Do I now need an IFA, little left to do.

ajw1100

My IFA has done a good job but now, after my (small) annuity is in place and other financial queries have been sorted all that is left for him to do now is look after a S&S ISA and CIA with Skandia. This involves changing a few investments every 4~6 months and re-balancing. However I am still paying the same monthly charge which is now impacting on the value of my investments. Skandia do not offer advice (Understandably) or seem to have 'Managed Fund' into which I could transfer my funds.
I see little point to continue paying his monthly fee and commissions and then see my funds being reduced in value. ( I know the stockmarket is not at its best at present!)
I have seen many posts on here about not using an IFA but I cannot see any other option, unless,of course, you, with a lot more knowledge and experience can offer any other way of keeping my funds and reducing my outlay.
The service I have had from Skandia has been excellent so would like to stay with them as this would remove the reinvestment costs of going to another provider, if I can find a cautious managed fund within their selection that would suit me.
Perhaps someone could give me a ball park figure of what an average IFA would charge to manage two funds with a total value of £70k I could then compare this to my IFA's cost.
Many thanks.

dunstonh

Skandia do not offer advice (Understandably) or seem to have 'Managed Fund' into which I could transfer my funds.

Skandia are a fund supermarket and have many funds. Their own "managed" solution is actually quite expensive and probably will end up costing more than an IFA.

I have seen many posts on here about not using an IFA but I cannot see any other option, unless,of course, you, with a lot more knowledge and experience can offer any other way of keeping my funds and reducing my outlay.

The two choices are to DIY or to IFA. The rest are easily rejected. If you DIY then you need to know what you are doing or use funds that do the job the IFA can do but be prepared that those options cost more. Like any area of DIY, you may be able to do a good job and save money. Or you may do a bad job that leaves you in a worse position.

The service I have had from Skandia has been excellent so would like to stay with them as this would remove the reinvestment costs of going to another provider, if I can find a cautious managed fund within their selection that would suit me.

That seems to indicate that you wish to replace one cost with another.

Perhaps someone could give me a ball park figure of what an average IFA would charge to manage two funds with a total value of £70k I could then compare this to my IFA's cost.

The problem is that in IFA terms it isnt a large amount and and IFA still has to comply with the same requirements irrespective of amount. With costs increasing and RDR likely to see a big jump in costs, you are not going to get much in the way of discounting on that amount. Every firm has it's own pricing but I would expect around £500 a year for an annual review/rebalance is your ballpark.

ajw1100

Thank you for your reply, I agree with much of what you say. But when you are paying your IFA around 12% of your annual income this hurts! As said I have a small annuity - around £500 pcm due to a large loss brought about by a previous IFA and although compensated by £48k under the old FSCS this amount still left a very large chunk of pension savings stolen/missing.

Skandia are a fund supermarket and have many funds. Their own "managed" solution is actually quite expensive and probably will end up costing more than an IFA.

Without knowing what this 'managed solution' is or what the costs are it may or may not be more than I pay at present. I have spoken to Skandia who have advised I can switch to any other fund without costs to me, so according to how much they charge to manage the fund it could save me the monthly IFA charge and less trail commission.

Quote:
The service I have had from Skandia has been excellent so would like to stay with them as this would remove the reinvestment costs of going to another provider, if I can find a cautious managed fund within their selection that would suit me.
That seems to indicate that you wish to replace one cost with another.

Far from it!!As said I would like to stay with Skandia and would like to find a cautious managed fund within their (Skandia's) selection.

With costs increasing and RDR likely to see a big jump in costs, you are not going to get much in the way of discounting on that amount. Every firm has it's own pricing but I would expect around £500 a year for an annual review/rebalance is your ballpark.

My costs are increasing too, hence my need to reduce them if and where I can, My car and house insurance costs have dropped right down with much haggling and using comparison sites, I have haggled BT into free calls without paying for the upgraded service, and my mobile is now PAYG and rarely phone out. I have calculated our Electric and Gas unit usage costs over 3 years and compared them across all major providers and tariffs to find the best deal. Any 'with bonus' savings are dated when to ditch & switch.
My present IFA charges over £700 pa for managing the funds so even £500 would be a hefty saving.

What does RDR stand for?

Thanks for your helpful reply.

dunstonh

Without knowing what this 'managed solution' is or what the costs are it may or may not be more than I pay at present. I have spoken to Skandia who have advised I can switch to any other fund without costs to me, so according to how much they charge to manage the fund it could save me the monthly IFA charge and less trail commission.

Skandia dont rebate any trail in an ISA. They also keep the hidden platform commission. They are not geared to be a DIY provider.

Far from it!!As said I would like to stay with Skandia and would like to find a cautious managed fund within their (Skandia's) selection.

A cautious managed portfolio fund will typically have a TER about 1% higher (or more) than single sector funds that the IFA would likely use on a sector allocated portfolio. So, if your IFA is taking say 0.5% p.a. and using cheaper funds then you save nothing by cutting out the IFA and using funds which cost more.

My present IFA charges over £700 pa for managing the funds so even £500 would be a hefty saving.

Ask him to drop it and review once a year. Any more on that amount is largely a waste of money.

What does RDR stand for?

retail distribution review. Many theories on what it will lead to but some think it will be the end of IFAs due to the liability (and therefore cost) that will exist when you can be a restricted adviser and still be whole of market. For example, if an IFA decides not to transact in certain high risk areas they will no longer be able to call themselves an IFA. However, they can carry on acting like an IFA on all in the areas they do transact in but wont have to pay levies or insurance for those areas they do not transact in.

For a profession that has no stock to buy and sell we do have a lot of costs. In the last week I have paid out over £8000 the liability insurance and FSA, FSCS and FOS levies. Roughly 25% up on last year. Some advisers are reporting they have had a 40% increase. It is very hard for an IFA to show a profit on advice that earns them under £500 unless they can really streamline it (such as email communications and having enough people with similar portfolios to share research etc).

gadgetmind

ajw1100 wrote: »

My present IFA charges over £700 pa for managing the funds so even £500 would be a hefty saving.

That would definitely cover platform charges elsewhere, and putting together a portfolio that meets your needs isn't exactly rocket science. It is however easy to get wrong, so you would need to do some research.

However, Skandia isn't a great DIY platform, and as per above all the rules and charges are going to be changing in the near future. Moving platforms without being out of the market is also going to get easy, faster and cheaper. The latter point is critical because market swings while you're in cash can go against you, and sod's law says they will!

I think you need to avoid doing anything hasty, understand what mix of equities versus bonds and income versus growth will be best for you, whether you're more inclined towards active management or trackers, and then find a suitable platform.

Of course, you might just decide to stay put, at least for now.

ajw1100

Gentlemen.
Two most informative replies, trying to find basic fund information on the Skandia website is not easy. A Supermarket is a fair description and is good if you know what your looking for, to me there are just pages and pages of fund names which do not mean much to me at present. But that is where the IFA comes into his own......
I have a list of the 25 funds that make up my portfolio, and I would think, judging by my IFA's correspondence that his various portfolios are spread across many clients and are not unique to each client so there may well be an opportunity to negotiate a little.
I do not intend to jump ship in the immediate future, as you rightly suggest I need to do some more investigation.
Can you suggest any websites or links that may give me some plain English guidance as to what would make up a cautious portfolio, not specific funds but areas (sectors?) that it may contain, 5% UK equity, 20% UK fixed interest etc. Don't know if anything like this may exist or not, I can only ask!

Once again thanks for your help.

gadgetmind

ajw1100 wrote: »

Can you suggest any websites or links that may give me some plain English guidance as to what would make up a cautious portfolio, not specific funds but areas (sectors?) that it may contain, 5% UK equity, 20% UK fixed interest etc.

There are two main approaches. 1) Use an "all in one" portfolio fund with an equity versus fixed interest split that suits your age and attitude to risk and leave the decisions to them. 2) Use a number of simple components to construct a portfolio. Approach (1) is much easier but (2) allows a lot more customisation.

To get a feel for things, you could try looking at the make up of some of the Jupiter balanced/cautious/growth portfolios and also a Vanguard Lifestrategy tracker. The BestInvest web site also has some sample portfolios for various attitudes to risk and investment time frames.

There are also some good books on the basics, and these are currently being discussed in this thread.

https://forums.moneysavingexpert.com/discussion/3973853

ajw1100

Gentlemen.
I am awaiting some information from Skandia regarding DIY and charges, I have found some useful links so my bedtime reading is now sorted.

In the last 4 weeks my ISA and CIA have dropped by around £2.500 which seems to be "acceptable" in these times if any drop can be called "acceptable!" that is.

Thanks again for your help.