Are Dimensional Fund Advisors on any investor platforms?

koru

I would like to invest in some of the products of Dimensional Fund Advisors (index trackers with a twist), but if I go through a fee-charging IFA I would have to pay about 1% fee to the IFA, which negates the benefit of the low TER of the DFA funds. They aren't available from Hargreaves Lansdown or Alliance Trust. Is anyone aware of any platforms that offer the DFA funds and are accessible to investors?

EMH101

You can not use DFA unless you work with a fee-only advisor. The reason is simple, DFA does not want hot money moving in and out of the funds. Advisors who use DFA typically(or should)have a long term perspective. The more money moves in and out, the more trading costs there are. I do not work for IFA, but I have spoken to the founder and they seem to have a good program. I think they charge .90 fee. You're paying for the the vast amount of information they provide on there website, which I am sure isn't cheep. There are other RIA's that are less expensive.

koru

Thanks. I am with you up to the word "program".

I take it that you are American, judging by your spelling and the fact that you use the term RIA, which appears to be a US term, equivalent to what in the UK would be called an IFA. RIA means nothing in the UK, but google indicates it means an investment advisor registered with the US SEC.

If so, I am puzzled by your comment about other RIAs being cheaper. Are you saying that I could find a UK IFA who would let me buy DFA funds and charge less than 1% fees (over and above the fees charged by the DFA funds)?

cheerfulcat

Hi, koru,

Looking at their website, their funds are only available through " a select group of advisory firms ".

koru

cheerfulcat wrote: »

Hi, koru,

Looking at their website, their funds are only available through " a select group of advisory firms ".

Thanks. I had seen that. I just wondered if any of those firms allowed access on a self-select basis, just as Alliance Trust do with the Vanguard funds. However, given DFA's desire to avoid "hot money", I imagine that they insist on using advisors who are aligned with the philosophy and don't just let clients self-select.

This creates a paradox, because DFA's philosophy is that index tracking is better because only a handful of active managers can consistently deliver returns that exceed the index (ie, the average return) by more than the difference in the annual charges on the funds (between 1 and 1.5%). And there is no way to know in advance who those handful of managers will be. (Bill Miller is a US manager who outperformed the S&P for 15 years on the trot, which is the best ever record of consistent outperformance. Most would have said he was one of these managers, but for the last 4 years his fund has been a dog. So perhaps he was just very lucky.)

The paradox is that although DFA charge low fees themselves, they insist that you can only buy through advisors who will charge another fee of at least 1%, which removes most or all of the cost benefit of using a low cost tracker.

Fortunately, there are other very low cost index options (Vanguard, HSBC through Hargreaves Lansdown) that do not require a fee-charging advisor. DFA seem to offer some interesting tweaks on standard index funds, but I doubt these are worth incurring an extra 1% fee. Of course, if you are going to use an advisor anyway, DFA might be more attractive.