What would you do with £350k to invest?

dunstonh

The problem is that the number of IFAs who work exclusively on a transaction fee basis are relatively few.

No its not. The vast majority will have a fee only option for those wanting one off transactional advice. They will also have a retainer option for those that want servicing.

Most won't have any expertise in investments that don't pay them commission, such as direct share investment, investment trusts, ETFs etc.

Of course they wont because most IFAs are not authorised and regulated to advise on those instruments.

Many will even have very little knowledge of unit trusts that pay lower rates of commissions such as tracker funds because they would normally avoid them in their commission-based business.

Your opinion but not backed by facts.

There is also the problem of what "fee-based" means. Many still call themselves "fee-based" when what they do is to charge a percentage of the amount invested. That means the more they persuade the client to invest, the higher their fee is.

percentage based is allowed to be called fee as long as there is a cap. Generally there is more work on larger portfolios than smaller ones so there is no problem with that.

What's more, not all IFAs will offer working on a fee basis even though I understand they are required to do so.

That is not correct. It is mandatory to have fee based options available and that information to be available in a published form.

When I recently asked a director of a large firm of IFAs about investing a sum considerably larger than £350k and specifically asked about the different methods of remuneration I was told "Don't worry, all our fees will come out of our commission, so there won't be anything for you to pay." The possibility of a fee-based arrangement wasn't revealed even when the question was directly asked. The best bet would seem to use someone who is upfront and works solely on a transaction fee basis.

Perhaps he misunderstood what you meant. What did their guide to their services/terms of business state about fees?

prudryden

dunstonh wrote: »

£350k pot would be daft doing it on commission. It should be fee based. It will be massively cheaper that way.

If it is fee based - is it an annual fee on total assets under management? And if so, what is the norm for annual fees on those assets and what service is provided for those fees? Also, if annual fees, why would it be cheaper than a one off commission on something that may be a long term hold?

bendix

tonysbt wrote: »

"What would you do with £350k to invest?"

RETIRE!!!

The same thought crossed my mind. If i was answering the OP's question literally (what would i do with £350k), I'd add it to my existing funds and bring my retirement forward, effective immediately.

But the I suspect the OP is relatively young, and £350,000 alone is not enough for a youngster to retire on, IMHO. A damn good start, but not retirement territory.

Rollinghome

No its not. The vast majority will have a fee only option for those wanting one off transactional advice. They will also have a retainer option for those that want servicing.

Do we disagree on the meaning of “exclusively”? If they have an option then they don’t work exclusively on a fee basis. What do you think "exclusively" means?

Of course they wont because most IFAs are not authorised and regulated to advise on those instruments.

Precisely. Good to see you agree on that.

Your opinion but not backed by facts.

Yes my opinion - based partially on the very limited knowledge of tracker funds that you have. In a recent thread you made it clear that you had almost no knowledge of the charges of even the best known tracker funds. I assume you’re fairly typical and no worse than most in that respect?

percentage based is allowed to be called fee as long as there is a cap. Generally there is more work on larger portfolios than smaller ones so there is no problem with that.

Yes there is a problem with that although I understand why you might not acknowledge that.

Two problems. One, is that it incentivises the adviser to persuade the client to invest as much as possible even if that isn’t appropriate. Two, is that the reward is not directly proportionate to the work done. Fees should be on a time/transaction basis, not on a percentage basis.

"What's more, not all IFAs will offer working on a fee basis even though I understand they are required to do so."
That is not correct. It is mandatory to have fee based options available and that information to be available in a published form.

I’m sorry, but as I have already said, it was not offered to me. Nor was I given a copy of their terms even after I went to see him a second time at his request and had given him an authority to obtain details of my current investments.

.

prudryden

"That is not correct. It is mandatory to have fee based options available and that information to be available in a published form"

Mandatory for whom? As I understand it at the moment, even though a firm may have a fee based option, the individual advisor doesn't have to offer it especially if it isn't suitable for a particular client. E.G. Someone who has a long term corporate bond portfolio e.g. Centrica Plc 7% coupon of 19/9/2018 with the intent of holding these bonds to maturity. One would charge a one off up front fee for each bond and not an annual management fee.

dunstonh

If it is fee based - is it an annual fee on total assets under management? And if so, what is the norm for annual fees on those assets and what service is provided for those fees? Also, if annual fees, why would it be cheaper than a one off commission on something that may be a long term hold?

It depends on the service you want. If you only want a one off transactional service then you pick an adviser that is going to have a fee basis to do that. Whilst IFAs have to have a fee basis, they do not have to offer all the different types.

Typically, servicing is either on a fixed retention amount or a fixed percentage. If percentage then 0.5% is the norm as that is the most common natural trail that is paid. Anything about 0.5% is getting greedy unless the fund size is too small to cover the work the person wants.

Mandatory for whom? As I understand it at the moment, even though a firm may have a fee based option, the individual advisor doesn't have to offer it especially if it isn't suitable for a particular client. E.G. Someone who has a long term corporate bond portfolio e.g. Centrica Plc 7% coupon of 19/9/2018 with the intent of holding these bonds to maturity. One would charge a one off up front fee for each bond and not an annual management fee.

It is mandatory for IFAs. It is not mandatory for other adviser classes. A Centrica plc 7% coupon is not a product an IFA can advise on anyway as its not within the remit of an IFA (at the moment, FSA is considering it)

Yes my opinion - based partially on the very limited knowledge of tracker funds that you have. In a recent thread you made it clear that you had almost no knowledge of the charges of even the best known tracker funds. I assume you’re fairly typical and no worse than most in that respect?

My knowledge of trackers is fine. There are 50,000 or so funds out there and there is little point remembering the AMCs for all of them. I see no reason to have an anal level of knowledge on something that can be looked up in minutes.

Yes there is a problem with that although I understand why you might not acknowledge that.

Two problems. One, is that it incentivises the adviser to persuade the client to invest as much as possible even if that isn’t appropriate. Two, is that the reward is not directly proportionate to the work done. Fees should be on a time/transaction basis, not on a percentage basis.

t does not. If someone says they want to invest £350k and you agree a1 1% charge with a £2000 cap then it doesnt matter where you put the money.

Portfolios of £200k take more time and work than a portfolio of £20k The percentage covers that.

At the end of the day if you dont want percentage then you dont have to go by that option. You can do hourly or fixed charge if you want.

Danslagarrigue

Very fortunate.
I would have the same amount IF i could save £100 a week for 67 years.
The overtime would kill me.
You most likely will never recieve such a sum again in your life.
With that in mind, I would be wary about asking a third party to manage this money.
Security would be my no.1 priority.
As you have no mortgage / debts yet, i am assuming you are young and single.
I would find a partner and use 50k or so for a yacht and experience the world.
Obviously learn to sail first.
Lucky man.