IFA Fees - benchmarks

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  • dunstonh
    dunstonh Posts: 116,028
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    edited 16 March 2017 at 4:23PM
    a) Implementation fee is up to 5%. Am I right in thinking that if an IFA coordinates the portfolio, if I get more £ to put in in future, I have to go through the IFA so he gets the fee? Again, seems fair, as he/she did the work to design the portfolio, after all

    Depends on the terms you agree. Some will do increments at no additional cost as long as you are on their ongoing servicing arrangement. Some will discount depending on how much you have invested. Some will take each and every time.
    1. Is your fee structure transparent so I know exactly what every transaction will cost and what the ongoing costs are?

    All adviser fees should be transparent as long as you know the terms. So, if you cover off initial, ongoing and top ups, you should be pretty much there.
    2. Are there any 'exit fees' if I decide to withdraw my portfolio from your coordination? What are they?

    There are not allowed to be blockers to exit and you have the right to terminate any agreement. Usually, these things come with upto 30 days notice.
    3. I appreciate that my investment is almost de minimis compared to others but will you always be available for simple queries via a quick call or email?

    What is the point of paying for ongoing servicing if you do not.
    5. If any of the investments you make on behalf are in ETFs or other income funds, do you charge a % of any income which is reinvested?

    Ongoing charge is a percentage of assets under management. If the portfolio goes up because of growth or income then the value has risen and the ongoing charge will increase accordingly.

    Apart from the fact you cannot differentiate between income and growth on a portfolio value, you would not a different fee because it would introduce the potential for bias.

    With £40k, if I was taking on the business and given your lack of investment history and background, I would be recommending the use of multi-asset funds. Not a bespoke portfolio. So, you could well end up paying an IFA to do the same investment that people have mentioned here. That is not to say that all would do that. I just base on my opinion on FOS decisions and FCA guidance that bespoke portfolios are not really suited for small amounts or inexperienced investors. Some advisers will follow that and some will decide not to. That said, I have millions in multi-asset funds with small investors who pay ongoing servicing because they do things like use some of the ISA allowance each year or just like the support that ongoing advice gives them. So, nothing wrong with it if that is what you want. Its all about making sure you are paying for what you want and not paying for something you dont want.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Jon_W
    Jon_W Posts: 108 Forumite
    edited 16 March 2017 at 3:34PM
    Because if we aren't willing to learn how to look after our own money, wire a plug, tie our own shoelaces, etc. then we have to pay someone else to do it for us. That's life.

    I think you shouldn't be so critical. Learning how to invest is easy and can be learned in next to no time, as I have now done.

    Learning how to invest well, using appropriate funds and wrappers isn't so straightforward!
  • JohnRo
    JohnRo Posts: 2,887
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    Jon_W wrote: »
    Learning how to invest well, using appropriate funds and wrappers isn't.

    Very true but you have to keep a sense of perspective as well. It's not like the suggestions you have been given are to pile into a x3 gold ETF.

    Single, global, multi asset funds are carefully constructed do what they do well, which is offer varying degrees of broad exposure to global equity and bond assets with some like L&G's offerings adding property assets into the mix.

    Using an IFA won't insure against or avoid the effects of market volatility and crashes.

    What you really need to ask yourself, as well as what you want the investment to do for you, is just how much of a potential loss will cause you sleepless nights or unsettle your investment resolve, answer honestly and then select accordingly.

    Getting that right is what you're paying the IFA for which determines to a large extent, or certainly should, what the portfolio will eventually look like.

    The thing is you're talking about 40/60K as opposed to 10 times that which means an expensive, potentially complex solution is not going to make much of a difference in absolute terms on a risk for risk basis.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
  • Jon_W
    Jon_W Posts: 108 Forumite
    JohnRo wrote: »
    Very true but you have to keep a sense of perspective as well. It's not like the suggestions you have been given are to pile into a x3 gold ETF.

    Single, global, multi asset funds are carefully constructed do what they do well, which is offer varying degrees of broad exposure to global equity and bond assets with some like L&G's offerings adding property assets into the mix.

    Using an IFA won't insure against or avoid the effects of market volatility and crashes.

    What you really need to ask yourself, as well as what you want the investment to do for you, is just how much of a potential loss will cause you sleepless nights or unsettle your investment resolve, answer honestly and then select accordingly.

    Getting that right is what you're paying the IFA for which determines to a large extent, or certainly should, what the portfolio will eventually look like.

    The thing is you're talking about 40/60K as opposed to 10 times that which means an expensive, potentially complex solution is not going to make much of a difference in absolute terms on a risk for risk basis.

    Thanks for your thoughts, much appreciated. :beer: Of course I don't want losses but I accept they are sometimes inevitable and am prepared for the long haul. I doubt I'd check my portfolio more than twice a year.

    I'll have a look at the L & G offerings, thanks.
  • JohnRo
    JohnRo Posts: 2,887
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    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
  • Audaxer
    Audaxer Posts: 3,506
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    Jon_W wrote: »
    I think you shouldn't be so critical. Learning how to invest is easy and can be learned in next to no time, as I have now done.

    Learning how to invest well, using appropriate funds and wrappers isn't so straightforward!
    I think the wrapper bit is easy - you can get £35k of your £40k in an S&S ISA if you put this year's allowance of £15,240 in before midnight on 5th April, and then the £20k allowance from the start of the next tax year (from 6th April).

    I agree the fund choice is difficult for us novice investors. I want to keep it pretty simple but I still can't make up my mind whether to go for the VLS60 or be a bit more cautious and go for the VLS40.

    You also need to decide which platform to go for, as the price differences are quite significant. I am thinking of going with Halifax Share Dealing, but again not quite decided yet.
  • Rollinghome
    Rollinghome Posts: 2,674
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    Jon_W wrote: »
    I think you shouldn't be so critical. Learning how to invest is easy and can be learned in next to no time, as I have now done.

    Learning how to invest well, using appropriate funds and wrappers isn't so straightforward!
    I’m sorry if it appeared critical because it wasn’t intended to be.

    You’ve never invested before and seem to have decided that investing is very difficult. It isn’t, certainly not the mechanics, and the hardest part is deciding your aims and tolerance for risk.

    It’s certainly way easier than it ever has been with huge numbers of people now managing their investments using internet platforms. Some here will remember what it used to be like before the platforms, before low cost index funds, before the internet for advice, and before PEPs and ISAs. Unit trusts were widely seen as a mug’s game and people who invested in them had usually been sold them by slick salesmen on commission. Others bought directly from the fund managers from off the page ads with front end loads of up to 7%. The alternative was build your own portfolio of shares perhaps with some gilts and ITs for diversification. Placing a deal with a city-slicker broker over the phone, typically charging a fee of 1.5% or more, could be pretty daunting for a noobie as were tax returns before PEPs.

    It’s also a lot safer to get advice than it ever was before, especially since sales commission to independent advisors was banned following RDR.

    Today, at its simplest, you only need pick a platform, and there’s any number of resources to help with that including SnowMan’s great spreadsheet, and a low cost index tracker, to get the market return less a tiny fee. Which as it happens is better than what the average investor will receive. If you want to try to beat the market then that becomes altogether more difficult with the risk of significantly underperforming instead. Until you know better, by keeping it simple and costs low you’ll do better than most, if required holding some cash to adjust your risk.

    Albert Einstein is sometimes quoted as saying: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t pays it.” Whether he actually said it or not, it’s true, and the same applies to costs in investing. There’s a useful tool on www.candidmoney.com among other stuff that shows the effect of high costs on investment returns.
  • BananaRepublic
    BananaRepublic Posts: 2,103
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    I’m sorry if it appeared critical because it wasn’t intended to be.

    You’ve never invested before and seem to have decided that investing is very difficult. It isn’t, certainly not the mechanics, and the hardest part is deciding your aims and tolerance for risk.

    For many of us investing is fairly straightforward. However, it requires a certain temperament and a degree of numeracy which some people lack. So whilst it might be easy for some, it is also possible to screw up big time, and lose a lot of money. I am surprised at how many people I speak to who do not understand the basics of investment, and have dabbled in the markets, lost some money, and stayed away ever since. I have the advantages of being numerate, and very dull, both of which are definite advantages when it comes to investing, as many here will testify. :rotfl:
    It’s certainly way easier than it ever has been with huge numbers of people now managing their investments using internet platforms. Some here will remember what it used to be like before the platforms, before low cost index funds, before the internet for advice, and before PEPs and ISAs. Unit trusts were widely seen as a mug’s game and people who invested in them had usually been sold them by slick salesmen on commission. Others bought directly from the fund managers from off the page ads with front end loads of up to 7%. The alternative was build your own portfolio of shares perhaps with some gilts and ITs for diversification. Placing a deal with a city-slicker broker over the phone, typically charging a fee of 1.5% or more, could be pretty daunting for a noobie as were tax returns before PEPs.

    It’s also a lot safer to get advice than it ever was before, especially since sales commission to independent advisors was banned following RDR.

    I started out in the dark ages, when information was hard to find. Only recently I discovered I had being paying commission to a broker. Such was/is the lack of transparency in the financial sector, that I received no indication whatsoever over 15 years that I was paying commission. Quite how that could be legal is beyond me, but that is why I have a deep distrust of the industry. In my defence, I bought from brokers who discounted the initial 5% fee which was standard at the time.

    Yes the not so recent changes in the way IFAs operate are welcome in my view too.
    Today, at its simplest, you only need pick a platform, and there’s any number of resources to help with that including SnowMan’s great spreadsheet, and a low cost index tracker, to get the market return less a tiny fee. Which as it happens is better than what the average investor will receive. If you want to try to beat the market then that becomes altogether more difficult with the risk of significantly underperforming instead. Until you know better, by keeping it simple and costs low you’ll do better than most, if required holding some cash to adjust your risk.

    Albert Einstein is sometimes quoted as saying: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t pays it.” Whether he actually said it or not, it’s true, and the same applies to costs in investing. There’s a useful tool on www.candidmoney.com among other stuff that shows the effect of high costs on investment returns.

    As someone who in a previous life was a research physicist, I find it hard to believe Einstein would have said any such thing. A quick Google gets variations on the supposed quote, but absolutely no source. I don't doubt it is apochryphal.
  • Rollinghome
    Rollinghome Posts: 2,674
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    As someone who in a previous life was a research physicist, I find it hard to believe Einstein would have said any such thing. A quick Google gets variations on the supposed quote, but absolutely no source. I don't doubt it is apochryphal.
    Yes, I would be be amazed if he said it too, which was why I hope I made clear my scepticism. The statement itself though is true enough.

    Competent investment that gives results as good or better than enjoyed by the average investor isn't difficult, it's easy, and neither does it require numeracy beyond school level. That's not to say there won't always be people who can mess up the easiest things. In investment it tends to be people who have ambition beyond their competence.

    It's tempting to think some of us have some special abilities that others can't possess but I don't really think that the mystification of something that really can be achieved with quite simple techniques is particularly helpful. :)
  • Jon_W
    Jon_W Posts: 108 Forumite
    I’m sorry if it appeared critical because it wasn’t intended to be.

    You’ve never invested before and seem to have decided that investing is very difficult. It isn’t, certainly not the mechanics, and the hardest part is deciding your aims and tolerance for risk.

    It’s certainly way easier than it ever has been with huge numbers of people now managing their investments using internet platforms. Some here will remember what it used to be like before the platforms, before low cost index funds, before the internet for advice, and before PEPs and ISAs. Unit trusts were widely seen as a mug’s game and people who invested in them had usually been sold them by slick salesmen on commission. Others bought directly from the fund managers from off the page ads with front end loads of up to 7%. The alternative was build your own portfolio of shares perhaps with some gilts and ITs for diversification. Placing a deal with a city-slicker broker over the phone, typically charging a fee of 1.5% or more, could be pretty daunting for a noobie as were tax returns before PEPs.

    It’s also a lot safer to get advice than it ever was before, especially since sales commission to independent advisors was banned following RDR.

    Today, at its simplest, you only need pick a platform, and there’s any number of resources to help with that including SnowMan’s great spreadsheet, and a low cost index tracker, to get the market return less a tiny fee. Which as it happens is better than what the average investor will receive. If you want to try to beat the market then that becomes altogether more difficult with the risk of significantly underperforming instead. Until you know better, by keeping it simple and costs low you’ll do better than most, if required holding some cash to adjust your risk.

    Albert Einstein is sometimes quoted as saying: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t pays it.” Whether he actually said it or not, it’s true, and the same applies to costs in investing. There’s a useful tool on www.candidmoney.com among other stuff that shows the effect of high costs on investment returns.

    In which case I apologise unreservedly, I'm sorry.

    I'll see what the IFAs I'm meeting next week say. I am just scared of making a monumental error if I go on my own.
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