Cost of IFA to invest £50k

clarky_cat

I am due to receive around £50k from a house sale (inheritance) so was looking to book an IFA to discuss investments. I have already have a Santander 123 account with £20k in, an ISA + am paying monthly into a couple of the higher interest bank accounts. I'm also looking at buying a flat for around £70k to rent out (I was planning on taking out a mortgage for that and already have the deposit). I have been recommended a IFA but was hoping someone could give an idea of what charges I should be expecting for them to advise on £50k investment? Or could I do it myself (I'm a newbie at this kind of thing)?

Thanks in advance.

dunstonh

I have been recommended a IFA but was hoping someone could give an idea of what charges I should be expecting for them to advise on £50k investment?

It will vary. I had some builders quote a job and there was over £20,000 difference between them. Its the same with any job using different people.

I would put it somewhere between £500 to £2000 but around £1000-£1500 being optimal.

Or could I do it myself (I'm a newbie at this kind of thing)?

DIY is an option. It will be cheaper as far as admin goes as you will be doing it all. However, it depends on what your knowledge is like and how much effort you want to put into it. Can you research options and do the required due diligence? If yes, then DIY, if no, use an adviser.

Broceliande

I would agree with the £1000 to £1500 figure. This would include advisory service and investments, regular reviews....giving you a chance to learn along the way and maybe downgrade to execution only when more confident.

I however would negotiate the figure. You are a new Investor with plenty of future potential.

BLB53

Or could I do it myself (I'm a newbie at this kind of thing)?

I am sure many more people could make a reasonably good diy job of investing so it may be worthwhile doing a little research before seeing an IFA.

Personally, I like investment trusts - City of London, Edinburgh, Temple Bar & Finsbury Gr. & Income to name a few that have done well for me over many years.

Another option is to select a few passive index trackers from the likes of Vanguard.

A couple of sites I recommend for getting some ideas are:
https://www.monevator.com which is good for research on passive approach, also https://www.diyinvestoruk.blogspot.co.uk for more active investments like shares and inv. trusts, also https://www.fool.co.uk

Even if you decide to use an adviser, at least you will be better informed.

Good luck!

dunstonh

Why should it matter if it is 50k or 500k?

1 - liability
2 - use of investment options (not likely to build a 50k the same way you would 500k)
3 - potential use of more tax wrappers

dunstonh

All true, thanks. I meant the cost of advice, or the selection of advisor. Does it take more time or skill to advise on 2 or 3? I guess more investment vehicles, but then why not charge per vehicle or hour?

Charging by vehicle could introduce a cost bias. Plus, i am not sure it would be compliant. After all, the advice has to be good. You cant have advice that is only good if you pay a bit more to get another wrapper.

In general consumers dont like hourly rates. Consistent research shows it is the least favoured option. Fixed fee is increasingly popular. However, percentage still exists as it is easy to understand and allows for some cross subsidy. Although most percentage priced models do taper nowadays and do have a ceiling.

Personally, I'd measure money versus cost and risk. If I valued my time at 50/hr, and it took more than 20 hours to achieve the same level of knowledge, and the cost was under 1000, and I accepted the risk of acting on advice, then it would seem good value. It would strike me that investable sum would not matter other than according to hours required for remuneration. Again personally, I'd find it difficult to accept the advice versus the liability held by the advisor, and would instead consider it a training cost.

If you looked at knowledge then each area of financial planning has around 100 hours each in terms of learning just to get to the lowest level. Plus, the real learning comes in the years after you get qualified. 20 hours wouldnt cut it. Although for the really basic stuff (i.e. someone investing say £15,000) then it could.

Cost of advice is too expensive at the moment. However, the reason is mainly audit trail and liability and an environment of constantly changing rules but retrospective regulation. The cost of running an advisory business are just plain silly. I did a £10,000 investment earlier this week for someone. Over 100 pages of documentation on file supporting the recommendation. Now, if that person wanted to borrow £10,000 unsecured then virtually no documentation. Crazy

clarky_cat

Thanks for the info, very useful. I will do some reading (thanks for the links BLB53 ) before I book an IFA and go from there.

chile_paul

I was in a similar position looking for an IFA to get some investments that I was planning to make and I did have an initial hour long interview with one which was fee free. I had fully anticipated taking up his services (% fee, something like 2% commission on all investments) but following the conversation started to do more research, reading some of the links people have suggested and also reading forums like these and decided that it really isn't that hard to do it yourself and you will immediately increase your return by 2% as a result

dunstonh

you will immediately increase your return by 2% as a result

Although if you get it wrong it could end up costing you. Not saying that DIY is wrong but lots of people DIY and make a right pigs ear of it. Its like any form of DIY. Get it right and it can be cheaper. Get it wrong and it can end up a costly mistake. You could also get the investment right but the provider wrong as some DIY providers are more expensive than advice.

suebfg

If you are willing to commit the time to research, I think you would be able to do it by yourself.

slopemaster

beancurd wrote: »

I find the idea of an IFA fascinating. People don't generally consult one for a 300k house (mortgage brokers!), a 15k car, or 5k holiday.....

No, but I wouldn't buy a house without a survey unless I was knowledgeable enough to survey it myself, or a second-hand car without getting it inspected by an expert. I might even consult a travel agent about a holiday.