Is a Financial Adviser worthwhile for investments (and when)?

JimmyTheWig

Hi,

As a general rule, I don't pay for financial advice.
If one account pays 3% and another account pays 2%, I know which one is better. I don't need someone else to tell me that.

The most recent time I used an adviser was for a mortgage application. I told him approximately how much I wanted to borrow and the purchase price. He told me the deals. When I looked at the figures later on I realised that I was on 70.3% LTV. By reducing my loan a fraction I got much better deals. I told the adviser and he said that's fine.
I was pretty miffed that he didn't mention it to me first.
But then this was a guy in an estate agent (I know the general consensus on these people but we were sort of tricked into using him). Maybe a better adviser would have told me?

My point is that I'm not convinced that, in general, an adviser can tell me much.


But...

I don't know anything, really, about investments. Could an adviser help me, here?

I've got a S&S ISA (Santander Stockmarket Growth) and a private pension (Aviva Stakeholder). Both of which I've been paying into since 2001. Both now worth around £13k. Have significantly increased my pension contributions in the last year or so and am looking to increase my ISA payments too.
I believe that the ISA has outperformed the pension as both have had similar contributions from me but obviously the pension will have been topped up by the government.

I doubt that these are perfect investments. But how do I find out if they are reasonable investments? How can I make them better investments? Would an adviser help? Would the amount they help be worth what they would charge for my level of investment?


Thanks,

Jim

SeniorSam

It depends entirely on the quality of the Adviser. Those who have been in practice for many years will have an established client bank and may have the expertise to do very well for you.

Remember that the adviser can only retain you as a client if he does well for you, so the onus is on him to show how good he is.

Some advisers specialise in certain areas and others are more general. Those who specialise in areas that are appropriate to your needs will have greater benefit.

Advisers who have only recently qualified are a little like new car drivers and although they have past their exams, they need time to develop their skills. There are a ot of very good advisers out there if you know where to find them and they will be worth paying for, although charges do vary, so make sure you understand all the costs.

dunstonh

If one account pays 3% and another account pays 2%, I know which one is better. I don't need someone else to tell me that.

It would be extremely wasteful to employ an adviser to do that.

But then this was a guy in an estate agent (I know the general consensus on these people but we were sort of tricked into using him). Maybe a better adviser would have told me?

Never use an estate agent adviser. They have a really poor reputation for both quality and technique. Many are tied insurance agents too. The exception are local independent estate agents who use local independent mortgage advisers. Also, most IFAs are not mortgage advisers. Although they will usually have a mortgage adviser in house. For many, being a mortgage adviser is part of the career path to become an IFA.

I've got a S&S ISA (Santander Stockmarket Growth) and a private pension (Aviva Stakeholder).

Pretty naff investment fund with the ISA via an expensive distribution channel and a good stakeholder pension but for most people nowadays, stakeholder pensions are not the best option. Good in 2001. Not so good in 2015. Although your value is a bit light.

I believe that the ISA has outperformed the pension as both have had similar contributions from me but obviously the pension will have been topped up by the government.

ISAs and pensions can have the same investments at the same cost. So, the performance has nothing to do with tax wrapper but investment selected. You havent mentioned the Aviva investments but I suspect they are not comparable.

But how do I find out if they are reasonable investments?

Its like anything you can do in life. Either you DIY or you use someone to do it for you.

How can I make them better investments?

At this stage, I wouldnt be too worried. You dont have enough invested and the cost vs benefit is unlikely to be worth it.

Would an adviser help?

I doubt many IFAs would offer advice unless there is a family link.

Multiple research studies have found that people that use advisers get higher pensions than those that do not. That is the headline that the articles tend to get published under. However, when you dig deeper, you find the main reason is that advisers are more successful in getting people to pay more sensible amounts into pensions than those that DIY.

Glen_Clark

JimmyTheWig wrote: »

I'm not convinced that, in general, an adviser can tell me much.
Jim

If that is so then you don't need one. Rather like you don't need a car mechanic if you know how to fix your car. But if you don't then you are better off employing someone who does, or buying a book.
All the information is probably available free on the internet, But you have to wade through a great deal that is wrong, or biased, in order to find it.

JimmyTheWig

SeniorSam wrote: »

It depends entirely on the quality of the Adviser.
...
There are a ot of very good advisers out there if you know where to find them and they will be worth paying for, although charges do vary, so make sure you understand all the costs.

Other than word of mouth, how would you go about finding a good one?

JimmyTheWig

dunstonh wrote: »

It would be extremely wasteful to employ an adviser to do that.

I agree. That's why I said I didn't normally need one.

Never use an estate agent adviser.

Again, I agree. Using him appeared to be cheaper than free when I was already tied in to a provider so didn't need any advice. Still turned out not to be good value!

ISAs and pensions can have the same investments at the same cost. So, the performance has nothing to do with tax wrapper but investment selected. You havent mentioned the Aviva investments but I suspect they are not comparable.

I understand that. I guess it was my terminology at fault there. Would it be more accurate to say that the investment that happens to be in an ISA wrapper has outperformed the investment that happens to be in a pension wrapper?

At this stage, I wouldnt be too worried. You dont have enough invested and the cost vs benefit is unlikely to be worth it.

I wondered if that would be the case.
At what investment level would you think it was worthwhile paying for advice?

I doubt many IFAs would offer advice unless there is a family link.

Because it wouldn't be worth it for the low value I currently have?

Multiple research studies have found that people that use advisers get higher pensions than those that do not. That is the headline that the articles tend to get published under. However, when you dig deeper, you find the main reason is that advisers are more successful in getting people to pay more sensible amounts into pensions than those that DIY.

"People who pay more in get more out" shocker!


But to some extent, the crux of it comes down to...

Pretty naff investment fund with the ISA via an expensive distribution channel and a good stakeholder pension but for most people nowadays, stakeholder pensions are not the best option. Good in 2001. Not so good in 2015. Although your value is a bit light.

By "value is a bit light" do you mean I don't have much in there?

So you're saying that the "Stockmarket Growth" is a naff investment fund (despite it outperforming whatever my pension is invested in - are you saying that's just a fluke?) and that a Santander ISA is an expensive way to do it?
Presumably the implications are that there are better funds that I should be invested in and better places to buy then through than Santander?

And you're saying that there are better pensions than stakeholder pensions?

If it's not worth paying for advice, how do I find out what these better options are? Where should I start reading up about them?
How much difference am I likely to be able to make by moving to better options?

Or by "At this stage, I wouldnt be too worried" do you mean I may as well carry on with them as they are and revisit when I hit, say, £50k total investment value?

SeniorSam

Word of mouth is the best way, as often this gives good results. Next is to meet with a few advisers and ask questions based on your requirements.

edinburgher

So you're saying that the "Stockmarket Growth" is a naff investment fund (despite it outperforming whatever my pension is invested in - are you saying that's just a fluke?) and that a Santander ISA is an expensive way to do it?

That would appear to be exactly what Dunstonh is saying. Just because your ISA has outperformed your pension, it doesn't mean it's good, your pension fund choices may also be sub-optimal.

Presumably the implications are that there are better funds that I should be invested in and better places to buy then through than Santander?

Yes, I wouldn't even consider Santander for investments, I doubt many investors would who are aware of charges for a range of brokers etc.

It strikes me that you are absolutely the sort of person who would benefit from using an advisor. You seem to assume that they cannot add value (based on unreasonable comparisons) and that you can pick winning investments/platforms (also no evidence of this).

Unfortunately it would seem you're not rich enough to interest the IFAs yet

If it's not worth paying for advice, how do I find out what these better options are? Where should I start reading up about them?
How much difference am I likely to be able to make by moving to better options?

It's definitely worth paying for advice if you need it, the problem is that you're convinced you don't need it!

Reading this forum is a start, but a decent Blog and a few good books will add to your knowledge if you wish to stick with a DIY approach. The Monevator blog offers good articles and a decent weekly roundup that offers a range of links to content about passive and active investing.

I am a passive investor and would recommend a copy of Tim Hale's Smarter Investing. It's a bit of a dry read, but it makes a solid case. Don't assume passive investing will work best for you, everyone is different and you need to do your own research and make choices that you can live with :beer:

AlanP_2

For an IFA, if you do want to use one, check out https://www.unbiased.co.uk where you can search by type and postcode.

As for going the DIY route there is a wealth of information on the internet but as said before you do need to devote some time to it and you will find some stuff that is relevant, correct and helpful and some that isn't.

As a start I would suggest you read through the posts on here and the Retirement board as a start point and also browse around monevator.com.

I don't know much about your funds or providers but generally a big name finance company such as Santander will have higher charges and less investment options than a DIY platform provider such as Charles Stanley, Fidelity, Cavendish, Hargreaves Lansdown and the like.

Monevator has articles and tables on who is cheapest based on amounts involved, frequency of investment and types of investment (Shares & ETFs or Funds for example).

http://www.comparefundplatforms.com/home allows you to enter details and see comparative costs across platforms for Pensions and ISAs.

http://www.candidmoney.com/calculators/ provides a range of calculators that could help along with a lot of other information and articles.

You haven't mentioned much about your age, tax rate, dependants and any cash savings / debt you may have. All of these need to be considered when you work out how much you want to invest and where (both in terms of relative risk / reward and the wrapper you use - ISA or Pension).

TBH it is not too difficult to go the DIY route, choosing your platform and your investments, and then monitoring them and adapting as you go to make sure you stay on track for whatever your plan is.

In terms of the performance of your current investments have a look at HL, or morningstar or trustnet and see what their past performance has been and what their charges are.

As an indicator I have a new style Personal Pension (cut down SIPP effectively) with Cavendish invested in Vanguard passive, tracker funds and pay 0.3% Platform Fee and between 0.15 and 0.24% for each fund (per annum).

232607

Can I suggest you buy & read a book....
Smarter investing by Tim Hale.

It'll probably be the best £20 investment you'll ever make & I very much doubt you'll feel the need for paid investment advise when you've read & understood it.

JimmyTheWig

You seem to assume that they cannot add value (based on unreasonable comparisons) and that you can pick winning investments/platforms (also no evidence of this).

That's not true. I wouldn't post asking if it was worth me taking financial advice to find the best savings account or mortgage. I can do that myself.
But I understand that investing is different, which is why I am asking if they can add value, and how much value.


I feel like I'm getting mixed messages here

edinburgher wrote: »

It strikes me that you are absolutely the sort of person who would benefit from using an advisor. (1)
...
Unfortunately it would seem you're not rich enough to interest the IFAs yet (2)
...
It's definitely worth paying for advice if you need it (3), the problem is that you're convinced you don't need it! (4)

1 - I should get advice.
2 - I shouldn't get advice.
3 - I should get advice.
4 - You say I don't think I should get advice. As I say above, I'm unsure. But the parts of me that thinks I shouldn't are due to comments like (2).