IFA charges

durham_saver

We have a lump to invest 150k and are thinking of using an IFA to invest this money in a balanced portfolio what kind of charges should we be looking at? Am very new to this kind of thing and my head is starting to hurt.:o

dunstonh

what kind of charges should we be looking at?

What service are you after? one off transactional or ongoing
What sort of investments do you want to use? (i.e. will you put restrictions on the IFA or gives preferences or leave it to the IFA)
What sort of IFA do you want to use? (plush city office or local rural firm)

Charges will vary depending on the services you want, where the IFA is located and the business model of the IFA (one focusing on high net worth clients wont be interested in £150k whilst others will be).

As a very very very very rough guide anything under £2000 for setting up and 0.5% p.a. for servicing is about right.

durham_saver

Think we are looking for an ongoing service with a local firm leaving the IFA to it.

bigfreddiel

durham_saver wrote: »

We have a lump to invest 150k and are thinking of using an IFA to invest this money in a balanced portfolio what kind of charges should we be looking at? Am very new to this kind of thing and my head is starting to hurt.:o

be prepared to lose an arm and a leg - count your fingers if you shake hands

seriously i saw an ifa from affinity (used by the civil service, local govt,teachers) I was not impressed - charges were high 4-5% - tho the ifa at first said ther were no charges - so i pressed him with an example £50k tansferred from my fidelity isa to skandia - he said there was no charge - so i said that means I would have £100k invested with skandia - oh no was his reply they take £5k to set it up,and provide reports every 6 months, plus an ongoing 1 1/2% per annum.

next question -having ascertained i wanted low risk investments -i asked for him to explain the strategy - he couldn't -it was all done at head office.

i asked him to provide a detailed report on how my £100k would be invested - he couldn't do that unless i agreed to go ahead before seeing the report.

may be i was unlucky and found a bad ifa,but i wasn't impressed and have not bothered contacting any others.

let u all know howyou get on

fj

Aegis

bigfreddiel wrote: »

be prepared to lose an arm and a leg - count your fingers if you shake hands

seriously i saw an ifa from affinity (used by the civil service, local govt,teachers) I was not impressed - charges were high 4-5% - tho the ifa at first said ther were no charges - so i pressed him with an example £50k tansferred from my fidelity isa to skandia - he said there was no charge - so i said that means I would have £100k invested with skandia - oh no was his reply they take £5k to set it up,and provide reports every 6 months, plus an ongoing 1 1/2% per annum.

next question -having ascertained i wanted low risk investments -i asked for him to explain the strategy - he couldn't -it was all done at head office.

i asked him to provide a detailed report on how my £100k would be invested - he couldn't do that unless i agreed to go ahead before seeing the report.

may be i was unlucky and found a bad ifa,but i wasn't impressed and have not bothered contacting any others.

let u all know howyou get on

fj

You certainly found a very expensive one.

5% set up cost is more than a bank tied adviser would charge, and they're usually seen as the most expensive!

cgzz

Think about this. An IFA normally hopes to provide financial advice to as many people as possible. They can't watch over everyone's portfolios all the time and if you are lucky your portfolio will get reviewed twice a year. Furthermore the annual charge will get deducted regardless of portfolio performance which means if your portfolio drops you lose money but your IFA still gets paid - for failure. Do you want to reward an IFA (through annual charges) for handing over your money for them to look after and you end up losing money?

bigfreddiel

Aegis wrote: »

You certainly found a very expensive one.

5% set up cost is more than a bank tied adviser would charge, and they're usually seen as the most expensive!

not only were his charges excessive - he tried to hide them,and could not explain the invesment strategy - basically he treated me as an idiot and my wife as her indoors and not toworry her pretty little head about finance asthere was no way she could possiby understand!

fj

Iancfp

cgzz wrote: »

Think about this. An IFA normally hopes to provide financial advice to as many people as possible. They can't watch over everyone's portfolios all the time and if you are lucky your portfolio will get reviewed twice a year. Furthermore the annual charge will get deducted regardless of portfolio performance which means if your portfolio drops you lose money but your IFA still gets paid - for failure. Do you want to reward an IFA (through annual charges) for handing over your money for them to look after and you end up losing money?

No think about this - an IFA (who doesnt work for a large company with targets etc) want to retain their clients by offering a good service as there is no lockin.

Software means you can monitor everyones portfolio all the time - I have been this lovely Sunday afternoon for my clients

The annual charge is currently on retail investments deducted whether you use an IFA or not but assuming the IFA charges are based on fund value if the funds go down so do the fees

So do you want to do it yourself - pay the same and make a hash of it???

dunstonh

seriously i saw an ifa from affinity (used by the civil service, local govt,teachers) I was not impressed - charges were high 4-5%

Thats BECAUSE you used one from affinity. There are a bunch of people to be paid in that process. So, they have to charge more to cover it. Affinity want paying, the employer of the adviser wants paying and the adviser themselves.

A general rule of thumb is that you should not buy products via your union.

may be i was unlucky and found a bad ifa,but i wasn't impressed and have not bothered contacting any others.

Unlucky in one respect but if you choose an expensive distribution method, it is going to cost you more. Many IFAs will charge between nothing and £1000 to charge for that sort of thing - just to put some context in it.

Think about this. An IFA normally hopes to provide financial advice to as many people as possible. They can't watch over everyone's portfolios all the time and if you are lucky your portfolio will get reviewed twice a year. Furthermore the annual charge will get deducted regardless of portfolio performance which means if your portfolio drops you lose money but your IFA still gets paid - for failure. Do you want to reward an IFA (through annual charges) for handing over your money for them to look after and you end up losing money?

An IFA is not there to watch over your portfolio all the time. The IFA is to provide planning advice and put the portfolio in place to match your risk profile and rebalance and reveiw once a year or so (or when software prompts it) to make sure it remains consistent with risk profile and investments are still suitable. An IFA is not a fund manager or a discretionary investment manager. So, you shouldnt expect them to act like one.

cgzz

"assuming the IFA charges are based on fund value if the funds go down so do the fees"

OK - 0.5% annual charge on £150000 portfolio is £750. If the portfolio drops to £140000 the annual charge is then £700. The IFA still gets £700 paid for failure but the portfolio owner loses a massive £10000. IFAs always focus on charges when everything is going up and of course when fund values go up the IFA reaps a better reward. However the IFA never loses out because when fund values go down they still get paid the annual charge. The charge may be smaller when the fund values go down but it is still being paid for failure.

Amanita_2

cgzz wrote: »

Think about this. An IFA normally hopes to provide financial advice to as many people as possible. They can't watch over everyone's portfolios all the time and if you are lucky your portfolio will get reviewed twice a year. Furthermore the annual charge will get deducted regardless of portfolio performance which means if your portfolio drops you lose money but your IFA still gets paid - for failure. Do you want to reward an IFA (through annual charges) for handing over your money for them to look after and you end up losing money?

So how would you suggest the OP gets help with investment?