Looking for an IFA - these are my T&C's

bigfreddiel

Calling all ifas - are you up for a challange?

I won't pay a fee.

I will pay on your performance - for every percentage increase in my portfolio i will pay you cpi + 1% of the increase - if its negative I pay nothing.

So are you up for it?

fj

gadgetmind

bigfreddiel wrote: »

I will pay on your performance - for every percentage increase in my portfolio i will pay you cpi + 1% of the increase - if its negative I pay nothing.

Over what timescale do you assess performance?

A bet like that would get best return for the counterparty if they put you into a highly volatile asset with a short sampling interval.

Be careful what you wish for, and maybe also read some books on game theory and (please!) asset allocation.

dunstonh

I will pay on your performance - for every percentage increase in my portfolio i will pay you cpi + 1% of the increase - if its negative I pay nothing.

That just encourages risk and as growth periods outnumber negatives, you would almost certainly pay more in charges.

In addition to gadgetmind's points, it also isnt a suitable remuneration method for an IFA as an IFA is not an investment manager.

Aegis

bigfreddiel wrote: »

Calling all ifas - are you up for a challange?

I won't pay a fee.

I will pay on your performance - for every percentage increase in my portfolio i will pay you cpi + 1% of the increase - if its negative I pay nothing.

So are you up for it?

fj

You've asked almost this exact same question before, and it still makes no sense as a business model. Let's assume you make a respectable 10% gain in a year where CPI shows 4%. That means the IFA earns 5% of 10% of your portfolio, i.e. 0.5%. Typically an IFA might expect to charge 0.5% to service your portfolio on an ongoing basis anyway, and might also benefit from an initial fee depending on the level of complexity of the initial investments.

10% year on year is very unlikely, so income levels would be dangerously unreliable. CPI is likely to drop at some point, reducing the annual fee.

Why on earth would any IFA agree to this? To make it appealing you would have to increase the split of the gains by a considerable margin, which will have the effect of hammering your portfolio in the good years.

If you don't want to pay an ongoing fee, then you'll have to either pay an up front fee and opt for no servicing or do it all yourself. I haven't met a single IFA to date who would happily tie his business income to the performance of markets, as he'd be out of business in a year with a general downturn.

There are some performance fee-only (i.e. zero AMC) funds being developed, maybe they would be more to your liking than an IFA.

Agree with the above, it's not down to the IFA to actually generate your returns, that's a fund manager's job.

jfh7gwa

dunstonh wrote: »

That just encourages risk and as growth periods outnumber negatives, you would almost certainly pay more in charges.

In addition to gadgetmind's points, it also isnt a suitable remuneration method for an IFA as an IFA is not an investment manager.

I have to admit to loving dunstonh just a little bit. He always pops up on IFA-related threads and speaks such sense (having trawled the MSE forums for more years than this login would indicate).


(ETA: No sarcasm, in case it comes across like that! )

gadgetmind

Aegis wrote: »

or do it all yourself.

If the OP put as much energy into researching asset allocation as to asking this question in various guises, then I'm sure they could manage their own investments and (depending on underlying fees, etc.) get a better long-term outcome.

gozomark

I'll take on your challenge - put the lot on gold options (either short or long - toss a coin to decide). In a years time, either send me a cheque or accept my apologies. Job done.

Even better - if you've a mate interested in the same deal, one of you go long, the other short.

bigfreddiel

Aegis wrote: »

10% year on year is very unlikely, so income levels would be dangerously unreliable. CPI is likely to drop at some point, reducing the annual fee.

people on this forum claim 10%+ year on year - and they're only amateurs!

fj

bigfreddiel

Aegis wrote: »

Why on earth would any IFA agree to this?

why not - if an ifa's any good surely perforance related remuneration is a good thing - after all we pay for loads of things based on performance:
your pc - better spec - bigger price
your cr - higher speed - higher price
your house - better area - higher price

to name but a few

is buying and ifa any different?

gozomark

bigfreddiel wrote: »

why not - if an ifa's any good surely perforance related remuneration is a good thing - after all we pay for loads of things based on performance:
your pc - better spec - bigger price
your cr - higher speed - higher price
your house - better area - higher price

to name but a few

is buying and ifa any different?

you are confusing two roles - IFA and investment manager.

gadgetmind

bigfreddiel wrote: »

people on this forum claim 10%+ year on year - and they're only amateurs!

If you count my highly-speculative technology punts, then I've done way better than that, but any claims of > 4-5% above inflation should always be taken with a pinch of salt, including mine!