Looking for an IFA - I will pay 5% maybe 10%!

bigfreddiel

I'mlooking foran IFA to handle £400k - I would be more than happy to pay him 5%, maybe even 10% + VAT on the increase in value of my portfolio on an annual basis - so if my portfolio drops in value he pays me - would any IFAs work on that basis - no doubt if they're any good they would!

In fact I would be happy to pay an increasing percentage if agreed targets were met.

fj

dunstonh

That isnt what an IFA is for and the method of remuneration you suggest will likely cost you more in the long run as historically, growth periods outnumber negative periods.

IronWolf

You want an investment manager not an IFA. In the old days you would usually pay 25% of any gains over say 6% p.a. , but you'll never find a manager willing to reimburse any losses

bigfreddiel

IronWolf wrote: »

You want an investment manager not an IFA. In the old days you would usually pay 25% of any gains over say 6% p.a. , but you'll never find a manager willing to reimburse any losses

Why wouldn't a manager be willing to pay for a loss - I wouldn't expect full re-imbursement - just a slidung scale of percentages i.e. just mirrors the payments made for any gains.

Sounds like a fair way of doing business.

fj

Aegis

bigfreddiel wrote: »

Why wouldn't a manager be willing to pay for a loss - I wouldn't expect full re-imbursement - just a slidung scale of percentages i.e. just mirrors the payments made for any gains.

Sounds like a fair way of doing business.

fj

Not really, it sounds like a good way of doing business in good years, then a way of going out of business altogether every time a big crash comes around unexpectedly. If (and it's a very big if) you managed to find someone to manage your money like that for you and they did that for more than just you, their business model would have to sustain a huge loss every time the markets fell significantly, which would probably leave you without an adviser altogether during the time you would need them the most.

The closest you'll get is a percentage of assets under management. That will increase when the portfolio increases in value and will decrease when it falls, but many people dislike that approach because it's not necessarily proportional to the amount of work actually done.

I'm not convinced you'll find any business model where the company will pay you for work they've done.

darkpool

bigfreddiel wrote: »

Why wouldn't a manager be willing to pay for a loss - I wouldn't expect full re-imbursement - just a slidung scale of percentages i.e. just mirrors the payments made for any gains.

Sounds like a fair way of doing business.

fj

yeah, you would think that an investment manager who had confidence in his abilities would accept your terms.....

however there is very little evidence that active management is worth the HUGE fees. in fact most academic evidence shows active managed funds deliver less than trackers

gadgetmind

bigfreddiel wrote: »

Sounds like a fair way of doing business.

I totally agree, but as the investment industry is built on coining it in no matter which way the markets go, why should they consider changing voluntarily?

TBH, this is why I favour companies and ITs where the directors/managers have got considerable "skin" in the game. Historically, this hasn't actually shown to help performance, but at least when they screw up, I know they have screwed themselves as well as me!

Regards your £400k, why not buy a good book on asset allocation then look for a basket of ITs, bonds and cash that meets your needs. Annual fees should work out to < 1%.

dunstonh

Still misses the point that an IFA is not an investment manager. The IFA is a facilitator, planner and adviser. Yes, that will involve putting in place a strategy and recommending investments (and if servicing, tweaking them over time). However, the IFA is not actually doing the investment management.

gadgetmind

dunstonh wrote: »

However, the IFA is not actually doing the investment management.

I guess that depends on whether the underlying investments are actively managed funds/ITs or passive investments in bonds, trackers, and equities.

darkpool

dunstonh wrote: »

The IFA is a facilitator, planner and adviser.

He is also a salesman, and like all salesmen he gets some of his income by selling financial products.

wriggly

Aegis wrote: »

Not really, it sounds like a good way of doing business in good years, then a way of going out of business altogether every time a big crash comes around unexpectedly.

Wait, you mean paying for active management won't get me out of the market before it drops?