Seen IFA, But also seen neg comments on here...

cos69

Dealing with £80K is a difficult task and trying to preserve the value of your money over a 15 year term is not going to be easy, even if you only pay a basic rate of tax because over 15 years, inflation could reduce the "worth" of that money to half its current value if put under the mattress. Difficult to understand, but when talking about returns - look at the net return to you after all fees and taxes, then take off the current inflation rate (yes inflation tomorrow could be lower, or it could be higher; the only rate of inflation you can be sure of is todays)

I can't help thinking that the advice you received about a stocks and shares ISA is fine, so putting money into that and then another chunk into a cash ISA (if you pay tax) this year and next year is reasonable - that would cover you for £21,360. Maybe you could also split the rest between cash and stocks/funds in a similar way. A decision on what to hold as stocks and shares is tricky, it seems its never the right moment to invest in the stock market, lots of threads here on whether individual shares, trackers, bond funds or trusts are best. One approach for the cautious is to keep the money in savings and just invest the interest received on a monthly basis into the market to benefit from "unit cost averaging"

I am not advising any particular approach, these are just some things you might think about when talking to your IFA

Aegis

bossymoo wrote: »

Thanks. All this is making sense. I've had a closer look at the illustration, and to be honest, I'm disappointed. Their assumed value after 15yrs at a growth of 4% is less than I could earn fixing it for just 5 years with the Halifax even after tax is taken off.

I realise 4% might be considered conservative, but really, when I think about the growth that would be required to pay for the fees and offer the same return, my mind boggles. In short, for an investment of £70k at 4% I'd get back £81,500 after 15 years. When, really a clean (without charges) 4% growth yoy would be £126,000. Thats nearly £45k in charges? They'd be making four times as much as I am. Am I missing something here (maybe a few marbles?). And, assuming a higher growth level, they'd be taking a higher charge.

I think I'll go back to my spreadsheets...

If you're going into something that's so low risk that you're more likely then not to underperform cash, then it might make more sense to just keep it in an interest bearing account. It's worth considering that the returns on equities can be largely tax free for basic rate taxpayers and fairly benign for higher rate taxpayers as long as you effectively utilise your ongoing capital gains tax, so it's worth comparing the net savings rate rather than the gross. Several bank structured products are like this at the moment: there's barely any return potential added for the risk you take on if you compare the product with a long-term fixed rate, so it's not worthwhile.

However, bear in mind that these projections are usually selected as industry standards rather than being actual predictions of what your portfolio might do. As an example, my own portfolio is higher risk than the vast majority of people I've encountered, but if I sought advice the highest annualised growth rate projection for me would still be the same 8 or 9% depending on which figures that company used.

The idea of these projections is to show you the difference between 4, 6 and 8% in terms of the eventual value and the effect of the charges on those underlying performances compared with other investment options.


That said, as mentioned above, Sterling doesn't seem to be the best platform for investments these days, so it's worth asking what other investment options have been considered. As a bare minimum, it's worth asking why other platforms have been dismissed, as there are numerous low cost offerings out there.

Does your adviser work for Zurich by any chance..?

fairleads

bossymoo wrote: »

Thanks. All this is making sense. I've had a closer look at the illustration, and to be honest, I'm disappointed. Their assumed value after 15yrs at a growth of 4% is less than I could earn fixing it for just 5 years with the Halifax even after tax is taken off.

I realise 4% might be considered conservative, but really, when I think about the growth that would be required to pay for the fees and offer the same return, my mind boggles. In short, for an investment of £70k at 4% I'd get back £81,500 after 15 years. When, really a clean (without charges) 4% growth yoy would be £126,000. Thats nearly £45k in charges? They'd be making four times as much as I am. Am I missing something here (maybe a few marbles?). And, assuming a higher growth level, they'd be taking a higher charge.

I think I'll go back to my spreadsheets...

You're not missing any marbles. 81K after 15 yrs implies a commission rate of 3% p/a. In effect the net growth rate applied to your 70K is 1% p/a.

darkpool

Aegis wrote: »

IHowever, bear in mind that these projections are usually selected as industry standards rather than being actual predictions of what your portfolio might do.

i think the point the OP was making was that the IFA industry is likely to make more from her investment than she is.

darkpool

bossymoo wrote: »

Thanks. All this is making sense. I've had a closer look at the illustration, and to be honest, I'm disappointed. Their assumed value after 15yrs at a growth of 4% is less than I could earn fixing it for just 5 years with the Halifax even after tax is taken off.

welcome to the world of the IFA! behind that smart suit and charming smile is a commission hungry salesman.

Aegis

darkpool wrote: »

i think the point the OP was making was that the IFA industry is likely to make more from her investment than she is.

It's too expensive, there's no doubt there. However, you are wrong (shocker!) in your assertion that the IFA world will make more than the investor in this case. With the charges being as high as they are, I imagine this IFA is wanting 1% p/a in trail, which can be easily beaten by shopping around. However, on the assumption that this is the level actually taken, the IFA will only earn more than the investor in years where the underlying performance is 4% or less. If the fund averages 6% per annum then the investor will earn more than the IFA by a considerable margin.

Over 15 years of typical stockmarket performance you'd expect to see average underlying returns of more than 4% annualised.

Again, not supporting this charging structure, it's too high for the amount in question, but it's important to get the facts right, wouldn't you say?

dunstonh

Does your adviser work for Zurich by any chance..?

I wondered this too. Openwork use Sterling as their platform and would be the biggest user and they are not IFAs. However, they often give the impression they are. bossymoo, check the IFA documentation and see if it mentions "openwork". If it does, then you are not seeing an IFA. Also, ignore darkpool. He is a bit of troll on here and doesnt engage in reasonable debate.

atush

Bossy, I am sure you can tell who one of those I spoke of in post 2 is ;-)

So I think you need to go to unbiased.co.uk and intervew by phone a couple of IFAs and choose one for an interview. And ask abt fee based advice, and tell them why are you aren't happy with the previous recommendations you have had.

Personally, I myself would go down the cash and S&S ISA route plus good investment trusts. This is where I have put money I am saving for my own 3 boys.

darkpool

Aegis wrote: »

It's too expensive, there's no doubt there. However, you are wrong (shocker!) in your assertion that the IFA world will make more than the investor in this case. With the charges being as high as they are, I imagine this IFA is wanting 1% p/a in trail, which can be easily beaten by shopping around. However, on the assumption that this is the level actually taken, the IFA will only earn more than the investor in years where the underlying performance is 4% or less. If the fund averages 6% per annum then the investor will earn more than the IFA by a considerable margin.

Over 15 years of typical stockmarket performance you'd expect to see average underlying returns of more than 4% annualised.

Again, not supporting this charging structure, it's too high for the amount in question, but it's important to get the facts right, wouldn't you say?

sorry, i should have made clear that i consider the fund provider etc as part of the "IFA industry"

we can all agree that the OP would pay 3% to the fund management industry with this investment. so the average returns would have to be over 6% before the OP got more from her money than she gave away each year in fees.

obviously the 6% returns would have to be after inflation. do you think real returns on the next 15 years will be over 6%?

darkpool

dunstonh wrote: »

Also, ignore darkpool. He is a bit of troll on here and doesnt engage in reasonable debate.

i beg to differ, i think the problem on this site is too many vested interests and a few people who don't know what "peer reviewed evidence" is.

do you think an investment with 3% annual fees could be considered best advice?