Do You Need Financial Advice? When To Get It, When Not To Get It Discussion Area

Dentonn

bowlhead99 said:

Dentonn said:

I'm not sure I fully understand how they charge. It's not per year then? Just per investment? As in, per each time I put in an amount of money? 

webmasterpolo said:

Sounds like you're thinking it's 2.4% per year. It's not. It's 2.4% once.  So if you  invested for 5 years it's  an average of 0.48% a year.  If you invested over 10 years it's  0.24% a year. For 20 years it's 0.12%.

On this basis if you make 40% in 10 years you get 37.6% which is far more than in cash.  of course you're investing so returns can be more or less than that.

I see, I think I really didn't understand their charges correctly. This is the paper I got with their fees on. I blacked out the irrelevant parts  

Sorry for the dumbass questions, I'm super super new to all this and I don't want to possibly unnecessarily spend money when I don't actually have that much /am afraid of making mistakes. 

The bit you didn't black out shows a fee being charged to implement a solution. For example, they will implement a solution to invest £75k, for a £1800 charge, and assuming you are going ahead with that, the minimum up front planning fee will be covered out of that money so you are paying £1800 total and not a separate planning fee on top. This doesn't mean you are paying 2.4% every year out of your income, because no further one-off planning or implementation is needed once the money is invested.

If next year you  suddenly find yourself with another £75000 to invest, they would perhaps charge £1800 to implement their recommendations on that too. However most advisors will charge an ongoing servicing fee which covers taking additional cash on an ongoing basis and deploying it into the same plan. If you had so much new money in the future that the optimum plan for you changed significantly and the original plan was no longer suitable, there might be an additional fee for that.

Is 2.4% low then? I'm confused bc r/UKfinance told me it was really high 
I didn't have the additional figures to hand last night so couldn't upload them. 
But what does the regular contributions part mean? 
I assume the yearly upkeep fee is 0.75%? 

Thank you

Dentonn

Thrugelmir said:

Dentonn said:

webmasterpolo said:

£576 for financial advice is very cheap. the percentage is less relevant as it's a small investment and most advisers wouldn't take you on as a client.  if you think of a solicitor they would charge you 576 for 2 hours work easy.  giving you  advice would take more than 2 hours of meeting time just discussing it, then hours of preparation behind the scenes.  sounds like they are working for very low rates per hour, if it takes them 5 hours to process the advice and 2 hours of meetings with you that's only £82ph. my mechanic charges more.  the charge is all relative.  if it was £10m 2.4% is expensive, but on £24k is a bargain. 

If I invest cautiously , and I've been told that the average return is 4%, then I wouldn't be making much over the average interest rate out there though? Since I'd have to take away 2.4% from that. Would it be worth it then? It seems I would have to invest at a medium risk at least to make it worth it.

Hence the current attraction of passive trackers for many. Returns will be average. However fees are low. Which results in a proposition that should beat bank deposit accounts over the longer term. 

Would you use an IFA for passive trackers as well? Is 2.4% initial fee low? 

Malthusian

Is 2.4% low then? I'm confused bc r/UKfinance told me it was really high

Reddit also thinks that the best financial advice is to put all your money in Bitcoins and retire on a 40-foot gold catamaran. 2.4% is low to reasonable for an initial fee unless the investment is in mid-high six figures, at which point you would expect it to be lowered or waived. Most IFAs would not quote for an investment of £24,000 or less at all as their minimum fee could not be justified. So for the amount you are considering investing it is cheap given the likely workload and liability of the IFA.

But what does the regular contributions part mean?

Nothing if you aren't arranging regular contributions. I was under the impression you wanted to invest a lump sum.

I assume the yearly upkeep fee is 0.75%?

Correct.

Would you use an IFA for passive trackers as well?

Either you need financial advice or you don't, whether you and the IFA prefer active or passive fund management isn't relevant to that decision.

One option that has not been mentioned is to go away and leave it until you have more time to think about it and are less stressed with university studies. A year isn't going to make a huge difference and your circumstances might change dramatically when you finish your degree.

Dentonn

Malthusian said:

Is 2.4% low then? I'm confused bc r/UKfinance told me it was really high

Reddit also thinks that the best financial advice is to put all your money in Bitcoins and retire on a 40-foot gold catamaran. 2.4% is low to reasonable for an initial fee unless the investment is in mid-high six figures, at which point you would expect it to be lowered or waived. Most IFAs would not quote for an investment of £24,000 or less at all as their minimum fee could not be justified. So for the amount you are considering investing it is cheap given the likely workload and liability of the IFA.

But what does the regular contributions part mean?

Nothing if you aren't arranging regular contributions. I was under the impression you wanted to invest a lump sum.

I assume the yearly upkeep fee is 0.75%?

Correct.

Would you use an IFA for passive trackers as well?

Either you need financial advice or you don't, whether you and the IFA prefer active or passive fund management isn't relevant to that decision.

One option that has not been mentioned is to go away and leave it until you have more time to think about it and are less stressed with university studies. A year isn't going to make a huge difference and your circumstances might change dramatically when you finish your degree.

Thank you! 

Yes I'm just investing a lump sum. 

I'm going on to do a masters so it's unlikely uni stress will change much and this is really weighing on my mind/annoying me 😂

Dentonn

I assume the yearly upkeep fee is 0.75%?

Correct.

Do you think it would be 0.75% (Advisory) or 0.75% + 0.9% (Discretionary)?

In their information booklet, Discretionary Management is described as 'allows you the luxury of not having to constantly monitor your investment, the team at company are doing it for you'. Whereas Advisory Management is listed as 'allows you to make your own investment decisions and be responsible for the day to day running of your portfolio. Company are here to help you in your decisions and to give advice when it is required.' 

It seems a bit dumb to ask you given you don't work at the company but I'd like to go into the next meeting as clear as possible and be able to make a decision instead of waffling about and being unsure. Is 1.65% a year a high % if Discretionary was the way I had to go?

Thank you.

webmasterpolo

It's highly unlikely they will offer you discretionary on £24k. Typically DFM is reserved for clients of £100k++ some have minimums of £1m. 
Just go to the meeting and talk to them, relax, they'll be happy to walk you through how it works and how much it will cost.

I would guess that there is no 1.65%. It's one or  the other not both.

dunstonh

In their information booklet, Discretionary Management is described as 'allows you the luxury of not having to constantly monitor your investment, the team at company are doing it for you'. Whereas Advisory Management is listed as 'allows you to make your own investment decisions and be responsible for the day to day running of your portfolio. Company are here to help you in your decisions and to give advice when it is required.' 
I think that is what you call marketing.

In both discretionary and advisory, the adviser is required to make a recommendation.  Discretionary allows changes to the investments to be made without permission from the investor.  Advisory requires the adviser to get permission from the investor.  In both cases, the adviser is responsible for any advice given.

What they seem to be describing is discretionary vs DIY.  Not discretionary vs advisory.

cfw1994

At your age I would trickle money into a Vanguard LifeStrategy ISA fund every month.  

Trickling in monthly helps smooth stock market dips along the way, especially over the long term.

Charges super low.  Your choice of risk level: you are young, I’d chose one at LS80 or LS100, but that is personal choice.
No special need for an IFA.   Is there a reason you feel you need one.

IF you want to open a LISA (considering house purchase in years way ahead), then maybe AJBell with one of their funds.  Gets extra Government funds added, but limited on when you can access (generally it is for a house deposit or at the age of 60).

Dentonn

cfw1994 said:

No special need for an IFA.   Is there a reason you feel you need one.

IF you want to open a LISA (considering house purchase in years way ahead), 

Just cause I have no idea what I'm doing and I don't trust myself to make good decisions because I'm uneducated on the matter. 

I do want to buy a house some years down the line but I'm an international student on a visa right now and I'm unsure if I had to leave the country, what the process to take the money out of the LISA would be and if it would end up costing me. 

Dentonn

webmasterpolo said:

Just go to the meeting and talk to them, relax, they'll be happy to walk you through how it works and how much it will cost.

Hahah, yeah I just overthink and dislike being unsure and feeling like I'm 'wasting' their time with my indecision.