Affordable IFA advice

grizzly1911

Linton wrote: »

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?

The course of expensive tablets may extend your life and be critical.

The difference between small scale investing differentials may not.

Some people swear by petrol additives or premium fuels.

If the equation is easy to demonstrate then it should be a no brainer to show how the annual fee and upfront fee, written of over say 3-5 years, are easily recovered. The benefits can then be weighed against the increased risk of moving to a equity/bond based investment.

Linton

grizzly1911 wrote: »

The course of expensive tablets may extend your life and be critical.

It may well but you cant prove it in advance, or even in retrospect. Just like an IFA cant prove that a particular allocation of investments will give the best returns.

grizzly1911

Linton wrote: »

It may well but you cant prove it in advance, or even in retrospect. Just like an IFA cant prove that a particular allocation of investments will give the best returns.

There are many options that have a good chance of providing a positive result over doing nothing or applying a weak poultice.

They will demonstrate only that on the balance of probability there is a meaningful positive benefit.

Things change over time, just as an ailment may move from acute to chronic, but at the point of engagement the benefit should be demonstrable. The usual caveats would still appertain.

I have seen an IFA attempt to demonstrate it (not very well) on a scrap of paper and a second use a Trustnet PDF to show relative historic rates to compare different scenarios.

For a relatively small amount the level of risk may outweigh a small possible gain and attendant expense.

dunstonh

I have seen an IFA attempt to demonstrate it (not very well) on a scrap of paper

One of the best advisers I have known cannot communicate well at all.

and a second use a Trustnet PDF to show relative historic rates to compare different scenarios.

And what is the problem with that?

Freecall

dunstonh wrote: »

One of the best advisers I have known cannot communicate well at all.

But surely the ability to communicate is at the heart of giving advice.

Advice
n. Opinion about what could or should be done about a situation or problem; communicate or counsel. Often used in the plural.

Badly communicated advice will, by definition, always be bad advice.

.

gadgetmind

jem16 wrote: »

However there are still going to be some who, even after reading a few books, decide that DIY is not for them.

Yes, and even Smarter Investing has a section on the factors that should influence this decision.

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.

Other than the pension increments, all of this is pretty straight forwards, but only if someone has done their research.

Pensions OTOH can be a sod nowadays and it took he half a day a couple of weeks' ago to make sure my models were right given the changes I've *finally* convinced Friends Life to make to my Pension Input Periods.

GOK, what I'd have had a pay an IFA to do all of that!

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".

There are also those who take their cars to a main dealer for the most trivial of faults, or eat nothing but ready meals because they don't know how to cook. While this doesn't necessarily mean that they have no practical skills worth mentioning and/or two hands bearing only thumbs, I bet there's a very strong correlation.

While doing some tinkering (metalwork) today, I was also musing on my father's approach to financial matters. He left school at 14 and worked his way up from lowest of low to a senior director position in a FTSE listed company. I'm pretty certain that he's always been totally DIY regards pensions and investments, and clearly has a decent touch because he retired in his early 50s. I recently discovered that he still runs a pretty aggressive portfolio even though he's now pushing 80.

What's interesting is that it's only in the last couple of years that we've discussed investing and finance. I'm not really sure why he didn't make a few suggestions over the years, and instead left me to find my own path, but I'm sure he had his reasons. Or maybe he was too busy or simply didn't think I'd listen!

I guess smart people who have a hands-on approach will always prefer fixing their own cars, cooking their own food, and organising their own finances, while others will go the main dealer, frozen dinner for two, and IFA route. I've resorted to all three from time to time but found I was paying more money for inferior results.

jem16

gadgetmind wrote: »

Other than the pension increments, all of this is pretty straight forwards, but only if someone has done their research.

Research - the key word. Anything you know how to do is straightforward. What is straightforward to some would be like rocket science to others.

There are also those who take their cars to a main dealer for the most trivial of faults, or eat nothing but ready meals because they don't know how to cook. While this doesn't necessarily mean that they have no practical skills worth mentioning and/or two hands bearing only thumbs, I bet there's a very strong correlation.

I make great meals and always home cook as opposed to ready meals. I'm reasonably handy around the house for small jobs. However I wouldn't tackle the car - although I wouldn't necessarily take it to the main dealer either - and I wouldn't tackle any electrical work as I know my limitations. I wouldn't really tackle plumbing work either - water and electricity can make a large mess!

Or maybe he was too busy or simply didn't think I'd listen!

My husband was very handy with DIY around the home and could turn his hand to anything. He took apart bicycles and built them from scratch. Anything, apart from cars, that needed fixed he could fix it. My 2 sons would simply take it to Dad and Dad sorted it but they weren't interested in learning as teenagers - always something else, like computers, interested them. Now they own their own houses there are some things they will attempt but wished their Dad was still alive to show them how. They're both smart boys but feel it's better to be shown than try to read up on it. However, as Software Engineers, give them a computer to work/fix and they're in their element.

I guess smart people who have a hands-on approach will always prefer fixing their own cars, cooking their own food, and organising their own finances,

I wouldn't lump those 3 things together. As I said, my husband was very much hands on with everything DIY but he hated working on cars and rarely did so, could cook but basic things and avoided finances as much as possible - that was left to me.

bigadaj

It's obviously a matter of personal choice, but basic education in finance is something that everyone should try and achieve, though scary how many don't, even on these boards reading the loans board does worry me.

People's opinions vary but the big factor is always cost. IFAs will no doubt work for a fixed fee, but it always work back to an hourly rate and the commonly quoted figure of £150-£200 an hour is just excessively high in my opinion.

I'm aware PI costs are an issue, but those costs would have to halve for me to even think about consulting an ifa, excluding things like annuity purchase where it's a no brainer.

Similarly I won't pay main dealer prices, but am not good mechanically so am happy to pay a local garage for work as their rate isn't excessive in my opinion.

doughnutmachine

bigadaj wrote: »

People's opinions vary but the big factor is always cost. IFAs will no doubt work for a fixed fee, but it always work back to an hourly rate and the commonly quoted figure of £150-£200 an hour is just excessively high in my opinion.

I'm aware PI costs are an issue, but those costs would have to halve for me to even think about consulting an ifa, excluding things like annuity purchase where it's a no brainer.

Yeah, I just don't see how it's cost effective for all but the wealthiest or people with complex financial affairs to go to an IFA.

I honestly think most people who go to an IFA would be amazed at how easy it is to look after a large portfolio.

The only value I think an IFA really adds is knowledge of tax and pensions. But again, unless you regularly pay CGT or want to minimise Inheritance tax for heirs there is little need to go to an IFA.

If all IFAs were banned I honestly think the average investor in the UK would be better off. Investors would save that 0.5% a year and might start to question the value of paying for active management.

jem16

doughnutmachine wrote: »

If all IFAs were banned I honestly think the average investor in the UK would be better off.

Don't be so ridiculous.

Just like anything, if you know what you're doing then DIY. If you don't then pay a professional to do the job.

DIY investors make mistakes too - we've already seen one DIY investor on this board having lost £20k through investing in shares.

Investors would save that 0.5% a year and might start to question the value of paying for active management.

IFAs provide advice not active management.