A very large sum - where do I start?

jem16

How about telling us why rather than just a statement?

dipsomaniac

in my view there are only three types of financial adviser - good ones, bad ones and those in between.

it is more important to find a good financial adviser regardless of nma or oma status.

it is the same arguement for annual management charges. I would rather pay a good fund manager 1.75% AMC for an average annual return of 12% than pay 0.2% to a bad fund manager for an average return of 5%.

How do you find a good IFA? Start by asking family, friends, work colleagues and neighbours. failing that, contact an IFA ask for referrals and initially give a small amount of business until confident that they are good at their job.

jem16

dipsomaniac wrote:

in my view there are only three types of financial adviser - good ones, bad ones and those in between.

it is more important to find a good financial adviser regardless of nma or oma status.

Absolutely agree on this.

However IMO the chances of finding a good adviser are increased if it's a NMA as their choice of investment is not commission driven. Some products carry a higher commission and can influence the choice which may not be the correct one. For the NMA the commission is the same regardless of the product.

it is the same arguement for annual management charges. I would rather pay a good fund manager 1.75% AMC for an average annual return of 12% than pay 0.2% to a bad fund manager for an average return of 5%.

Absolutely agree on the charges. They should not drive the investment. There is no point in saving on charges if all it means is a lower return.

How do you find a good IFA? Start by asking family, friends, work colleagues and neighbours. failing that, contact an IFA ask for referrals and initially give a small amount of business until confident that they are good at their job.

A referral can often be the best way.

However, as I found out, the commission charge for me was more than my friend as, presumably, he had more business from them including, at one point, my friend's company business. As it turned out he never got back to me with his recommendations - perhaps I asked him too many pertinent questions.

Flynn_2

That makes a lot of sense Dipso though I'd want some evidence of success before paying ten times more for one service than another and would bear in mind the usual riders about past performance.

The problem I find with recommendations from friends is that in most cases they weren't very impressed or if they were impressed, from the details they give, there wasn't much to be impressed about - or it was due to the wrong reasons. Sometimes too people are disappointed with advice because their investment hasn't done as well as they expected but the advice may not have been incompetent. Perhaps the majority haven't a clue how well they are doing or should be doing and why should they: they sought advice because it was something they knew nothing about. If only it was as easy as buying a fence.

Flynn_2

jem16 wrote:

For the NMA the commission is the same regardless of the product.

Might be wrong but I'm not sure that's quite what Dunstonh said:

dunstoh wrote:

One option is to have all trail commission rebated and agree a fixed 0.5% charge against the investment. I wouldnt but its possible if you do feel that it would be better to have a straight line payment (considering that the fixed interest and property sectors tend to pay 0.15/0.35% and most portfolios would contain some of those).

prudryden

Since you have the cash - you should go where the big boys go. Here are some choices for you. Goldman Sachs, Lehman Brothers, Credit Suisse First Boston. Citibank, Merrill Lynch. A team of advisors will probably manage your portfolio, if that is what you want, for .50 % of the assets for a 1/2 million pound portfolio. All charges would be included in that fee. Funds would be bought at NAV, so no commission on the purchase, trailers, if any, would be returned to you. Funds would be switched at no charge. They have contracts with all major fund providers world wide. Also, are members of all major exchanges around the world.

jem16

Flynn wrote:

Might be wrong but I'm not sure that's quite what Dunstonh said:

I'll let Dunstonh clarify what he meant himself although I think he said "I wouldn't"

One option is to have all trail commission rebated and agree a fixed 0.5% charge against the investment. I wouldnt but its possible if you do feel that it would be better to have a straight line payment (considering that the fixed interest and property sectors tend to pay 0.15/0.35% and most portfolios would contain some of those).

However what I meant was that the commission payment that he keeps is 1% and the rest is rebated back to your investment. He may of course take less than this depending on your level of investment.

So if the product paid 7% commission the adviser would get 1% and you would get 6% rebated back into your investment. If the product paid 3% commission the adviser would still get 1% and 2% would be rebated back to you.

So basically you are not being advised to take a product that is unsuitable for you simply because it pays the adviser more upfront commission. He gets 1% regardless.

dunstonh

My comment on "wouldnt..." was that you can agree a flat 0.5% across the total investment if you want a level playing field. The wouldnt was because fixed interest and property funds tend to pay 0.15/0.35% and most portfolios would include a chunk of those so by agreeing a flat 0.5% you would actually pay more. Standardising the charges doesnt mean that it will always work in your favour.

in my view there are only three types of financial adviser - good ones, bad ones and those in between.

Very fair comment. Tiggs, who posts here, is very competent on IHT cases. You can tell just by reading his posts. He makes a point of stating that he is old model and proud of it.

My main caveat to OMA is that you tend to find you dont get discounted and it is used mostly by the old tied agent working in a salesforce model which promotes sales targets, incentives. The salesforce model is perhaps the most important thing to avoid first.

dipsomaniac

i can fully see your point jem16. all things being equal the client paying the lower commission/fees is alway going to be better off. but...

an advisor has to make a living whether it is by charging a fee, initial commission, renewal or a combination of these.

unlike solicitors and accountants, ifa's spend a lot of time doing unpaid work.

i can't see how many ifas taking 1% i/c could be happy driving 30 miles to see a client who wants to invest 5,000 in an isa. apart from the travelling they have to; drink a cup of tea, complete a factfind, establish the clients objectives and risk profile. unless they were prepared, they would then go away do their research before returning to present their recommendations. if the client was happy they would then need to complete all of the compliance and produce a reasons why/suitability letter and review the investment at least once a year - all for £50 i/c + £25 +/- pa.

what i am trying to say is that you have to negotiate a fair price with your adviser for the work they are doing - that may mean taking 1% or 5% i/c, renewal, a fee or a mixture of all three.

perhaps ifas & fund managers should be paid only for positive investment returns? that would be a huge incentive to pick the correct asset allocation and underlying funds or would they put all their clients in cash?

jem16

dipsomaniac wrote:

i can fully see your point jem16. all things being equal the client paying the lower commission/fees is alway going to be better off. but...

an advisor has to make a living whether it is by charging a fee, initial commission, renewal or a combination of these.

I agree. It's certainly a valid point.

Personally I feel there is more benefit when the initial commission is lower and the renewal commission is where the adviser really makes his money. If the investment performs better then the adviser is paid more.

i can't see how many ifas taking 1% i/c could be happy driving 30 miles to see a client who wants to invest 5,000 in an isa. apart from the travelling they have to; drink a cup of tea, complete a factfind, establish the clients objectives and risk profile. unless they were prepared, they would then go away do their research before returning to present their recommendations. if the client was happy they would then need to complete all of the compliance and produce a reasons why/suitability letter and review the investment at least once a year - all for £50 i/c + £25 +/- pa.

I do see your point here and many probably wouldn't take on such business. However small starts may lead to bigger investments so I'm sure some will. Perhaps they could find another way of communicating?

perhaps ifas & fund managers should be paid only for positive investment returns?

That would be an interesting possibility

that would be a huge incentive to pick the correct asset allocation and underlying funds or would they put all their clients in cash?

There's always a downside