IFA Quote

Thrugelmir

sandsy wrote: »

Ongoing fee works out at 0.45%, so just under 1/2%pa which is generally considered reasonable.

If the gross return is say 3% - 4% above the rate of inflation in the years to come. Then total charges are going to take a bite sized chunk out of this.

£180 per month is £43k over 20 years. Not an insignificant sum.

Aegis

gadgetmind wrote: »

For maintenance? A couple of £k pa just for some rebalancing seems like a huge amount to me given that it takes me about an hour a year to rebalance two ISAs and two SIPPs.

And surely this is a fixed amount of time no matter how many zeros are involved? Why quote as a percentage? Could the fee still be £180 a month if the total involved was £50k?

Looks like trail commission is still doing the zombie shuffle!

Bear in mind that when it's someone else's portfolio rather than your own, there are a lot more matters to consider when deciding whether an annual fee is reasonable. For example:

• Rebalancing itself takes little time to implement, but before doing so as an adviser, I must 1) explain the current situation to the client, 2) explain what rebalancing is and why we would do it, 3) provide a new proposed allocation, commenting on any changes made to the ideal allocation from last year, 4) explain any fund changes and 5) obtain client permission before implementing any of the changes. This takes the few-minute task and often turns it into a few-hour task.
• An ongoing fee demands an ongoing service. For example, with recent changes to pensions legislation, many of my clients have needed discussions about how to change their retirement planning strategies. These conversations are included in the annual fee rather than being bolted on as an additional chargeable service.
• Compliance requirements are also a major headache. Advisers are responsible for a raft of requirements every year, including updating questionnaires, risk profiles, any required declarations, stated objectives, etc.
• Cash flow models also need to be updated periodically if one has been used for that client.

Some of these seem like trivial tasks, but at £180 a month for a professional, that likely comes to under 12 hours of their time a year if paid on an hourly basis. If you assume that preparing for the annual review, proposing a rebalance, writing the necessary recommendations for that rebalance, updating all compliance requirements, obtaining permission and implementing the changes comes to around 6 hours in total, that leaves less than half an hour a month for the adviser to spend on that client before the hourly fee would be more expensive.


Yes, if you are only using the IFA to rebalance back to a model which is never updated and you don't want/need annual reviews or updates on legislation, then an adviser charging this amount would be poor value. The best value of an adviser doesn't come from the investment management, it comes from helping you to best plan for your future, however that may be achieved.

gadgetmind

Aegis wrote: »

Some of these seem like trivial tasks

Not trivial, but neither do they seem to be much more than a bit of unskilled paper shuffling.

If, however, someone was working with me to optimise pension input periods across different pots with different periods (a lot of "what if") then I'd happily pay for that! However, I quickly discovered that neither my accountant nor a couple of IFAs I spoke to were actually prepared to tackle this task, so I ended up developing a fairly complicated spreadsheet to solve it.

It then took six months of me explaining pension legislation to Friends Life to get them to implement what I needed to do!

So yes, I'd happy to pay a professional to do the complicated stuff, but they all seem happier charging a lot to do the simple stuff instead.

Linton

gadgetmind wrote: »

Not trivial, but neither do they seem to be much more than a bit of unskilled paper shuffling.

.....

Really??? Do you want the office junior answering questions on, and explaining, the current situation, the proposed changes to the balance and the effect of legislation changes?

It seems to me that if you want/need the level of service and explanation then the fee is not unreasonable, assuming a quick chat with the office junior doesnt suffice. Perhaps a newbie to investing would find it valuable for a couple of years before taking over more responsibility.

gadgetmind

OK, maybe I should have said "semi-skilled"?

And TBH I woudn't trust anyone to explain those things you outlined without also doing my own research to see if they were right and to check if there were better options. Or at least I wouldn't now having made this mistake in the past!

atush

Basically ALL those taks mentioned have to be done the first time around, from the risk take to the allocations, fund choosing, everything.

So to do them again the next year should not cost more apart from a small rise for inflation.

TheTracker

What happened when you told him you'd been quoted 1/3 the price elsewhere?

Aegis

gadgetmind wrote: »

If, however, someone was working with me to optimise pension input periods across different pots with different periods (a lot of "what if") then I'd happily pay for that! However, I quickly discovered that neither my accountant nor a couple of IFAs I spoke to were actually prepared to tackle this task, so I ended up developing a fairly complicated spreadsheet to solve it.

It then took six months of me explaining pension legislation to Friends Life to get them to implement what I needed to do!

So yes, I'd happy to pay a professional to do the complicated stuff, but they all seem happier charging a lot to do the simple stuff instead.

I include PIP manipulation as part of my ongoing service fee for clients where it is applicable. If you found IFAs who didn't understand the concept of these, then I can agree with you that they likely weren't worth the fee. PIPs are complicated if you've never read about them before, but after a while they become relatively straightforward.

Admittedly, I only needed to actually adjust a PIP for one client this year because most have more than enough carry forward without using next year's allowance as well.

DancingBadger

Thank you all for your input, which I really appreciate.

Although he is Chartered and has over 30 years' experience, I'm not sure this IFA is the one for us, but can't decide if I'm being over-sensitive or unfair so would appreciate your opinions.

First, he didn't grasp the fact that OH works on a freelance basis through a limited company, so is technically an employee. OH also has a small self-employed sideline, for which he submits a Self-Assessment Return. The IFA asked for clarification on OH's employment status, stating:
"Generally, you can be employed or self-employed, but you can't be both."

IME, quite a few people are 'both'.

We told him we would like to be flexible, drawing down funds whilst OH continues to work, albeit not doing so many hours, and also make pension contributions from earned income. His response indicates he seems to have misconstrued this completely, making a few comments about recycling pensions, and also managing to insult us in the process:
"In any case, you are short of income [we're not], so I can’t see why you would want to be making contributions – you want the opposite: to utilise the funds. It is illogical to draw on a pension fund and pay into it at the same time, unless you are trying to pull fast one on the Revenue, something I don’t approve of!"

Is it me (and OH, who read it the same way)? I can understand an IFA not wishing to get involved with someone attempting tax evasion, but I'm almost speechless at his lack of tact. :mad:


Is he being so rude because he doesn't want our business, I wonder? (For the record, we're quite principled and 'pulling a fast one' is something we would never contemplate.)

Perhaps he's not being rude, perhaps it's just us, but I would really appreciate your feedback.

dunstonh

First, he didn't grasp the fact that OH works on a freelance basis through a limited company, so is technically an employee. OH also has a small self-employed sideline, for which he submits a Self-Assessment Return. The IFA asked for clarification on OH's employment status, stating:
"Generally, you can be employed or self-employed, but you can't be both."

IME, quite a few people are 'both'.

Not many are both. However, it is possible. However, the general public really does consistently mix up self employed shareholder director as being the same thing. So, it is not unusual to get clarification.

We told him we would like to be flexible, drawing down funds whilst OH continues to work, albeit not doing so many hours, and also make pension contributions from earned income. His response indicates he seems to have misconstrued this completely, making a few comments about recycling pensions, and also managing to insult us in the process:
"In any case, you are short of income [we're not], so I can’t see why you would want to be making contributions – you want the opposite: to utilise the funds. It is illogical to draw on a pension fund and pay into it at the same time, unless you are trying to pull fast one on the Revenue, something I don’t approve of!"

Is it me (and OH, who read it the same way)? I can understand an IFA not wishing to get involved with someone attempting tax evasion, but I'm almost speechless at his lack of tact.

That would put me on guard. Mainly from a compliance point of view. It could easily be construed as not leaving sufficient emergency fund and potential churning leading to a mis-sale allegation. Remember that written text carries no expression. The exclamation at the end could indicate a light hearted response to a serious reason.
It should also be noted that just because something is possible does not make it ethical or suitable or have the potential to come back and bite you on the backside later. Our compliance has told us not to get involved with people using the so called loophole because of a range of concerns (mostly regulatory and liability) yet this site encourages people to do it (as it doesnt have to face the come back if it goes wrong).