BestInvest v IFA v DIY

Searcher2

In about 2000 I became self employed and decided to put £7000 per year in ISAs instead of having a normal pension. At the time I chose to do this via BestInvest. Over time the stock market dropped and my £21K became £15K. In the meantime I decided to stick with property and rent out my first house instead of selling and investing. This paid off quite handsomely. As a result I am cash rich at the moment - with money being in a high rate account in the hope I can find another house to buy to renovate.

Anyway - I recently decided to put another £7K in an ISA with BestInvest (original £21K worth £27K now) so rang them to ask them to recommend swaps of investments in my portfolio as the update they sent me said my portofolio (which they set up) was unbalanced. They told me that as I don't have £50K in my portfolio I can no longer get advice from them. I am sure this didn't used to be the case and was not impressed.

Coincidentally my mother had an IFA around to advise about investments to help avoid inheritance tax, and due to my being peed off with BestInvest I asked about her managing my portfolio and I suggested putting £7K in this month and £7K in after 6th April and her taking over my BestInvest portfolio.

My moneysaving side says that I guess I will instantly lose about 5% of the £14K to the IFA BUT the theory is that she should be able to gain me at least that 5% with her knowledge of the financial markets - of which I know very little.

I begrudge paying BestInvest the trail fees when they give me no advice (which would I guess take 5-10minutes on the phone) though I appreciate they have advice online.

I guess I could find the time to investigate the market - but for someone such as myself with little current knowledge is there a better option than taking on an IFA?

dunstonh

My moneysaving side says that I guess I will instantly lose about 5% of the £14K to the IFA BUT the theory is that she should be able to gain me at least that 5% with her knowledge of the financial markets - of which I know very little.

Many IFAs will take on an existing portfolio without any initial charges or just a small nominal fee just to cover the admin. Even where there is an intial commission taken, the current average commission (as published by the FSA and updated every 6 months) is 1.8%. Average of course means some cheaper and some more expensive. If you did assume typical maximum commission of 3%, then the intial charge on new money would be between 3 and 5.25%.

The holdings can be transferred and reinvested into a better spread, usually at no cost but a few funds may have a small initial charge on transfer (typically it ranges from zero to 1%).

I guess I could find the time to investigate the market - but for someone such as myself with little current knowledge is there a better option than taking on an IFA?

You are self employed. I tend to find that most self employed have a better business sense and know what they are good at and what they are not and know when its right to get someone in to do a job that they cannot do. So, you probably know if you are capable of doing it yourself and if it is worth the time doing it.

DIY investing is like DIY decorating. If you can do it and can afford to spend the time doing it, it will be cheaper than a decorator doing it. If you cannot do it, it can end up doing it wrong and cost you more than it would have done had a professional done it in the first place.

It takes about 25k to build an optimal sector allocated portfolio. Less than that and it is still possible but it gets harder.

cheerfulcat

Searcher2 wrote: »

My moneysaving side says that I guess I will instantly lose about 5% of the £14K to the IFA BUT the theory is that she should be able to gain me at least that 5% with her knowledge of the financial markets

Not necessarily - there are some pretty duff IFAs out there; they aren't all as scrupulous in their dealings as dh, either...

I begrudge paying BestInvest the trail fees when they give me no advice (which would I guess take 5-10minutes on the phone) though I appreciate they have advice online.

You could move to a discount broker or fund supermarket who will rebate some of the commission.

I guess I could find the time to investigate the market - but for someone such as myself with little current knowledge is there a better option than taking on an IFA?

If you have the time and inclination, nothing beats the DIY approach. The cheapest and most flexible is direct investment in shares but a certain amount of maintenance is required. If you would be happy with investments performing in line with or just under the market, then you could look at index trackers or exchange traded funds.

db3745

I am also with Bestinvest (since about 1998), and yes, there have been changes that I have noticed. While Jason Hollands was there as deputy MD they had a high press profile, which was how I found them, and seemed hungry for all levels of business. Their web site was innovative, and offered more news than you could digest.
When Jason Hollands left (for Isis I think, later merged with F & C), they really missed him, and now certainly have very little of interest on the web site, and have a lower profile. Also their fees have rocketed in terms of giving personal advice. I have a larger amount invested through them in funds supermarkets, only through gradually building up from nothing, and still get the same quarterly personal spreadsheet advice as I always did, along with their recommended funds.
Like you I used to ask their advice on funds to buy, and the results have been no better than using my own judgement; I do have time to do research using their own very good fund research resource, and others if necessary like Citywire and Morningstar - assuming they're still going. It's much more fun and I wouldn't worry at all when they tell you you are overweight in say UK larger companies or the Pacific area. I personally don't like their "models" of risk which determine these "overweights" and "underweights".

Having said all this, I would still use Bestinvest even in your situation, as they ARE trustworthy, unlike in my experience many IFAs who are driven to guide you in directions which maximise returns for them. Until this profession acknowledge they have a major problem, and start to flush out the rogues, while demanding high standards of entry to the business, I would not work with any IFA unless I had researched them thoroughly and could trust them as much as I trust Bestinvest. I have been ripped off, and have "friends" who call themselves IFAs and know less than I do about investing.

Interestingly, this morning I looked into Moneyspider which is getting a high profile now with its rating system. They don't offer advice on what to buy or look at or after your portfolio; it seems they give you just their ratings, and for this you hand over your fund trail commission. This is just like Bestinvest but without any real service.

Summing up, Bestinvest have got more than a bit greedy, and streamlined the business, but you could do much much worse. I still have a lot of time for their research and analysis offering.

EdInvestor

It's certainly worth looking at Hargreaves Lansdown for anyone contemplating DIY.

Apart from the fact their charges are the lowest, there's a lot of excellent info on their website.

https://www.h-l.co.uk

mutley74

use hargreaveslansdown, whre they even share the renewal commissions. Do the investments yourself and save more.Its not hard. Depends on your attitude to risk; time frame you have in mind; and what suits your lifestyle. HL have made this easy with their recommendation of reasonable funds called the Wealth 150. I manage a considerable sum within the family, so dont pay an IFA.

Why do i do it myself - well back in 2000 an IFA told me to invest my money in some fidelity funds he recommended. I invested it all then which just happened to be the market peak. he gave me no suggestion to invest in any UK funds or to suggest drip feeding it over 12mth. As a result i lost loads afterwards with all the market crashes. Only since the last 2 years i am making money but managed to transfer my money into better performing funds.

dunstonh

Why do i do it myself - well back in 2000 an IFA told me to invest my money in some fidelity funds he recommended. I invested it all then which just happened to be the market peak. he gave me no suggestion to invest in any UK funds or to suggest drip feeding it over 12mth. As a result i lost loads afterwards with all the market crashes. Only since the last 2 years i am making money but managed to transfer my money into better performing funds.

With respect atpug, IFAs do not have the ability to predict a stockmarket crash. Had you done the investment back then, then you would have lost loads because of your actions. We could have a crash next week and you could lose a load. Its the nature of the beast and nothing to do with advisers.

Also, drip feeding it over 12 months can result in lower returns as well. Only hindsight well tell whether pound cost averaging or single investment was the best option. If you had been pound cost averaging in the last 4 years, you would have lost out compared to single investments.

HL have made this easy with their recommendation of reasonable funds called the Wealth 150.

That does have a very poor reputation. Its basically made up of best past performing funds. If you get hold of some of their older lists and look at the funds in there, you will see exactly what I mean. past performance is no guide to future returns.

EdInvestor

dunstonh wrote: »

IFAs do not have the ability to predict a stockmarket crash.....

... past performance is no guide to future returns.

Given that they can't predict the future and believe that the past is no guide, one wonders what IFAs base their investment choices on.

I know that many people believe that "commission bias" plays a part, but I'm sure that's just a scurrilous rumour....:rotfl:

carnet

IMHO, HL's Wealth 150, as well as most (discount) IFA's recommendations, should not be regarded as being of any great investment merit.

IFA's, by necessity, have to cover their backs and, as a consequence, you find them all, more or less, recommending the same funds month after month, year after year.

Many (HL not quite so bad here) will only recommend funds, for example, that have a minimum verifiable track record of anything up to 3/5 years - long after the action/original good manger/investment rationale has moved on.

Some of their recommendations are so past their sell by date they would be laughable if it wasn't for the fact that many novice investors are suckered into investing in them.

As an example, what I believe to be (one of) the finest fund(s) available in terms of risk/reward/manager's skills/optimum critical mass/remit "freedom" etc etc and which has doubled my money in well under 3 years, has AFAIK, still not shown up on any broker's recommended list (which suits me as it keeps the fund small & nimble - when it does eventually feature and investors start piling in, I'll be long gone).

And no, I ain't saying what it is. DYOR

mutley74

dunstonh wrote: »

With respect atpug, IFAs do not have the ability to predict a stockmarket crash. Had you done the investment back then, then you would have lost loads because of your actions. We could have a crash next week and you could lose a load. Its the nature of the beast and nothing to do with advisers.

Also, drip feeding it over 12 months can result in lower returns as well. Only hindsight well tell whether pound cost averaging or single investment was the best option. If you had been pound cost averaging in the last 4 years, you would have lost out compared to single investments.



That does have a very poor reputation. Its basically made up of best past performing funds. If you get hold of some of their older lists and look at the funds in there, you will see exactly what I mean. past performance is no guide to future returns.

it was my first time that i had made investments in UTs/OEICS and the IFA knew this. I just think he should have offered option of drip feeding my investment even for just a few months. He never mentioned nor advised of any less risky stocks such as in the UK market. He based most of his stock recommendations from the fidelity brochure. I personally think i would have lost less if i had more diversification and even if i drip fed my money for just for months, in my opinion. But this made me wiser in the long term and more interested in making my own decisions rather than paying someone else.

shokadelika

Carnet a guess |Dimensional UKValue ? xx