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  • FIRST POST
    • Jon_W
    • By Jon_W 14th Mar 17, 7:42 PM
    • 108Posts
    • 17Thanks
    Jon_W
    IFA Fees - benchmarks
    • #1
    • 14th Mar 17, 7:42 PM
    IFA Fees - benchmarks 14th Mar 17 at 7:42 PM
    Aaaaand it's my stupid question hour, again!

    I am trying to find an IFA via unbiased.co.uk. I've sent about 12 emails so far. Only had had a 4 replies, 3 aren't taking new clients on (though I bet they would if I had a few million to invest! ). One has replied saying they charge:

    3% implementation fee (by which I assume they mean designing and executing the portfolio)
    1% ongoing management charge

    I have absolutely nothing to act as a comparison. Are these fees unduly excessive? Because I don't seem to be getting much interest in taking me on or meeting me for a fee-paid appointment. So I am hoping that these are reasonable as I don't think I'm gonna have too many options!
Page 3
    • Jon_W
    • By Jon_W 17th Mar 17, 11:12 PM
    • 108 Posts
    • 17 Thanks
    Jon_W
    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.
    Originally posted by Rollinghome
    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.
    • TheTracker
    • By TheTracker 18th Mar 17, 7:34 AM
    • 1,055 Posts
    • 1,052 Thanks
    TheTracker
    It would be wonderful if someone (lightbulb: an IFA!) were to create a reference post with the same title and populate it with the wealth (ha!) of their knowledge in the area of benchmark fees. Sometimes it feels like there are 80,000 posts on 3 variations of the topic.

    These posts work well for items like broker fees (snowman!) and regular savers (special_saver!) and p2p (jamesd!) and safe withdrawal rates (jamesd!), so I can't see why one on IFA fees would not.

    Oh my goodness, another lightbulb just went off: perhaps MSE could create a page on the topic instead of the usual redtop trash about some hypothetical proposal that might affect 1% of the population.
    • BananaRepublic
    • By BananaRepublic 18th Mar 17, 7:57 AM
    • 815 Posts
    • 570 Thanks
    BananaRepublic
    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.
    Originally posted by Rollinghome
    it's also not very helpful to ignore reality which is that most people tend to think in the short term, and panic during crashes. I've met plenty of people who dabbled in the stock market and had their fingers burnt. I suspect most people could invest wisely, but it requires first learning the basics, which means reading, and understanding. I can think of plenty of supposedly intelligent people who screw up financially, due to an emotional temperament, and an unwillingness to learn.
    • eskbanker
    • By eskbanker 18th Mar 17, 12:36 PM
    • 4,788 Posts
    • 4,518 Thanks
    eskbanker
    These posts work well for items like broker fees (snowman!) and regular savers (special_saver!) and p2p (jamesd!) and safe withdrawal rates (jamesd!), so I can't see why one on IFA fees would not.
    Originally posted by TheTracker
    Because there are over 30,000 IFAs in the highly fragmented and localised UK market, versus tiny numbers of national brokers, regular saver and P2P providers?
    • TheTracker
    • By TheTracker 18th Mar 17, 1:06 PM
    • 1,055 Posts
    • 1,052 Thanks
    TheTracker
    Because there are over 30,000 IFAs in the highly fragmented and localised UK market, versus tiny numbers of national brokers, regular saver and P2P providers?
    Originally posted by eskbanker
    Sorry for the confusion, I didn't mean one that mentions any firms. Simply information that describes a typical response (including range of costs) for a set of popular situations.

    Getting dizzy on the merry-go-round of half a dozen questions.
    • Rollinghome
    • By Rollinghome 18th Mar 17, 2:23 PM
    • 2,081 Posts
    • 2,271 Thanks
    Rollinghome
    it's also not very helpful to ignore reality which is that most people tend to think in the short term, and panic during crashes. I've met plenty of people who dabbled in the stock market and had their fingers burnt. I suspect most people could invest wisely, but it requires first learning the basics, which means reading, and understanding. I can think of plenty of supposedly intelligent people who screw up financially, due to an emotional temperament, and an unwillingness to learn.
    Originally posted by BananaRepublic
    I haven't notice anyone here suggesting "dabbling" in stock-markets. Quite the reverse. You seem to be confusing the concept of something being simple and easy to achieve when done in a sensible way with something that's impossible for some people to mess up. The two aren't the same. Wiring a plug is easy enough but some people will still manage to get it wrong. Simple but sound investing does not need to be esoteric and I'm surprised if you expect reading to transform "an emotional temperament". If you think otherwise then it's just possible you've been reading the wrong books.
    • BananaRepublic
    • By BananaRepublic 18th Mar 17, 4:17 PM
    • 815 Posts
    • 570 Thanks
    BananaRepublic
    I haven't notice anyone here suggesting "dabbling" in stock-markets. Quite the reverse. You seem to be confusing the concept of something being simple and easy to achieve when done in a sensible way with something that's impossible for some people to mess up. The two aren't the same. Wiring a plug is easy enough but some people will still manage to get it wrong. Simple but sound investing does not need to be esoteric and I'm surprised if you expect reading to transform "an emotional temperament". If you think otherwise then it's just possible you've been reading the wrong books.
    Originally posted by Rollinghome
    I don't understand the points you are making, including the last sentence. I have met plenty of degree educated people who do not get to grips with stock market investing. You say "Simple but sound investing does not need to be esoteric" and I agree. However, what I have seen is that an awful lot of people, many supposedly well educated, struggle with concepts many of us find 'simple'. A common mistake is to panic and crystallise losses. Lots of people have issues with risk, and volatility. There is a difference between abstractions, and reality. That is why IFAs determine the client's risk profile at the outset.

    I happen to find investing simple, I've done well (could have done better but when I started out the available tools were limited), but I've seen friends do not so well. That is why I have softened by attitude to IFAs. Whilst some of us do better without them, some people do benefit from their (overpriced) services.
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