Knowledge- Advice -Advisers how much do I need

div_ad

How much more advice do I need?

I am about to stop earning at the age of 55. Due to a recent inheritance and an insurance payout I will shortly have a large sum to invest to provide an income for life (together with a 100k) pension pot.

I will probably post lots of questions on the specific advice I have received in separate entries. This is about my methodology in getting advice.

I have seen an IFA representative of a medium size firm (not one of the household names). He has given prompt advice and a good service.

I have seen a Lloyds TSB wealth manager (who impressed me) and I await his advice.

I have read stuuff about investments on this and other sites until my head is spinning.

So Questions
Should I see further IFA's to get more opinions?

Specifically should I see my 'old' advisor who has given good advice in the past but seems to have lost interest in me?

Since my aim is a fairly common one - A balanced fund and the ability to draw income this should be meat and drink for an adviser. The advice is very similar to what web based 'aids' suggest in terms of % split in asset classes.

What kind of commisssion rebate should I aim for? I don't mind paying my way but on say a £500,000 fund a say 3% commission and 1.5% trail commisssion is a lot and in no way imho good value for advice which is essentially "50% bonds, 30% uk equities 10% developing countries, maximise your ISA's and of coure for choosing funds"

How good is the average IFA firms 'fund picking' compared to say a 'fund of fund' type approach like Hargreaves Landsdown or Best Invest who seem to do 'balanced selections'?

As you can tell I am very cynical about the number of managed funds that beat a tracker and the level of charges on investments, and the lack of ongoing support from advisers once they have signed you up. On the other hand as you can tell I lack the guts to 'go alone'

Help!!

dunstonh

I have seen a Lloyds TSB wealth manager (who impressed me) and I await his advice.

Watch out as they are expensive, tend to over use their own products and have high staff turnover.

Should I see further IFA's to get more opinions?

You will get different opinions. Investments are all about opinion. LloydsTSB should be easily beaten on cost and service. An IFA may not be able to be as slick on the marketing side as them but should be able to beat them everywhere else.

What kind of commisssion rebate should I aim for?

You shouldnt go on commission. Agreed fee/remuneration basis instead. Aim for £1000-£2000 initial and 0.5% p.a. which should include servicing (rebalancing being the key service point). Shouldnt be at all difficult to find one on that basis. It also wont be difficult to find those that are greedy as well unfortunately.

How good is the average IFA firms 'fund picking' compared to say a 'fund of fund' type approach like Hargreaves Landsdown or Best Invest who seem to do 'balanced selections'?

HLs fund of funds is pointless. Fund picking is always going to have hits and misses. its inevitable. The most important thing is to have structure and an objective.

As you can tell I am very cynical about the number of managed funds that beat a tracker and the level of charges on investments, and the lack of ongoing support from advisers once they have signed you up. On the other hand as you can tell I lack the guts to 'go alone'

Some sectors have areas where the trackers are dire and others where they are good. You cant be cynical and assume one is always better than the other as that isnt the case. In some places a tracker will be right. In some places it wont. You should keep an open mind and expect to have a mixture.

If you employ a transactional adviser then expect to see them only when you want a transaction done (typically once only). If you employ a servicing adviser then you would expect servicing. The term "IFA" covers a very wide range of skills and areas of speciality. It also covers a wide range of business models and target markets.

feesarefare

Hi div_ad

Before commenting on your query whether you should see other IFA's can you give any background on why the Lloyds adviser impressed you?

feesarefare

Dunstonh can you expand on this

HLs fund of funds is pointless. Fund picking is always going to have hits and misses. its inevitable. The most important thing is to have structure and an objective.

As a fellow IFA I cant quite understand what you are getting at here.
IMHO all IFA portfolios are basically "funds of funds" and while I agree there will always be hits and misses, I cant see where you see they would be vastly different to HLs offerings - HL fofs would certainly have a structure and an objective wouldnt they?

div_ad

Thanks guys for such useful thoughts

The fees you suggest Dunston H seem reasonable compared to what I am paying a solicitor currently.

Lloyds - The jury is out. I saw a (to me) quite a young wealth manager who understood my needs, thought about things strategically first, and raised all the appropriate subsidiary questions like tax, insurance, future plans etc. I'm still waiting for his written conclusion. I wanted to not like him! Too young, tied to Lloyds etc...

Both the advisers seem to want to talk costs later in the process rather than sooner, and I guess they will only detail their thoughts once they are sure I'll use them.

Keep the thoughts coming

Lokolo

You must also bare in mind a lot of IFAs start off in banks..... he could be wanting a way out at some point.

dunstonh

feesarefare wrote: »

Dunstonh can you expand on this


As a fellow IFA I cant quite understand what you are getting at here.
IMHO all IFA portfolios are basically "funds of funds" and while I agree there will always be hits and misses, I cant see where you see they would be vastly different to HLs offerings - HL fofs would certainly have a structure and an objective wouldnt they?

Fund of funds fit the lazy investor very well. Especially on smaller investments where it is either not possible to sector allocate and rebalance or where its not cost effective to do so. However, for larger portfolios where you are already working to a structure, the fund of funds dont fit in with that.

A FoF is certainly better than a random hit and hope that far too many portfolios are set up on.

HL's fund of funds doesnt offer any level of performance or consistency that you cant get with a bog standard, cheaper company balanced managed fund. If you were considering the HL MM fund then you may as well go for a cheaper fund doing the same thing.

Rollinghome

div_ad wrote: »

What kind of commisssion rebate should I aim for? I don't mind paying my way but on say a £500,000 fund a say 3% commission and 1.5% trail commisssion is a lot and in no way imho good value for advice which is essentially "50% bonds, 30% uk equities 10% developing countries, maximise your ISA's and of coure for choosing funds"

For a sizeable amount you should be looking at someone who routinely charges by the hour or by flat fees. That also means avoiding those who normally sell on a commission basis or who "offset against commission" because they will generally have very poor knowledge of any investments that don't pay them good commission. "Agreed fee" tends to be the way of those whose business is more often commission-based and can mean catch as catch can. Someone like www.nomonkeybusiness.co.uk in Fulham who charge flat fees might fit the bill.

How good is the average IFA firms 'fund picking' compared to say a 'fund of fund' type approach like Hargreaves Landsdown or Best Invest who seem to do 'balanced selections'?

Probably not very good though they may try to convince you otherwise and, unlike with funds etc., it will be very difficult to get proof of their track-record. That may also equally apply to H-L and Best Invest. The most important skill required to be a commission based IFA is for selling and that will invariably be their background.

As you can tell I am very cynical about the number of managed funds that beat a tracker and the level of charges on investments,

Advisers that work on a hourly or flat fee basis and refund all commission don't have the same incentive to sell investments that pay them the best commission and are far more likely therefore to suggest non-commission paying trackers and more efficient low cost investment trusts

feesarefare

div_ad wrote: »

Lloyds - The jury is out. I saw a (to me) quite a young wealth manager who understood my needs, thought about things strategically first, and raised all the appropriate subsidiary questions like tax, insurance, future plans etc. I'm still waiting for his written conclusion. I wanted to not like him! Too young, tied to Lloyds etc...

Thanks for your reply- its a poor reflection of the financial services industry in general, that a bank salesman is seen as "impressive" by merely doing his job properly. What did the IFA talk about , I assume he asked the appropriate subsidiary questions as well?

Both the advisers seem to want to talk costs later in the process rather than sooner

Didnt you want to talk costs sooner? What prevented you from asking them "what is it going to cost?" Why do you think they didnt want to be open with you?

What happened to the Initial Disclosure Documents?

Linton

div_ad wrote: »

How good is the average IFA firms 'fund picking' compared to say a 'fund of fund' type approach like Hargreaves Landsdown or Best Invest who seem to do 'balanced selections'?

Having been in a similar position to the OP (stopped working at 55 with a relatively large investment pot) I advocate the following approach...... It has worked for me.

IMHO you are looking at things in the wrong way if you are after a "fund picker". The important thing is for you to understand your requirements and set up a portfolio to match those. A FoF will almost certainly not have the right mix of funds to best meet your objectives.

A fund picker has about the same chance of success as a racing tipster.

I suggest you think more about your requirements....

Do you need regular income now? If so how much? You can easily determine a pessimistic return aim and that will give you the size of your income portfolio - a portfolio whose sole aim is to provide your income. Your task here is now limited to choosing a diversified range of income producers.

Do you need short term (< 3 years) cash? How much? Right - set that up as a cash portfolio.

Can the amount left over (if any) be put aside for long term (> 5 years) growth. Yes - OK go for a wide range of growth funds.

Thinking in this way you will subdivide the problem into manageable lumps. Each portfolio has a clearly defined aim, you only need look at funds which meet that aim. And you will end up with a diversified fund of funds that exactly matches your needs.

Over time the relative values of the portfolios will change, and your needs may change. Because you have set up these portfolios according to clear criteria you will be in a good position to rebalance your portfolios as needed.

Once you have your strategy right choosing particular investments becomes a relatively minor matter. One that does not necessarily need a lot of expert advice.

div_ad

What Linton says makes some sense to me and is tempting. I'm a reasonably sensible person and looking at the facts.

I know how much cash I need for emergencies
I know my predictable expenses
Stats (apparently) don't support the view that managed funds (on the whole) do better than the index
Past performance of managed funds is no guide to the future
Nobody can predict the future

I'm very tempted to split the dosh I need to invest for income and growth into 3 parts and buy 3 wrappers (unit trust or investment bonds) and a range of funds in each. I may use an IFA for one and do so very mindful of the charges, do it myself for one, and an off shelf fund of funds for the third.

This way I spread the investment risk, the 'fund picker is useless risk', and reduce the commission charges.

Where I lose out this way is the annual review and rebalancing etc. and the danger which I have fallen into in the past (though busy working 60 hours a week to earn this cash then) of letting sleeping and poor performing dogs lie.