What to ask at a meeting with Financial Advisor

VT82

Hi,

My mum has asked me to go with her to see her financial advisor, because I'm up to speed on general MSE principles, and savings in particular. But I'm not as clued up when it comes to investments. I understand about the need to diversify. And I understand about the only guarantee with an investment is that the % fee will be taken, so minimising the fee is the main thing once you've decided on your diversification and general strategy. And you should get it into S&S ISAs as and when you can. But not much else above that.

Here are the facts I know about what she has to play with:

She has been given the proceeds of the sale of a business by my grandma, to avoid inheritance tax. The current balance in her savings is about £350k, with another £90k on the way. Her cash ISA for this year is filled. In addition, she has a property worth in the region of £350k, which will shortly be yielding a rental income of £1,500 per month. In addition, she is also being bequeathed her mother's house where she lives at the moment (valuation is very difficult, maybe £500-800k, although the accountants are working on getting this down for IHT planning).

She is in her mid fifties and I believe she has a pension pot of £100k (not sure what this is invested in).

Her objectives are to create an income to live off, and to preserve the capital value of her assets, keeping up with inflation as much as possible. In terms of risk appetite, she likes the idea of property as an investment, although I have already pointed out that she has plenty of that already. She had earmarked a large proportion of the money to buy a cheap block of flats nearby, but has had cold feet.

She has been recommended a team of a solicitor, tax accountant and financial advisor by a friend who she trusts, and she is happy with them so far. She is paying them on a fee basis. She had originally asked them to invest £70k on her behalf, but was thinking of upping this to £200k now. When it was £70k, she reeled off a list of about 18 different funds they had planned for the investment. I am concerned about the timing of such a big investment and whether drip feeding would be suitable? The guy also only seems to use Brewin Dolphin for investments. Is this normal?

As much as I think I'm getting my own personal finances spot on, making use of regular savers and Halifax's £5 a month etc. doesn't seem like relevant knowledge when the figures are this big! Any help on what I need to know before going in there, or what I should be asking, would be greatly appreciated.

Sorry for the long post. Thanks for reading this far if you have!

sorcerer

I think it's best to leave this to the experts, because you are talking about over £1 million, but I think it's good to go with her and listen to what they have to say.

dunstonh

I am concerned about the timing of such a big investment and whether drip feeding would be suitable?

There is no way to know what is a good time or bad time in advance. Pound cost averaging by phasing the contributions can reduce the risk but it also reduces the potential. Historically, it would have provided less on more occasions than than single premium (as growth periods outnumber negative). You just cant tell.

You know investments are going to zig zag in value. So, if you are concerned before the money is even invested then what are you going to be like when it is invested? There will always be a drop coming at some point.

The guy also only seems to use Brewin Dolphin for investments. Is this normal?

FAs are limited in choice. IFAs are whole of market but they may prefer to use certain providers for their services. You shouldnt use an FA. A discretionary investment portfolio seems to be the reason for using them. Is that what your mum wants? There are pros and cons to such an approach. The amount being invested is still within IFA territory but equally high enough for a DFM service. So, its more a case of what she is after.

VT82

Thanks for your reply.

dunstonh wrote: »

A discretionary investment portfolio seems to be the reason for using them. Is that what your mum wants? There are pros and cons to such an approach. The amount being invested is still within IFA territory but equally high enough for a DFM service. So, its more a case of what she is after.

I've looked this up and, yes, I think that is what she wants. She has signed something giving him permission to make decisions with her money, which sounds like it will be a DFM service. Do you know what the most typical method of someone charging for this service is? Is it per year, per amendment, or a percentage?

Regarding pound cost averaging, if we did want to reduce volatility in this way, could we just tell the FA that we wanted to invest say £30k at a time at two month intervals for a year? Or is there a more traditional way of doing this with large amounts?

Should I bring up the subject of getting it into ISAs and checking they don't charge just for them to do this?

Thanks again.

dunstonh

Do you know what the most typical method of someone charging for this service is?

It varies a lot and it typically more expensive than the IFA doing it. Some are very expensive and even have double charging (DFM charge on top of the inbuilt commission that some investments have without rebating the commission).

Regarding pound cost averaging, if we did want to reduce volatility in this way, could we just tell the FA that we wanted to invest say £30k at a time at two month intervals for a year? Or is there a more traditional way of doing this with large amounts?

You can give instructions.

Should I bring up the subject of getting it into ISAs and checking they don't charge just for them to do this?

Tax wrappers rarely cost any more. It should be automatic to consider ISAs. Ask about bed&ISA and how much that will cost each year. Most servicing IFAs will do that at no extra cost as the servicing remuneration covers it. However, with a DFM involved, that may not be the case.

Onawingandaprayer

Another thought - and it's a pretty obvious one - is don't agree to anything until you've all slept on it (as it's such a large amount, probably 2 nights )

And when they come back to you with their suggestions, maybe post a general outline on here. There are many learned folks on this forum who will advise you well.

All a bit scary, isn't it. Had to do something similar for my dad*, though the figures weren't quite in the same league.

Good luck.

*In the optimistic pre-Lehman collapse days, so your timing, I suspect, is a lot better

bigfreddiel

the door!

glad to help

fj

waspsandjam

Is your mother definately sure that she wants this advisor, how did the friend she trusts choose this advisor and would you choose them based on this? Are their financial situations similar?

Theres lots of information floating around about questions to ask when choosing an advisor so you could research these and shop for a financial advisor instead if your mother isnt 100% sure she wants this advisor.

Have you considered an initial meeting with the advisor to check that you want them to work for you? You could explain the situation and find out what they can do for you, whether they have all of the expertise you require and how much they will charge, before choosing them.

Other than that, get the whole meeting in writing, make sure you understand everything (if not, ask the advisor to explain) and have a think about it all before making any decisions.

bigfreddiel

ask him how good he thinks he is compared to other people in the same field - then ask for the evidence

glad to help

fj

dunstonh

ask him how good he thinks he is compared to other people in the same field - then ask for the evidence

What a silly question. How would he know what XYZ down the road does.

srcandas

dunstonh wrote: »

What a silly question. How would he know what XYZ down the road does.

Market research? Peer group meetings? Industry statistics?

Seriously this is a major problem. It is very difficult to compare IFAs even for basic services. And by the very nature of the work they do it may be some years before you find out if the IFA is hero or donkey.

All you can do is ask lots of questions and possibly try to broaden the scope and see if the IFA says at any time "well that is not my field, perhaps I could recommend someone else" or "I'll need to go away and look into that" and then you know something very positive :beer: