IFA charges and recommendations- thoughts please.

bigadaj · 28 May 2017 at 10:05AM

ARandomMiser wrote: »

For such investments, in this technology era, I would suggest that an IFA doesn't bring a lot to the table (just my opinion). They may provide some ideas but I would suggest you look at some of the offerings often talked about on this board such as Vanguard, Nutmeg or Moneyfarm (just examples). They really do make things easy including handling risk assessment.

If you want to be more selective about your funds then look at something like Fidelity or Charles Stanley (others to choose from as well).

Could you get a better return from an IFA? The reality is about 50:50 ... they are guessing as much as anybody else where the market is heading but might be able to offer something more tailored towards your needs ... but do you really want to throw away a couple of thousand quid on something you can do very easily yourself?

I was in your situation a couple of years ago (although it was a much larger portfolio) and am really happy going down the DIY root (after I lost all faith in the IFAs I had been using).

I think diy is fine and you can do better than using an ifa, but I'm not sure money farm or nutmeg add a lot to the process.

There's plenty of literature and online tests to provide an assessment of risk tolerance, and translation of that into portfolios, be they multi asset funds or individual elements.

The risk in using the simple robo services is that people still panic after a market fall, for example, and remove their cash before the rebound occurs due to a lack of understanding.

There's also the issue that much investment theory was developed in normal times, near zero interest rates and the consequent skewing of returns such that a high risk portfolio has performed extremely well but a low risk portfolio has given negligible returns may also impact the novice investor.

LHW99 · 28 May 2017 at 10:07AM

I would say whether DIY or IFA route, do some reading around here, and perahps other sites like Monevator, so that you can have a conversation with the IFA if you use one, rather than just sitting and being told things.

You need to have some idea what is being talked about so you can get answers to things rather than just accepting the first suggestions made.
They could be good, or there could be things that the IFA didn't realise were as important as you do, which might mean a slightly different approach would suit you better.
A proper discussion will also help you to feel you can fully trust the IFA's recommendations.

Linton · 28 May 2017 at 10:33AM

In some of these posts we can see the advantage of going to an IFA. We know nothing about the OP - age, family commitments, objectives, timescales, employment situation, pension arrangements, tax position yet people are telling him/her where to invest. Even suggesting the % of bonds to equity and the fund manager to use.

The benefit of going to an IFA shouldn't be to get a list of successful funds, but rather to get help in understanding one's financial circumstances in terms of the sort of factors outlined above and hence to identify an appropriate strategy leading to the investment wrappers and finally investments. The specific investment choice is in my view the least important consideration.

I went to an IFA many years ago in my 30's long before online investing was available as we had started to accumulate significant excess cash. He changed my life simply by asking one question - "when do you want to retire?", something that had never crossed my mind before. From then on investing had a purpose which led to retirement a few months after the age chosen some 18 years previously.

ARandomMiser · 28 May 2017 at 12:38PM

Linton wrote: »

I went to an IFA many years ago in my 30's long before online investing was available as we had started to accumulate significant excess cash. He changed my life simply by asking one question - "when do you want to retire?", something that had never crossed my mind before. From then on investing had a purpose which led to retirement a few months after the age chosen some 18 years previously.

That seems to be one of the standard questions asked but I found that as I approached retirement it became less and less relevant. I had the ability to retire several years before my expected date but felt I wasn't ready to be put out to pasture. I worked for several more years and eventually retired due to a health issue - every day was then like a Sunday and I was bored out of my mind (even part time running my business).

Last June I saw an opportunity down to brexit that totally suited my skill set and I have gone back into full time employment. Much much happier now.

bostonerimus · 28 May 2017 at 1:58PM

Linton wrote: »

In some of these posts we can see the advantage of going to an IFA. We know nothing about the OP - age, family commitments, objectives, timescales, employment situation, pension arrangements, tax position yet people are telling him/her where to invest. Even suggesting the % of bonds to equity and the fund manager to use.

My suggestions were based on the information give by the OP, ie £60k to invest and wanting medium risk. They are very generic and could obviously change given more information. But I thought I'd offer my thoughts and they can be criticized and maybe that will help the OP

The benefit of going to an IFA shouldn't be to get a list of successful funds, but rather to get help in understanding one's financial circumstances in terms of the sort of factors outlined above and hence to identify an appropriate strategy leading to the investment wrappers and finally investments. The specific investment choice is in my view the least important consideration.

I agree that it's more important to develop a financial strategy than to dwell on the tactics of individual funds

I went to an IFA many years ago in my 30's long before online investing was available as we had started to accumulate significant excess cash. He changed my life simply by asking one question - "when do you want to retire?", something that had never crossed my mind before. From then on investing had a purpose which led to retirement a few months after the age chosen some 18 years previously.

Today you can get that advice for free online and in books. The vast majority of people's financial needs can be met by following some simple rules....one of which is keeping costs down; paying an IFA won't do that. The OP would be paying 2.1% with the first IFA and that's just a stupid strategy and waste of money.......dangling 3% dividends and 10% price growth borders on criminality.

If you have a particular problem then there is an argument for a one time consultation. But, unless you are operating a complex tax mitigation strategy like trusts or have enough spare cash that you would rather pay someone to manage your money I think DIY is the way to go for people with some common sense.

I started retirement saving 30 years ago with a US company called TIAA-CREF. I read their literature and went to some seminars given by my employer. My mother (having lived through the Depression in Lancashire) taught me thrift....nice way to say being careful with the pennies. So I lived within my means and saved regularly to my employer's retirement fund and also to other tax advantaged advantaged and regular investment accounts. After a flirtation with individual company Dividend Re-Investment Programs (DRIPs) I read about Vanguard and Jack Bogle and decided that passive investing was a better approach....I was already doing that with TIAA-CREF anyway. My goal was to save for retirement and be financially independent. A simple passive indexing strategy has taken me from the early 1990s to today and allowed me to retire with substantial assets at age 52. I believe that the vast majority of people do not need complex strategies. The most important things they need to succeed is old fashioned thrift and some healthy cynicism when it comes to the financial industry. Unfortunately, stagnant wages, falling job benefits and rising costs in the UK are making it difficult even for the most thrifty to save.

Audaxer · 28 May 2017 at 2:08PM

Linton wrote: »

The specific investment choice is in my view the least important consideration.

That's an interesting point as I had initially thought of going to an IFA mainly for that purpose, as I wasn't confident about picking the right selection of funds. It makes me think even more so that a 3% initial fee for the OP's £60k investment wouldn't be worth it.

havingaball74 · 9 August 2017 at 10:05AM

Thanks all for the advice. I have spent some time now doing some research and trying to weigh up my options. I would rather not pay such a huge fee for advice and management, but I feel that a plus side to this is that I can sit back and not worry so much about what the investments are doing. The cost also includes an annual meeting/review. The problem is, at the moment I am getting so bamboozled that I am doing nothing through fear of making a mistake!
My circumstances are:
age:43
family commitments: live with partner (no children)
objectives: to save for retirement, but also to be able to access all or some funds if needed
timescales: Hope to retire in 15/17 years (would i cash in the investment then or keep it?)
employment situation: full time
pension arrangements:work pension for past 17 years
tax position- lower rate tax payer (I earn under 40k).
Hope this helps.
1.Is it better to invest all the 60k and put 20k in a S and S ISA (and move across annually until it is all wrapped?) And leave the other 40k 'unwrapped'?
2.If I drip feed as suggested, what do I do with the rest? I like the idea of drip feeding to minimise risk but am worried that the rest is doing nothing in the meantime.
2,I have been thinking about a VLS 50 or 60. Would I do this directly through Vanguard or through someone like Fidelity?
4. I have been reading up on the capital gains and income tax implications for the 'unwrapped' 40k. Is it likely that the returns would be so high that I would pay tax?
These are all questions that I would ask an IFA but I appreciate that I am paying through the nose for something that could be pretty straightforward.
Thanks in advance. I am a worrier and very much appreciate your help.

havingaball74 · 9 August 2017 at 10:31AM

And, which is better: an actively managed fund or a passive fund? All the research I have been doing is about passive investing.

dunstonh · 9 August 2017 at 11:27AM

And, which is better: an actively managed fund or a passive fund?

Plenty of old threads on this. Please refer to those. Otherwise we get another repeat of a repeat of a repeat saying the same things.

In a single line there is nothing wrong with either method as long as it si suitable for the area in question. Some people are biased to one method or the other and that is wrong. In reality, both have pros and cons and should be used where best.

2,I have been thinking about a VLS 50 or 60. Would I do this directly through Vanguard or through someone like Fidelity?

There isnt a VLS50. There is a VLS60. You mention this and not wanting to pay huge fees for advice and management. However, it is worth noting that our portfolio for the same risk profile as VLS60 has outperformed VLS60 net of charges. There are never any guarantees one solution will be better than another but equally, it does not mean that cheap will be best.

JohnRo · 9 August 2017 at 11:35AM

havingaball74 wrote: »

I like the idea of drip feeding to minimise risk but am worried that the rest is doing nothing in the meantime.

You're not really minimising risk in general, drip feeding a larger amount intended for equity investment defers market risk, it might help you sleep at night in the early phase of the process but in doing so it is also retaining and introducing other risks.

There is no guarantee there will be a gut wrenching market crash. That doesn't mean it's wise to ignore the possibility but drip feeding won't automatically produce a better outcome even if one does occur.

What if the markets associated with your chosen investment keep on rising overall during the bulk of the period you've decided to drip feed that lump sum for example?

You then risk ending up in a situation where you've paid more, perhaps a lot more, for an investment that would have cost you less if lumped, which still carries all the same risks you were fearful of and trying to mitigate without the capital gains buffer a lump would have acquired to date.

Better to focus on what you aim to achieve, how long you intend to hold, what level of potential capital loss you can honestly stomach and then lump sum an appropriate, affordable amount, all things considered, into a suitable investment vehicle and let it do it's thing imo.

IFA charges and recommendations- thoughts please.

Comments

Categories

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