When should you use an IFA?

dunstonh

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?

IFAs accounts for under 1% of complaints at the FOS and most of those are rejected. Many of things in that list are not mis-sales and doesnt sound like an IFA was used some of the responders seem to have a very strange idea of what an IFA is there to do. I suspect many are either making it up or basing it on old tied agent sales of many years back. And picking an article from 2010 is hardly indicative of widespread issues.

No professional group can claim perfection but the figures suggest there are not many issues with IFAs.

enthusiasticsaver

Thanks for all the responses. I shall be carrying on with reading monevator articles and other investment books plus of course the investment threads on this forum as I do not need to make a decision until May. At the moment my general feeling is I split the £36k between 2 index trackers, - I worldwide and 1 uk based plus the two funds I have already researched which are passive funds with a mix of equity and bonds ( plus property in the L and G one). I am not really sure what an IFA can add to this but will decide nearer the time. I am looking for low risk and low charges so it seems slightly ridiculous that I am looking at passive funds and index trackers as they have lower charges then fork out up to 2k for an IFA who will probably tell me what I already know or at least something I can find out for myself after a few more months of reading and research.

dunstonh

I am not really sure what an IFA can add to this but will decide nearer the time.

Probably not a lot given your small value. However, an IFA would risk profile, do due diligence and research and use asset allocations built to match your risk profile rather than picking two trackers. Quite possibly resulting in a recommendation of a multi-asset fund to match that. Not picking a few sectors at random.

I am looking for low risk and low charges so it seems slightly ridiculous that I am looking at passive funds and index trackers as they have lower charges then fork out up to 2k for an IFA who will probably tell me what I already know or at least something I can find out for myself after a few more months of reading and research.

It depends on how you value your time. Plus, that £2000 could actually be cheaper than you investing above your risk profile and suffering a bigger loss during a negative period than you thought using your own investments. Plus, that £2k figure was made up by an anti-IFA poster. I would expect it to be around half that unless you went to a prestige/high net worth firm. Again, not saying you need advice but just putting things in context.

EdGasket

If I were investing 36K, I would split it over more than two funds; maybe 5 or 6. Consider a world property fund, far-east fund, and maybe index-linked gilts and corporate bond fund. Best of luck. If you are looking for low-costs then ETFs are probably the lowest-cost.

colsten

Be careful with ETFs - they can make very efficient investments but they can also be a minefield.

dunstonh

EdGasket wrote: »

If I were investing 36K, I would split it over more than two funds; maybe 5 or 6. Consider a world property fund, far-east fund, and maybe index-linked gilts and corporate bond fund. Best of luck. If you are looking for low-costs then ETFs are probably the lowest-cost.

Why not a muti-asset fund? (given the small amount)
Why just 5 or 6 when there are at least 8 major sectors? Which sectors would you leave out?

ETFs are generally regarded as a more experienced investor fund given the difference in risks that can exist over the OEIC. What is it about the OP that makes you think that they have the knowledge to understand the different risks?
In an unbundled pricing world, the cost differences are not as great as you are making out.

This is not to rule them out as an option but you seem to be pushing them as a focus on cost but not considering the knowledge of the OP and the risks that they can have.

EdGasket

The OP says he would invest in index trackers (post13); what is so complicated about buying an ETF world and UK index tracker such as iShares provide with full replication and very low charges? Where is the alleged minefield?

dunstonh

The OP says he would invest in index trackers (post13)

Just because that is what he thinks he wants does not mean it is right.

what is so complicated about buying an ETF world and UK index tracker such as iShares provide with full replication and very low charges? Where is the alleged minefield?

Synthetic or replicated. Trading costs, spreads, liquidity.

According to BlackRock, the average equity ETF in Europe levies a total expense ratio (TER) of 0.40%. Sure there are cheaper but then there are OEICs cheaper than that too.

EdGasket

dunstonh wrote: »

Just because that is what he thinks he wants does not mean it is right.

He sounds very sensible and what he suggests is pretty close to what is right as far as most people would be concerned.

dunstonh wrote: »

Synthetic or replicated. Trading costs, spreads, liquidity.

Are you an IFA by any chance trying to make it sound all so complicated and beyond the grasp of most people?

iShares FTSE and World trackers are replicated (i.e. they invest in the underlying shares, not derivatives), trading costs with x-o are £5.95 per trade (no stamp duty on ETFs and no cost to hold in or out an ISA with x-o). Spreads are generally low (not significant) on the big iShares ETFs and there is no problem whatsoever with liquidity.

There, simple isn't it? Why could you not have said that?

colsten

EdGasket wrote: »

Are you an IFA by any chance trying to make it sound all so complicated and beyond the grasp of most people?

dunstonh is a financial advisor who has probably forgotten more about ETFs than you or I will ever know about them. It's somewhat irresponsible of you to suggest to a total investment newbie to "take a look at some ETF's" without pointing out the potential dangers of investing in ETFs.