When should you use an IFA?

enthusiasticsaver

I am new to investing in stocks and shares and have done some research in the last month and just started a monthly investment plan with Cavendish into Vanguard LS 60 with the intention of investing £12k over the year split between this and Legal and General multi index. I chose these as they matched my risk profile and seemed to be fairly diverse with the Vanguard being slightly more US biased and the L and G more UK.


I also have a fixed term cash isa with Santander maturing on 1.5.15 with around £36k in it and normally I would just reinvest in another fixed term one but am also considering putting this in a stocks and shares isa as the cash isa rates are so poor. Given that this together with the £12k will amount to half our savings (ignoring pensions and property) should I use the same strategy as with the monthly plan I just started in that I research and choose funds which are diverse or is it worth paying out for an IFA? How much would that normally cost for an appointment to discuss and what is the best way to find a reputable and knowledgeable one?

EdGasket

Never if you can avoid it. An IFA will probably charge you at least £2K and I doubt the advice would make that back over what you could do yourself. So long as you aren't a complete idiot, do your own research and invest in what you are happy and comfortable with.

Take a look at some ETF's (exchange traded funds) such as iShares core series which have very low charges. You buy and sell them through a broker such as x-o or AJ Bell YouInvest; both of which offer ISAs.

Archi_Bald

I haven't used an IFA myself as I am happy to make my own investment decisions but I spent countless hours over a very long time to understand what I believe I need to understand about investing in wrapped and unwrapped investments, and how to select platforms.

I certainly wouldn't recommend that anyone would take their wisdom simply from an internet forum from strangers who throw some names around and say it's easy. If you have the time to do your own reading and research, I agree, you probably don't need an IFA. But if you don't, and/or if you are a novice with a large amount of money to invest, an IFA can actually save you a lot of money by helping you to avoid mistakes.

EdGasket

Archi_Bald wrote: »

But if you don't, and/or if you are a novice with a large amount of money to invest, an IFA can actually save you a lot of money by helping you to avoid mistakes.

That does assume you find a good IFA though. Anyone can pick investments and walk away with their fee when it all ends in tears. What if the IFA's advice doesn't gel with the OP's thinking? He ends up paying for advice that he either doesn't use or uses but is not happy about it.

Linton

EdGasket wrote: »

That does assume you find a good IFA though. Anyone can pick investments and walk away with their fee when it all ends in tears. What if the IFA's advice doesn't gel with the OP's thinking? He ends up paying for advice that he either doesn't use or uses but is not happy about it.

The IFA skill that would be worth paying for isnt picking good investments, as there is no such thing as a universally good investment. The skill is picking appropriate investments to match your timeframe and ability to accept short term losses without panicking. A further skill you may need is financial planning to minimise tax, maximise retirement income, maximise inheritance value or whatever your high level objectives are.

Despite what you may hear from some people setting up an effective investment portfolio isnt just a matter of choosing a few ETFs. There is far more to it than that.

As to whether the OP needs an IFA...

For the amount of money you are talking about and as I assume that you are relatively young I would say no. If things dont go well you wont blight the rest of your life. At this stage of your investment career learning is as, if not more, important than returns. Read a lot, try out a few sensible investments and see how you get on.

If you had told us your rich uncle had left you £500K the advice would have been very different. In my view in that case you would have been very foolish to go ahead without an IFA.

EdGasket

Did I mention good investments??

Call it appropriate investments if you like. My point is still valid. There have been many instances of advisors putting elderly people into risky investments that were totally inappropriate. Better to do your own research than gamble on an IFA....

e.g. http://citywire.co.uk/money/my-mother-the-ifa-and-the-property-fund-he-sold-her/a415220/2

See the last page:

http://citywire.co.uk/money/my-mother-the-ifa-and-the-property-fund-he-sold-her/a415220/3

"
My situation is that I am 60 and I instructed my IFA to not speculate with our funds. He was repeatedly and in writing told to 'invest' in only interest bearing products, which did not risk the base capital. I specifically asked for "widows and orphans" zero risk products.
The reason being is that even with a return at low interest rates, we have so much money from a life time of hard work and proper, even frugal, fiscal management we do not need more than these boring products would produce.
Instead he recommended we invest in commercial property, suggesting that it was "as good as cash". I have it in writing from him.
Our losses peaked at over £400,000. What is more, he invested further funds in a Luxembourg commercial property product and these duplicated three of the five funds he had already recommended and bought in our SIPP's, thereby reducing the diversity of our investments.
A complaint to the FOS/FSA is not an option for us because the sums are greater than the limit of compensation they can award. So we are advancing a claim in the Civil Courts.
Mr Lander, I too will keep you advised of developments."

Linton

EdGasket wrote: »

My point is still valid. There have been many instances of advisors putting elderly people into risky investments that were totally inappropriate.

e.g. http://citywire.co.uk/money/my-mother-the-ifa-and-the-property-fund-he-sold-her/a415220/2

That is 1 example dating from over 4 years ago. What % of consultations do you think end in tears? Presumably you have some evidence for your use of the word "many". Did Dr Shipman discourage you from seeing your GP?

If inappropriate advice is given redress can be claimed. And of course these days advice is generally paid for directly and not by commission so there is far less incentive for an advisor to advise something that isnt in the customers best interests.

jimjames

EdGasket wrote: »

My situation is that I am 60 and I instructed my IFA to not speculate with our funds. He was repeatedly and in writing told to 'invest' in only interest bearing products, which did not risk the base capital. I specifically asked for "widows and orphans" zero risk products.

If your IFA has done that then you have a valid complaint.

However age 60 I think you'd be crazy to restrict yourself to non equity products when you could have 25 years plus of retirement ahead.

The IFA may be best to walk away when the client instructions are not the appropriate option.

EdGasket

Linton wrote: »

That is 1 example dating from over 4 years ago. What % of consultations do you think end in tears? Presumably you have some evidence for your use of the word "many".

There are lots more in the comments on the last page of the article I posted.

The evidence of 'many' is that this sort of thing is frequently in the media. Just google "IFA MisSold"or similar. Plenty on the radio too; where have you been?

colsten

EdGasket wrote: »

The evidence of 'many' is that this sort of thing is frequently in the media.

So it must be true. It is in the media.

jimjames

EdGasket wrote: »

There are lots more in the comments on the last page of the article I posted.

The evidence of 'many' is that this sort of thing is frequently in the media. Just google "IFA MisSold"or similar. Plenty on the radio too; where have you been?

You only need to read these forums to see the number that shout scam or mis-selling when the reality is nothing of the sort.

Maybe people have incorrect assumptions about what to expect as you seem to from your previous posts.