Financial Advisor - recommendations

opinions4u

darkpool wrote: »

If IFA number 1 invested your £200k in unit trusts you'd pay 2.5% a year in fees. So within five years you'd have paid about £31,000 in fees ouch!!!!!!!

it's no wonder i've never seen an IFA about investments.

No. I haven't got a spare £200k either .

darkpool

opinions4u wrote: »

No. I haven't got a spare £200k either .

i'm worth ever so much more than £200k

caveat_emptor

darkpool wrote: »

yes a lot of people here are very gullible what did your IFA do to disillusion you with their service?

I won't go into the detail but beware of anything in the IFAs T&Cs that says 'may do' because in my experience in means 'won't do'.

jem16

darkpool wrote: »

If IFA number 1 invested your £200k in unit trusts you'd pay 2.5% a year in fees. So within five years you'd have paid about £31,000 in fees ouch!!!!!!!

The fees alone are pretty meaningless without putting them into context with the return. If you have paid 2.5% and made 5%pa AFTER all fees, would you rather pay 0.5% and have 4%pa AFTER fees.

it's no wonder i've never seen an IFA about investments.

The IFA wouldn't be getting all the fee though. ( I do agree that £6k for initial advice is being greedy though).

Rollinghome

The fees alone are pretty meaningless without putting them into context with the return. If you have paid 2.5% and made 5%pa AFTER all fees, would you rather pay 0.5% and have 4%pa AFTER fees.

Option (c) please - pay 0.5% and have 7% after fees.

As much as some people like the "reassuringly expensive" approach, there no correlation between high fees and performance. High costs, however they arise, damage your wealth.

Morningstar research on fund management fees:

"If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.

Expense ratios are strong predictors of performance. In every asset class over every time period, the cheapest quintile produced higher total returns than the most expensive quintile."
http://www.morningstar.co.uk/uk/funds/article.aspx?articleid=91222&categoryid=505

Rollinghome

Aegis wrote: »

If you wanted advice that was independent of the size of the investment, why didn't you seek out an IFA who would work on a fixed fee basis, either hourly or task-based? That sounds like it would be the best bet for you if you don't want to pay on percentage terms.

That's obviously good advice, not only for reasons of cost but because it reduces the temptation to IFAs to tailor advice to maximise their fees.

But presumably they were asking those fees because there are gullible people out there who let characters like that get away with it. We've had people on this board who have paid hugely more. In this case on Candid Money the adviser would have netted £30k. http://www.candidmoney.com/questions/question282.aspx

And in most cases the IFAs are unlikely to be impressively well qualified professionals but just one step up from their former jobs as bank and insurance salesmen. Many IFAs, even those who have been allowed to operate for years, will have to stop giving advice next year because they still aren't up to the new (still sub-degree level) qualifications required from 2013.

jem16

Rollinghome wrote: »

Option (c) please - pay 0.5% and have 7% after fees.

What does it matter - the return is still 7% after fees? What if I can have 2.5% fee and 7% returm after fees - is that worse?

As much as some people like the "reassuringly expensive" approach, there no correlation between high fees and performance. High costs, however they arise, damage your wealth.

Neither is there a correlation between low fees and performance unfortunately.

Morningstar research on fund management fees:

"If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.

Expense ratios are strong predictors of performance. In every asset class over every time period, the cheapest quintile produced higher total returns than the most expensive quintile."
http://www.morningstar.co.uk/uk/funds/article.aspx?articleid=91222&categoryid=505

It refers to a US study which really doesn't apply to the UK due to the difference in taxation.

"This article refers to a US study carried out by Morningstar on US funds, and first appeared on Morningstar.com. "

Rollinghome

What does it matter - the return is still 7% after fees? What if I can have 2.5% fee and 7% returm after fees - is that worse?

It's not tricky, the more someone else takes from your returns, the less remains for you. Paying more doesn't guarantee higher returns and the higher the costs hurdle, the more risk is required to clear it.

From the FT:

FSA warns wealth managers on advice... A review of client portfolios at 16 wealth management firms, carried out by the Financial Services Authority, found that, in 14 cases, the level of risk did not match the objectives or circumstances of the investor.

http://www.ft.com/cms/s/0/2e3a6722-966d-11e0-afc5-00144feab49a.html#axzz1Ppb0TnVD

jem16 wrote: »

It refers to a US study which really doesn't apply to the UK due to the difference in taxation.

Do you have any evidence of that or is it just something a dodgy adviser told you? Did he also explain to you that the UK has among the highest fees for funds in the world making it even more relevent here?

Aegis

Rollinghome wrote: »

It's not tricky, the more someone else takes from your returns, the less remains for you. Paying more doesn't guarantee higher returns and the higher the costs hurdle, the more risk is required to clear it.

From the FT:
http://www.ft.com/cms/s/0/2e3a6722-966d-11e0-afc5-00144feab49a.html#axzz1Ppb0TnVD



Do you have any evidence of that or is it just something a dodgy adviser told you? Did he also explain to you that the UK has among the highest fees for funds in the world making it even more relevent here?

What are the results of the studies if taxes are excluded from those studies?

givenupwork

Dunstonh - I notice that you are a financial advisor and you give good answers.
I probably havent put this message on right place as Im new to the forum.

We were on the verge of bankrupty 2/3 years ago. Our FA got us some breathing space by getting mortgage reverted to interest only. We are on a much better footing now and it is suggested that the mortgage company is written to, to propose a 7 year plan for us to pay an increasing amount on top of interest. If it works it will be ideal, We are told mortgage co. will require paperwork and charge but if FA does it, its cheaper and quotes a specific current rate of £277 and requests payment first.

A friend who is also a FA says this payment is unnecessary and has caused us some doubts...What do you think?I