Independent Financial Advisers fees vs Novice Investor!

Janeybo

Yes this is producing an interesting debate and I'm still not sure what to do at the moment, although appreciating how much i'm learning.

So in the spirit of your post saveonarola I will see about getting the whole thread moved.


Before I do can you tell me what you mean by 'platform' and paying a 'trail commission' please?
thanks

jem16

saveonarola wrote: »

Is the 'ISAs and Tax-free Savings' sub-board supposed to be for all ISAs or just Cash ISAs?

It's for all ISA related questions, whether it's S&S or cash. So it is in the right section.

Janeybo wrote: »

Before I do can you tell me what you mean by 'platform'

A platform provides an investor with the means of purchasing funds, shares etc all under one roof utilising the various tax wrappers or unwrapped investments. Basically a supermarket where you can buy everything.

and paying a 'trail commission' please?

The amount that an IFA receives for ongoing servicing.

roves1

You are paying people to advise you and manage your money, and they are losing your money instead, while pocketing the fee.

Lesson Learnt?

dunstonh

roves1 wrote: »

You are paying people to advise you and manage your money, and they are losing your money instead, while pocketing the fee.

Lesson Learnt?

You clearly dont understand what an IFA does. So, what is it you are trying to teach?

roves1

You clearly see no problem in recommending someone puts money into an investment that loses money so long as you and the fund manager get paid for your time. The recent market risks were predictable and are still present, but the IFA is still giving the same advice he/she gave a year ago - maybe they hope or expect a quick recovery, or maybe they just want the fee.

"An IFA should not be measured on returns" - your customers will and should judge you and the fund manager on this, whether you like it or not.

dunstonh

You clearly see no problem in recommending someone puts money into an investment that loses money so long as you and the fund manager get paid for your time.

You dont understand investing do you.

The recent market risks were predictable and are still present

Oh. You are one of those are you? Someone who thinks every drop is predictable.

but the IFA is still giving the same advice he/she gave a year ago - maybe they hope or expect a quick recovery, or maybe they just want the fee.

Maybe they are not as lucky as you to have a crystal ball. However, more likely they are looking long term because short term issues are so unpredictable that its not worth trying.

Maybe they are acting as an IFA should because IFAs are not discretionary investment managers. So, trying to make out they are is just wrong.

BobQ

roves1 wrote: »

You clearly see no problem in recommending someone puts money into an investment that loses money so long as you and the fund manager get paid for your time. The recent market risks were predictable and are still present, but the IFA is still giving the same advice he/she gave a year ago - maybe they hope or expect a quick recovery, or maybe they just want the fee.

"An IFA should not be measured on returns" - your customers will and should judge you and the fund manager on this, whether you like it or not.

I have to say that I am sceptical about some IFAs objectivity too. However....

In the context of investments in stocks and shares, ultimately the invester has to decide if they are confident their judgement is better than they would get from letting an advisor influence their decsions. Investment is ultimately a gamble based on evidence as to the risks and benefits involved. This is true whoever makes the decision and neither an IFA nor an individual investor can guarantee the outcome. If people CHOOSE to use an IFA then all they can reasonably expect in return for their fees is the IFA's best judgement based on a good knowlege of the risks involved and investors circumstances.

The only way to win is not to play the game!

saveonarola

jem16 wrote: »

It's for all ISA related questions, whether it's S&S or cash. So it is in the right section.

Okay, so it looks like it’s in the right place. Maybe the problem is that asking this forum if you paid too much for financial advice is like asking a knitting forum if you paid too much for your new jumper from Marks & Spencer! Or maybe everyone’s just too busy writing letters to Hargreaves Lansdown to complain about their new fees...

Anyway, I don't know enough about advisers and their specific fees to comment on that, but here’s my tuppence-worth on the more general aspect of your query.

You'll see a lot of criticism of advisers on this forum. You've already seen some on this thread. This is because many of the regular posters on this forum have chosen to manage their own investments and they resent the large salaries pocketed by fund managers because they’re paid for out of investor’s fees. Of course, advisers are not fund managers and most of them don't own yachts, but they do represent another 'tier' of intermediaries between the investor and the market, which is where the returns are made, and so they come in for some of the same criticism.

And there’s another reason. Among DIY investors, there are some who are even sceptical about the central claim of the fund management industry - that a skilful fund manager can consistently pick stocks that are likely to outperform the market. They think it's all luck and logically, therefore, they also think that the idea that IFAs can pick funds which are likely to perform better than average is also nonsense, and they see the fees and commissions paid to advisers as just another (unnecessary) drag on performance. These investors will tend to advocate a wholly or mostly 'passive' investment strategy - that is, a strategy that uses 'index' (or 'tracker') funds, which aim to 'track' the market average (minus fees) rather than outperform it. Most advisers, historically, have favoured 'active' strategies – well, you'd hardly expect a doctor to be sceptical about medical science – but these investors see advisers' preference for active funds, coupled with the fact that active funds pay higher commissions to advisers, as further proof of the greed and self-interest of the industry in general.

None of this, however, is an argument for or against using an adviser. It's quite possible to favour active management, but to want to pick the funds yourself. Equally, it's quite possible to favour passive investing, but to want someone else to manage your portfolio. This is because, as dunstonh has pointed out, there is a lot more to investing than picking funds. The kind of investment strategy you follow should be tailored to your personal circumstances – your other assets (e.g. property, pension), your job, health and family situation, your tax status, the amount you have to invest, the timeframe for the investment, your tolerance for risk and so on – and it should change as your circumstances change. In this respect, asset allocation (how your investments are divided by asset class: cash, bonds, equities, etc) is generally regarded as crucial. Also, diversification not only by equity but by geographical region, and maybe also by industrial sector, all of which involves decisions about percentage allocations to different areas. And that's before you even get to the tangle of brokers, platforms and fund supermarkets, all of which seem to offer slightly different menus of funds and slightly different charging structures.

Janeybo wrote: »

I've had a brief look at the Discount brokers, and although I could invest based on the IFA's recommendations, I'm not sure I'd know what to do after that.

No one is born knowing this stuff. The question is whether you have the time, the curiosity and the enthusiasm to learn enough to feel confident making these decisions for yourself. The fact that you've looked at some brokers' sites and posted here suggests that you have some interest. My advice would be to do a bit of reading. You could start with any of these basic guides to investing:

http://www.fool.co.uk/Investing/guides/The-Difference-Between-Saving-And-Investing.aspx?source=uhpsitts0000001

http://www.candidmoney.com/investment/default.aspx

http://www.incademy.com/pages/home.htm?ginPtrCode=10002

Once you've laid the foundations, or if you'd rather mix the textbook stuff with something a bit more bracing, you could have a look around this site. Maybe try one of these threads:

https://forums.moneysavingexpert.com/discussion/416337

https://forums.moneysavingexpert.com/discussion/3599153

https://forums.moneysavingexpert.com/discussion/3448731

I'm not presenting these threads as in any way 'definitive'. I just did a quick forum search and chose the first three that were long and seemed to deal with general investing issues. Everything will probably be very confusing at first, but just read anything or follow any link that seems interesting and see where it takes you. That's what I did when I started doing my research a few months ago and it seemed to work for me.

I'm guessing you'll find out pretty quickly whether you have the interest in the subject to manage your money yourself. You may find it interesting, but choose to use an adviser anyway, which would be a perfectly legitimate decision; at least, in that case, you'd be in a better position to evaluate their advice and ask pertinent questions. Or you may decide that you want nothing to do with it and the adviser's fees were very good value to avoid having to go too deep into this stuff!

Good luck.

Janeybo

Thank you saveonarola, and to everyone else who is contributing, sorry not to name individually.

I think in a nutshell that's the conclusion, I need to find out more myself more about investing, then I'm in a better position to decide, even at it's most basics if I want to invest, then the tricky bit of how to and whether it's me or an IFA who does it on my behalf.

I think fear puts a lot of people off, I'm not great with the idea of being held to ransom on the idea that only certain people can know and understand this stuff. It's up to me to learn and if I'm no good at it or don't have the time or can't be bothered then I'll stay out of the kitchen!

There's no such thing as a free lunch, so I will start looking at those web links. Thank you again
bw
J.

Lokolo

Janeybo wrote: »

Thank you saveonarola, and to everyone else who is contributing, sorry not to name individually.

I think in a nutshell that's the conclusion, I need to find out more myself more about investing, then I'm in a better position to decide, even at it's most basics if I want to invest, then the tricky bit of how to and whether it's me or an IFA who does it on my behalf.

I think fear puts a lot of people off, I'm not great with the idea of being held to ransom on the idea that only certain people can know and understand this stuff. It's up to me to learn and if I'm no good at it or don't have the time or can't be bothered then I'll stay out of the kitchen!

There's no such thing as a free lunch, so I will start looking at those web links. Thank you again
bw
J.

Ask lots of questions on here, best way to learn.