Affordable IFA advice

gadgetmind

doughnutmachine wrote: »

Good question, I would consider good advice to be "go buy yourself a couple of books on investments and forget about paying an IFA thousands of pounds a year to do simple admin tasks".

I find myself agreeing with you, which doesn't make me feel entirely comfortable.

Alenna

So the second IFA has got back to me pretty much agreeing with the first one that I should combine my savings account (17K) with my Cash ISA (24K) and a few shares I've already bought and turn it all over time into an equity ISA. Plus he'll sort out my stake holder pensions. He'll arrange all this for a fee of £750, then annual £350 for on-going management and advice. This is less than the 3.5% fee quoted by the first one but still seems like loads to me. I see how this would work well for someone with 100k!
My question is this: is this something I am able to do myself at much lower cost or will his know-how and the fact that he can sort out my pension (which I can't) make it worth while paying such a fee?

jem16

Alenna wrote: »

My question is this: is this something I am able to do myself at much lower cost or will his know-how and the fact that he can sort out my pension (which I can't) make it worth while paying such a fee?

You've been given a very good price for advice.

Yes you can obviously get a lower price by doing it yourself if you feel you can do so. You will need to make the choice of provider and suitable fund/s by yourself. If you feel confident making those choices then go ahead.

If you feel happier paying for the cost of initial advice to get it all set up, then you could always ask for it to be done on a one-off transactional basis with no ongoing servicing providing you are going to look after it yourself.

jem16

gadgetmind wrote: »

I find myself agreeing with you, which doesn't make me feel entirely comfortable.

Are you saying that any person contacting an IFA should be told to go away and get a couple of books on investing or are you suggesting that someone with a smaller amount should be given that advice?

grizzly1911

Alenna wrote: »

So the second IFA has got back to me pretty much agreeing with the first one that I should combine my savings account (17K) with my Cash ISA (24K) and a few shares I've already bought and turn it all over time into an equity ISA. Plus he'll sort out my stake holder pensions. He'll arrange all this for a fee of £750, then annual £350 for on-going management and advice. This is less than the 3.5% fee quoted by the first one but still seems like loads to me. I see how this would work well for someone with 100k!
My question is this: is this something I am able to do myself at much lower cost or will his know-how and the fact that he can sort out my pension (which I can't) make it worth while paying such a fee?

Perhaps you should ask the adviser to provide a spreadsheet detailing how thier costs will be recouped from enhanced investments, bearing in mind the potential risks of equity/bond investment with a relatively small pot. Will this be a lower risk and low return?

I am not saying don't, use them but just think about the impact of those charges on limited returns. Does the ongoing maintenance fee include all platform/pension admin fees?

Your pension issues are the Achilles heel.

Linton

grizzly1911 wrote: »

Perhaps you should ask the adviser to provide a spreadsheet detailing how thier costs will be recouped from enhanced investments, bearing in mind the potential risks of equity/bond investment with a relatively small pot. Will this be a lower risk and low return?

...

I would have thought preparing, checking and presenting a spreadsheet would add a fair bit to the costs. It would not be straightforward as you could only assess the returns based on a wide variety of scenarios and assumptions. And there is nothing to compare the IFA's recommendations against to decide whether the choice of investments is beneficial as no-one knows what the OP would choose if diying.

grizzly1911

Linton wrote: »

I would have thought preparing, checking and presenting a spreadsheet would add a fair bit to the costs. It would not be straightforward as you could only assess the returns based on a wide variety of scenarios and assumptions. And there is nothing to compare the IFA's recommendations against to decide whether the choice of investments is beneficial as no-one knows what the OP would choose if diying.

Not an easy one to demonstrate overwhelming benefit then.

gadgetmind

jem16 wrote: »

Are you saying that any person contacting an IFA should be told to go away and get a couple of books on investing or are you suggesting that someone with a smaller amount should be given that advice?

Neither of those, to be honest.

I think that everyone should read a few books whether they intend to DIY or not as it should let them decide for themselves which approach is best for them.

But certainly for simple admin tasks (such as rebalancing) I can't see any point in paying someone else to do it unless you're close to innumerate

Linton

grizzly1911 wrote: »

Not an easy one to demonstrate overwhelming benefit then.

In a private medical system...

You go to the doctor with a pain

He diagnoses your problem as a serious condition and recommends a course of expensive pills

You say "I cant afford those pills, I read on the internet that with my symptoms a herbal poultice works fine. Prove to me I will live longer using your pills than using the herbal poultice".

Doctor - "I cant, it's impossible to predict how long anyone will live".

You - "OK I am better off saving my money and using the herbal cure".

Were you correct?

jem16

gadgetmind wrote: »

Neither of those, to be honest.

Ag good - thought you'd lost it completely.

I think that everyone should read a few books whether they intend to DIY or not as it should let them decide for themselves which approach is best for them.

I agree. You can't go far wrong with gaining some knowledge. However there are still going to be some who, even after reading a few books, decide that DIY is not for them. We also have to acknowledge that there will be some who don't want to read up on it and who simply want professional help.

But certainly for simple admin tasks (such as rebalancing) I can't see any point in paying someone else to do it unless you're close to innumerate

Ongoing servicing isn't just about simple admin tasks though. It can involve fund changes so further advice needed, Bed&ISA each tax year which may or may not involve fund receommendations, pension increments (ie lump sums)which often require full advice, capital withdrawals to utilise tax advantages etc, etc. All of this would be covered under a servicing agreement but not a transactional agreement.

So it really depends on circumstances and amount invested whether it's worthwhile or not. There are many who will be happy to DIY and make a good job of it and there are many who will prefer to have professional help. It doesn't make them innumerate or "simple".