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

edinburgher

Nobody has a crystal ball, so even if we knew what your rate of return has been since you started investing, all we could do would be to compare it to funds with a better/different track record. A good IFA may have suggested that you invest with these funds, a bad one might have steered you in an entirely different direction.

In that sense, it's probably difficult to put a % figure on the value added by a good IFA. IFAs will be able to provide examples of the value they have added for clients, but that would be unique to the individual.

I don't think I'm delivering the contradictory messages that you think I am.

1) You should get advice (or learn a bit more about DIY investing)
2) You should get advice, but you may struggle to find an IFA who wants your business, £26k is not a large portfolio
3-4) I'd ignore these as they don't add anything to the discussion, I was just responding to your points in turn. Occupational hazard of responding to lots of similar comments, some noise will confuse things.

Long story short - do your own research and optimise your own portfolio if you feel comfortable doing so - if not, employ an IFA who wants your business.

JimmyTheWig

Ok, that starts to make sense.

In terms of point 2, are you saying that an IFA would charge based on a percentage of the investment?
I'd imagined that it was a case of paying, say, £100 an hour and so depending on how many hours they would charge and by what percentage they could increase my returns it would either be worth it for me or not.

Sounds like my first job is to get reading, and take it from there.
I sort of feel that there should be a "default best" thing to do which won't fit everyone (or maybe even anyone) perfectly but would fit most people reasonably well.
Maybe that's what I'll find when I start reading.

edinburgher

I believe that IFAs will typically charge by the hour, or as a percentage of assets managed, this would be agreed in advance. Can an IFA/IFA user confirm?

I sort of feel that there should be a "default best" thing to do which won't fit everyone (or maybe even anyone) perfectly but would fit most people reasonably well.

There are plenty of reasonably balanced choices that have historically worked quite well for a lot of people. As you say, you will discover more about these once you start researching.

bowlhead99

The gist of it is basically - you don't really have the expertise / experience to make great choices, yet, so an IFA would be able to add some value, BUT as dunstonh and others said, unfortunately the amount of value the IFA could add is not really going to be enough to allow them to make money and you to get a net better result.

If he improved your potential gains through cheaper or more suitable products, or reduced your exposure to losses to a level that was more in line with your goals, that is not really worthwhile when his fee would be a large proportion of your relatively small pot. An extra couple of percent a year on £26k is only £500 and you would spend a fair chunk more than that on getting the advisor to know you and review and deliver the advice.

That is why unless it was an extension of an existing family advisory relationship, it's probably not worth the advisor taking on a new customer at that level

With only enough money for one year's ISA allowance-worth of ISA, you don't have big problems staying tax-efficient and the advice would not be complex, maybe just a single fund in each wrapper. At higher levels of investment it's more worthwhile having a closer look at risks, performance and tax because you can actually see benefits of the advice as wodges of pounds rather than a percentage change measured in pence!

A bit of self education is a good thing - if you aim to be self sufficient now, maybe make some mistakes without too much harm done, then reconsider the advice route when you have more at stake.

This is not to say you should *definitely* forget the idea of paying for professional regulated advice suitable for your situation right now, because maybe it would give you a lot of peace of mind. But if IFAs themselves are saying on this thread that there is not a lot that would really be worthwhile engaging them for, that seems pretty honest and candid- at least it's not the other way round where they push you to buy advice.

jimjames

JimmyTheWig wrote: »

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 had a similar experience with a mortgage adviser but one that was an IFA not estate agent tied.

In the end I found a better deal than they had offered but it wasn't available direct so I had to use the IFA. They didn't suggest the provider as they could be slow - in the end it wasn't the mortgage that caused delays but the rest of the chain.

I was surprised that they'd not made any suggestions of choices or at least given the option for other alternatives.

For the kind of numbers you're looking at I can't see a lot of point in an IFA as you'll be paying a massive amount in fees as a percentage.

dunstonh

I believe that IFAs will typically charge by the hour, or as a percentage of assets managed, this would be agreed in advance. Can an IFA/IFA user confirm?

There are multiple pricing models. However, since the abolition of commission, pricing on percentage basis has evolved with caps and collars being applied and/or tiered amounts to prevent the percentage resulting in a figure that is too low or too high.

Hourly rate is used by some but consumers in general dont like it. I find fixed fee is increasingly common

noggin1980

You don't need very much knowledge in order to set up and run your own Stocks and Shares ISA on a low cost platform, with low cost index tracking passive funds. You can certainly learn all you need to know 1 day of a weekend reading something like Tim Hales book and some of http://monevator.com/category/investing/passive-investing-investing/

Honestly I think everyone who invests should get to that level of knowledge even if you use an advisor. As then you have a better understanding of what to ask and of the advise you are being given as well as if you are being charged fairly and getting good value.

edinburgher

Best of luck reading (and understanding) Smarter Investing in a day!

It's so information dense that I still find myself returning to it years after buying a copy.

That said, the list of bullets from the start of the book covers everything in the broadest possible terms.

enthusiasticsaver

I am of the same opinion as you and do not use an advisor but do my own research. Incidentally you might want to check out the fees on the Santander isa as I researched their s and s isa recently as I have my main bank accounts with them and their fees were high and the peformance was not great. I use monevator and trustnet quite a lot and this forum is great for advice.

JimmyTheWig

enthusiasticsaver wrote: »

Incidentally you might want to check out the fees on the Santander isa as I researched their s and s isa recently as I have my main bank accounts with them and their fees were high

That echos what dunstonh was saying above, so definitely worth me looking at.
I believe they were quite competitive back in 2001...

I had a quick look at Monevator over lunch. All sounds good.
I like the logic that a lay person can't hope to beat the market.

So far I believe I want
* A world equity index tracker (though I'm not convinced you can buy on of those off the shelf and you have to build it yourself)
* A provider that charges a percentage fee rather than a flat fee (though I couldn't find examples of these)