IFA advice...good, bad or indifferent

HarryFlatters · 9 October 2016 at 5:21PM

Thanks to all for their advice, as you all have correctly stated I am new to investing in this sphere, whilst my work is "manual" I have successfully owned and run a company in the building sector for 30+ years so budgeting, forecasting etc have been necessary. It is the manual aspect I am trying to restrict. Personally I am happy to research how and where to invest and am able to apply myself to this.
The links to Monevator etc are just what I am looking for, I was using HL & II for their guides to new investors to give me a little insight on how to proceed, the Vanguard costs for example do highlight the premium charges of the IFAs chosen funds, which do not include the platform charge. A nett 3.5% yield would be my preferred aim and to diversify into passive with its significant cost saving makes sense, guess its the dilemma of the worth of man v machine.
Whilst I am prepared to pay for professional advice when necessary there is also an aspect of looking for a fresh challenge and to retain control would certainly provide this, realistically I don't need to invest the whole amount from day one so could break myself in gradually. Should I decide to follow this course is there a clear winner in providing such services, is a platform required or does this add another layer of fees.
Appreciate this is the wrong forum but what do you think of adding to the pension pot, the tax saving adds to the pot but isn't this just returned to HMRC later ?
Thanks to all for your replies again, you have helped me considerably in such a short time, it is the weekend after all

coyrls · 9 October 2016 at 5:40PM

HarryFlatters wrote: »

Thanks to all for their advice, as you all have correctly stated I am new to investing in this sphere, whilst my work is "manual" I have successfully owned and run a company in the building sector for 30+ years so budgeting, forecasting etc have been necessary. It is the manual aspect I am trying to restrict. Personally I am happy to research how and where to invest and am able to apply myself to this.
The links to Monevator etc are just what I am looking for, I was using HL & II for their guides to new investors to give me a little insight on how to proceed, the Vanguard costs for example do highlight the premium charges of the IFAs chosen funds, which do not include the platform charge. A nett 3.5% yield would be my preferred aim and to diversify into passive with its significant cost saving makes sense, guess its the dilemma of the worth of man v machine.
Whilst I am prepared to pay for professional advice when necessary there is also an aspect of looking for a fresh challenge and to retain control would certainly provide this, realistically I don't need to invest the whole amount from day one so could break myself in gradually. Should I decide to follow this course is there a clear winner in providing such services, is a platform required or does this add another layer of fees.
Appreciate this is the wrong forum but what do you think of adding to the pension pot, the tax saving adds to the pot but isn't this just returned to HMRC later ?
Thanks to all for your replies again, you have helped me considerably in such a short time, it is the weekend after all

You will require a platform.

On the tax question, for a pension 25% of what you take out will (currently) be tax free. Also there can be a difference in the tax rate applied on the way out vs. the way in (e.g. 20% vs 40% or 0% vs 20%).

dunstonh · 9 October 2016 at 6:51PM

Platforms are not required. You can invest without them. However, in most cases, you would use them for convenience. Especially when holding multiple tax wrappers. It makes life easier.

HarryFlatters · 9 October 2016 at 6:54PM

Just ordered Tim Hales book, 2nd hand of course, don't want to waste money

Subscribed to the Meaningful Money podcasts to listen to while I work.

andrewm1981 · 10 October 2016 at 1:14AM

bigfreddiel wrote: »

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

I'm no expert, and indeed have never used an IFA, but paying an IFA £25k for this financial advice seems an awful lot of money. Is this the correct advice to be giving? I would certainly suggest not paying that much otherwise a reasonable amount of potential profit would get eaten up in charges (never mind how much the ongoing fee would be!)

AnotherJoe · 10 October 2016 at 6:43AM

andrewm1981 wrote: »

I'm no expert, and indeed have never used an IFA, but paying an IFA £25k for this financial advice seems an awful lot of money. Is this the correct advice to be giving? I would certainly suggest not paying that much otherwise a reasonable amount of potential profit would get eaten up in charges (never mind how much the ongoing fee would be!)

Big Freddie is being sarcastic as part of his ongoing campaign against IFAs but it's going to be too subtle for most people who aren't familiar with that.

I think the fees on the ongoing investments are too high as is the IFA fee. Whether they are par for the course I don't know but if I ever took IFA advice I'd want it to be on the basis of time spent, fixed fee, after all if you have say £440k of investments or £220k or £880k it's the same amount of work yet the IFA would presumably charge 4K or £16k if they had those respective amounts.

bowlhead99 · 10 October 2016 at 7:06AM

andrewm1981 wrote: »

I'm no expert, and indeed have never used an IFA, but paying an IFA £25k for this financial advice seems an awful lot of money. Is this the correct advice to be giving? I would certainly suggest not paying that much otherwise a reasonable amount of potential profit would get eaten up in charges (never mind how much the ongoing fee would be!)

The subtlety you missed is that freddie is famously dismissive of IFAs and has often drawn criticism for using any opportunity to throw disparaging remarks at them as a group if he smells a headline that someone has a complaint about one.

So, his post should be read in an entirely sarcastic tone, and he is not actually suggesting that the OP should pay £25k of advice fees (not that anyone else is suggesting that they should, nor has anyone proposed to charge that much).

The £8k from the OP's advisor was about 1.3% of the proposed £440k of OEICs and £130+50k of pension ; and Dunstonh as an advisor suggested it was high (while acknowledging we've only had a very bare outline of the OP's circumstances).

Obviously the initial setup fee is a larger amount of money if it is literally a fixed percentage on the amount invested, but you usually find it is not a fixed percentage because the IFA business will have a cost element for the workload (complexity is probably not much different between 400k or 600k) and an element for liability (higher on greater sums). So IFAs would usually not charge one standard percentage for every level of assets, even if they may give a quote on a percentage basis because percentages help you put things in context with pot size.

Others have suggested to simply DIY, suggesting that building a personalised portfolio is as simple as picking what Lifestrategy fund you want out of five choices available, none of which are targeted to a particular level of risk or volatility, being a static selection of trackers. That sounds an extreme view to me, given the OP's lack of experience, but they say they are willing and capable of learning.

I would be surprised if their learning resulted in buying just one multi-asset fund for half a million quid, but if they are winding down their career they do have some time to spare to devote to serious study and research.

HarryFlatters · 10 October 2016 at 7:41AM

A quick reply from me re fees, its 3% on 100k, 2% on second 100K and 1% on further 300k, existing pensions are not included. Thinking on this subject we already have 60k stocks and shares ISA previously arranged on Elevate platform, would seem somewhat greedy as this has been added to the total for fee purposes.

TheTracker · 10 October 2016 at 8:40AM

bowlhead99 wrote: »

Others have suggested to simply DIY, suggesting that building a personalised portfolio is as simple as picking what Lifestrategy fund you want out of five choices available, none of which are targeted to a particular level of risk or volatility, being a static selection of trackers. That sounds an extreme view to me, given the OP's lack of experience, but they say they are willing and capable of learning.

The charge that the lifestrategy funds are not "targeted to a particular level of risk or volatility" resembles a repetition of a canard I recall dunstonh floating. What tripe. In a well balanced portfolio, the overriding influencer of risk/volatility is the equity/bond ratio. It seems to me terribly patronising to presume a punter can not comprehend the funds are sold with equity/bond ratio labels but have underlying risk/volatility characteristics. A fact hammered home with the plain english factsheets. Then again, as I reflect, perhaps it is not surprising that an (I)FA (I forget which dunstonh is, this year) is swayed by marketing brochures.

bowlhead99 wrote: »

I would be surprised if their learning resulted in buying just one multi-asset fund for half a million quid, but if they are winding down their career they do have some time to spare to devote to serious study and research.

Really? I've more than half a million quid in a small collection of funds which 90% resemble a lifestrategy product. Yes, I've chosen to have a small but separate tilts toward property and emerging markets for example, but these are mere baubles on the side. And I built my own as I could do so for 2/3 the fees, but regular rebalancing doesn't suit everyone.

Personally, I expect I'd need to devote a lot more "serious study and research" to buy into an IFAs basket of active funds than to buy into a passive fund product like LifeStrategy.

bowlhead99 · 10 October 2016 at 8:47AM

HarryFlatters wrote: »

A quick reply from me re fees, its 3% on 100k, 2% on second 100K and 1% on further 300k, existing pensions are not included. Thinking on this subject we already have 60k stocks and shares ISA previously arranged on Elevate platform, would seem somewhat greedy as this has been added to the total for fee purposes.

So by adding them to the amount being reviewed and charged for, rather than not trying to provide any advice on them, they are incrementing the fee by 1% of £60k, right?
(£600).

If you were previously a £60k investor and are now a 500k investor, it might make sense to consider whether the old ISA holdings are still sensible investments to hold in the new context, as the solutions would likely be different with a significantly different pot size.

It is probably easier for the IFA to incorporate them into your overall planning than have to work around them not knowing what's in them or what you're doing with them.

IFA advice...good, bad or indifferent

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