Lets hear it from the IFA's ....

dunstonh

I kind of wish I'd still been using an IFA when I started taking an interest in subordinated bonds, preference shares, and similar "off the risk scale" instruments. I've got a mental image of the outline of a running (as fast as pinstripes allow) man punched through my front door as he beat a hasty retreat.

In that scenario, I would offer two options. 1) keep your DIY stuff apart from the advice stuff or 2) thanks but no thanks, good luck and goodbye.

'm not so sure. It seems to be a massive "all or nothing" process, which isn't the way it works with (for instance) my accountant. I do some research and thinking, email him a spreadsheet or two, he suggests a few tweaks, we debate pros and cons, and away we go.

Accountants probably dont sit there thinking about how an ombudsman would view the case. The accountant will tell you that a "grey" area may have issues and may result in a charge form HMRC and let you decide if its worth challenging it or not. If it fails, you pay the tax cost but the accountant suffers no issues. An adviser doesnt have the luxury. If its wrong, the adviser is the one that pays up. The opinion side of financial advice has really reduced and has become more black and white. Some may say this is a good thing. Some may feel that it reduces flair and flexibility. Some may say that it isnt actually required but is a overkill reaction by the industry that is becoming scared of liability.

With IFAs I never felt part of the process (despite trying to be) and found everything very opaque.

Q: "Why have you recommended 30% in Commercial Property?"
A: "Based on your attitude to risk."
Q: "How does that work?"
A: "Computer says."

20 years ago, asset allocations were guesses. 10 years ago, you used more sectors but were still largely estimates in a spread. Then asset allocation models came into play. Some were early adopters. Others much later (and no doubt a few dinosaurs). Today, I would answer that as a small advisory firm, we do not have the resources to build asset allocation models and market analysis in-house. Instead we buy in that data from a major global actuary and risk analysis company and use an external research company to complete the due diligence. We select the asset allocations based on the risk profile we deem most suitable for you. This will mean the portfolio is built to a certain volatility level to match your tolerance to risk, capacity for risk (you may not be able to afford the risk you are willing to take). We also use investments that are within a reasonable level of understanding by you.

So, in part, computer says this quarter we should have x% in property. However, that x% is based on analysis and research to meet your needs and requirements. I may not have personally carried out all that but I am trained and qualified to understand it. I have paid to obtain that data and I sign off on it as being suitable as I still need to make sure it all stacks up to meet what I think is right for you. (various bits of documentation to support that being available. The quality of which is getting better every year)

saver861

dunstonh wrote: »

You cant. An IFA can provide strategy, structure and due diligence but that doesnt mean it will perform better than a selection of investments with no due diligence and possibly no structure (or a different structure if one exists). Everyone can be lucky or unlucky. You may be willing to use investments an adviser would not be prepared to use for you.

Agreed that you cannot compare investments as such, i.e. if I had taken this route my portfolio would be x% better. Thats a hindsight thing.

I was referring more to the scenario of an IFA taking on a client that already had a reasonably balanced portfolio etc. as opposed to someone with everything in a 0.5% savings account.

Where there is an existing portfolio then I think the IFA would have to convince the client their route is overall better. That might be more difficult for the IFA as opposed to the client with all their money in the savings account.

magpiecottage

I think there is a consensus here that an IFA cannot guarantee investment performance.

If they could then they would not be giving financial advice for a living - they would instead win the lottery every week.

What they will do, though is help their client to make informed decisions, understanding not only the risks of a particular investment but why it is reasonable for that client to take those risks at this time.

They will also consider whether or not a particular product should continue to be held and, if it should not, help their client to make an informed decision about a replacement.

Thrugelmir

saver861 wrote: »

I was referring more to the scenario of an IFA taking on a client that already had a reasonably balanced portfolio etc.

How would an average person on the street know that they held a reasonably balanced portfolio?

gadgetmind

Thrugelmir wrote: »

How would an average person on the street know that they held a reasonably balanced portfolio?

I use a spreadsheet (download portfolio from platform, cut and paste, it does the rest) but many platforms have an analysis function that breaks your portfolio down by both territory and asset type. Many will also then rate your risk level, etc.

Those I have experience of do a better job with funds than with ITs an ETFs, hence the spreadsheet. You also can't use the online tools to analyse across multiple portfolios (which my spreadsheet can).

jem16

gadgetmind wrote: »

I use a spreadsheet (download portfolio from platform, cut and paste, it does the rest) but many platforms have an analysis function that breaks your portfolio down by both territory and asset type. Many will also then rate your risk level, etc.

If you're doing that, I doubt you would be described as the average man on the street.

atush

Gadget has never been 'average' lol.

gadgetmind

Well, maybe my spreadsheet is a notch or two above average, but hitting the appropriate "analyse" button on the web sites of HL or BestInvest isn't exactly rocket science.

For example, hitting the button for my wife's SIPP tells me that the estimate annual volatility is 8.2% versus 6% for BI's Balanced Adventurous model, but they don't count her 5% portfolio cash.

Interestingly, to get to their Balanced Adventurous, I'd have to reduce equities and add high yield bonds, a big wodge of "hedge", and some "fund cash" in place of directly held cash.

I think I'll keep it as it is!

Linton

Thrugelmir wrote: »

How would an average person on the street know that they held a reasonably balanced portfolio?

www.trustnet.com has a free portfolio analysis facility which will give you allocations by country and sector. You could compare the breakdown of your portfolio with that of a global equity index fund. There would be little point in trying to imitate the global fund, but you should have good reasons if your allocation %s are wildly different.

saver861

Thrugelmir wrote: »

How would an average person on the street know that they held a reasonably balanced portfolio?

Well it depends on the definition of 'average person on the street' in this context.

Many people have none, or little financial assets, either through misfortune, squander or limited capacity. Therefore that may shift the applicability of the definition.

Of those that have such finances and/or access to them, such people will range from very little knowledge to the astute. So, I'm guessing that those with little financial knowledge need IFA advice more so than those who are further along on the knowledge continuum!

It is also my guess that those with higher than average financial knowledge will make up a higher percentage of those looking for an IFA rather than the other way round.