approx 5 years then stop manual work, no point getting to retirement with a body not fit to enjoy it !!

Aiming for approx 10-15k pa from current investments from now if possible, then add pension income from age 60.

IFA advice is to make one off payment of £50k into pension to cover last 3 years allowances.
Invest £440k in OIECS, all multi manager funds with annual charges of 1-1.7% on Elevate platform. For this we pay the IFA 8k

I have been researching and reading various sites, primarily HL & II, are there others good for newbie investors.

We have our own thoughts on the IFA advice but would welcome yours, the daunting aspect for us are the long term ramifications for our financial health of our hard earned but previously unavailable wealth.

Over to you, many thanks in advance.

dunstonh · 8 October 2016 at 12:43PM

I have been researching and reading various sites, primarily HL & II, are there others good for newbie investors.

They are not newbie investors. They are for DIY investors. Elevate is cheaper than HL.

We have our own thoughts on the IFA advice but would welcome yours, the daunting aspect for us are the long term ramifications for our financial health of our hard earned but previously unavailable wealth.

The advice seems to be perfectly fine based on the very limited info going. Only thing I would take issue with is the size of the fee.

EdGasket · 8 October 2016 at 1:08PM

Why buy funds with 1 to 1.7% annual charge? That's a huge hit to returns over the years. You can buy a range of ETFs instead with annual charges well below 0.5%; some as low as 0.1% e.g Vanguard or iShares core series.

Pay me £8K and I'll recommend some !

enthusiasticsaver · 8 October 2016 at 1:26PM

Steep fee and yes I would have issue with the 1-1.7% ongoing fee. I do my own investing in Vanguard lifestrategy funds.

dunstonh · 8 October 2016 at 1:46PM

Do remember that some people have a complete blinker to managed funds and will only use tracker. Some are pro managed and dont consider passive. The use of tracker or managed or combination is opinion. Personally, my view is a combination is usually best. Others will go fully managed or fully passive but all are opinions. No right or wrong.

If you do have a preference then let the adviser know. They will take into account preferences in their advice.

it should also be noted that if your adviser was to recommend the use of ETFs to you and you then complained, the FOS would almost certainly uphold the complaint calling the advice unsuitable.

Steep fee and yes I would have issue with the 1-1.7% ongoing fee. I do my own investing in Vanguard lifestrategy funds.

I use the vanguard LS funds on smaller investors. However, on larger model ones I use a bespoke portfolio where the total ongoing charge is around 1.2% (fund, platform and adviser). They consistently outperform VLS on a like for like volatility rating. There is no guarantee that will continue and there would have been discrete periods when they did not. But who is to say which is best in the future until that time happens and we look back. VLS is good but it is not the solution for everything and paying less does not mean you will get more. Just as paying more does not mean you will get more. The primary concern is suitability. Cost is secondary. Important yes but not more important that suitability.

Jackthedog · 8 October 2016 at 3:36PM

IFA fee is huge so their advice better be good!

The funds costs seem high imho.. To get 15K pa they will have to yield about 3 and a half percent net of costs so in effect will need to yield about 5% pa including costs. Possible I guess but remember stuff outside of an isa above 5K will be attracting tax at your marginal rate and if things go well potentially capital gains.

Does the fee include platform costs or just fund costs? Either way there are much cheaper options including using investment trusts to achieve the same result and grow the income effectively. These small charges become hugely costly over time.

Putting a lump in your pension seems sensible.. There is quite a tax advantage in doing this.

Mind you the markets seem expensive presently...if it falls back from this high stage you may take a significant capital hit in the short to medium term.

BLB53 · 8 October 2016 at 4:56PM

Invest £440k in OIECS, all multi manager funds with annual charges of 1-1.7% on Elevate platform. For this we pay the IFA 8k

Before you go any further, get hold of Tim Hale's 'Smarter Investor' and get up to speed on a diy approach..it could save you many £000 over time. The fund fees of over 1% are too high and the adviser fees are unnecessary.

You will do a better job with low cost Vanguard Lifestrategy - charges 0.24% and a low cost platform - lump sum with Halifax Share Dealing is £12.50 p.a.

Read some of the articles on diy investor uk and monevator etc.

LHW99 · 8 October 2016 at 5:27PM

Have you spoken to several advisors, or only one?
Most will give an introductory half hour, at which you should be able to get them to explain their fees, and check whether you think you will get on with / trust them. Many people here are DIY, and will recommend that, but if you are not confident, using an IFA is fine BUT you want to be happy that you will trust their advice / them.
Make sure they are registered IFA's and have suitable qualifications (https://www.unbiased.co.uk/) and if you decide to stay with this one you have already spoken to, make sure he/she explains absolutely everything, and the reasons for suggesting it and what you get for the fees paid.

bigfreddiel · 8 October 2016 at 7:28PM

You must talk to an advisor they know what you need. Pay them at least 1%, probably more like 5% of the sum you're investing.

They will find you the best deals and look after it all for you so you don't have to.

You cannot do it yourself, advisors have access to information and investment vehicles that us newbies do not have.

You can't go wrong, and don't forget that advisors have extensive training and qualifications equivalent to a first class degree. They also have insurance shoulda tying go wrong and you de ide to seek recompense.

Just make sure you explain your objectives and expectations very clearly and that the advisor understands.

Good luck fj

DrSyn · 8 October 2016 at 10:49PM

1. If you are not confident in making your own decisions when handling large sums of money or in making investments seeing an IFA makes sense.

2. I would suggest seeing maybe 2 or 3, instead of just one as you have. What LHW99 #8, writes is reasonable. Have you looked at the following either before or after seeing your IFA? Its worth your while.

https://www.citizensadvice.org.uk/debt-and-money/savings/getting-financial-advice/

3. I understand that some IFA's only recommend passive investing.

4. For the long term placing your money into cash ISA's, Low cost Socks & shares ISA's and Low cost Pensions seems to me a good idea.

5. If you are confident in your own ability to handle money, you can save money by doing it yourself.

6. Did the IFA you saw only suggest multi manager funds with those high charges? Where low cost passive investments or investment trusts such as below mentioned at all? If not why not? Look them up.

(a) Vanguard LifeStratergy Fund.
(b) Vanguard FTSE All World ETF (VWRL)
(c) Witan Investment Trust (WTAN)
(d) Foreign & Colonial Investment Trust (FRCL)

7. Whatever you intend to do, use an IFA or do-it-yourself, I suggest you do more research. Have a look at the following sites:-

http://monevator.com/highlights/

http://www.candidmoney.com/

http://www.comparefundplatforms.com/compare.aspx

http://meaningfulmoney.tv/getting-started/

I hope it will be of some help to you.

dunstonh · 9 October 2016 at 12:22AM

3. I understand that some IFA's only recommend passive investing.

They shouldnt do. That would be a restriction and they would not be allowed to call themselves Independent.

6. Did the IFA you saw only suggest multi manager funds with those high charges? Where low cost passive investments or investment trusts such as below mentioned at all? If not why not? Look them up.

The use of investment trusts would likely be considered a mis-sale in this case.

IFA advice...good, bad or indifferent

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