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

BLB53

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

I believe a good adviser could more than likely do a good job BUT an increasing number of ordinary people with modest investments are finding its just not economical to use one - even if they could find a good one!

It obviously makes sense to do a bit of research and see if diy is an option. In this regard a couple of sites I visit regularly - https://www.monevator.com and https://www.diyinvestoruk.blogspot.co.uk

Personally, I would try to keep it as simple as possible - a good one-stop solution, no fuss would be Vanguard LifeStrategy 80 - use a low cost broker such as Charles Stanley Direct and job done for total annual costs of around 0.50%.

steelbru

Check out http://monevator.com/compare-uk-cheapest-online-brokers/ - flat fee brokers first, then percentage fee brokers underneath. Quite a few to choose from.

noggin1980

JimmyTheWig wrote: »

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)

Vanguard lifestrategy 100 is kinda a world equity tracker, it's a fund of tracker funds and is diverse and for the most part has close to the correct balance, it's heavier in the uk than it should be because its a product aimed at us and most investors like to be heavy in their country. it costs 0.24% per year + platform fee. So you can do it slightly cheaper yourself if you wish but it's a great option if you don't want to be bothered.

I did it myself using these 3 funds
VANGUARD FTSE ALL SHARE INDEX FUND ACC (this is for UK equity)
VANGUARD INV UK LT FTSE DEVELOPED WLD EX UK EQ (This is for the rest of the Developed World not including UK)
VANGUARD EMERGING MARKETS STOCK INDEX FUND GBP ACC (This is for emerging markets.

most the money would go in the developed world one.

This is fractionally cheaper and allows you to have your own mix (though it's very unlikely we know more than vanguard choosing the mix for you), of course you can break it down further into alot more funds if you wish, but this is a simple starting point.

you can compare brokers here http://monevator.com/compare-uk-cheapest-online-brokers/

I've been very happy with Charles Stanley Direct 0.25% per year (which is one of the cheapest percentage fees and they have a good website (though it had a few hours of internet issues yesterday) and in my experience great customer service.

This is 100% equity remember so be sure thats what you want, it's reasonably high risk, if you are in it for 20 years or so then it's likely to be the way to make the most money but there are no guarantees and you have to know that you'd stick the course in a crash. If you arn't comfortable being 100% equity you can add a bond fund or funds, or go with a prebuilt thing like vanguard 80 or 60, or you could be 100% equity but also save cash in things like Santander 123 accounts.

JimmyTheWig

Thanks guys. This is all good stuff.

Yes, I'm perfectly happy for this to be 100% equity. As you say, there are plenty of alternatives for keeping cash.

racing_blue

JimmyTheWig wrote: »

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

Jimmy I believe you have nailed a plausible investment strategy right there. A trawl of this board should dot your "i"s and cross your "t"s.

What value do you think an IFA might add? I cannot see an angle based on what you have said.

JimmyTheWig

racing_blue wrote: »

What value do you think an IFA might add? I cannot see an angle based on what you have said.

Well, two days ago an IFA could have turned round and told me those things without me needing to google. But that would hardly have justified their fee!

I had thought that an adviser would have been able to beat the market in terms of expected value. But I accept Monevator's stance that that isn't possible - not for the likes of adviser I could afford, anyway!

What could an IFA do for me now?
Well, they could find or make a world equity index tracker for me.
And they could find the lowest percentage fee provider for me.
But again, I don't think that would justify their fee.


I think I've got my answer.

racing_blue

If you want active management of investments, there are plenty of funds offering that. Half of them are better than average!

If I bought the services of an IFA, I'd hope more for insight into my financial blind spots. And here's the rub - I don't know what my blind spots are. There are bound to be some, but I don't know if those blind spots are costing my £100 or £100,000. So I don't know if it is worth buying the services of an IFA.

How does one square that circle?

JimmyTheWig

racing_blue wrote: »

If you want active management of investments, there are plenty of funds offering that. Half of them are better than average!

Exactly. And you'd be paying for that 50% chance of beating average!

If I bought the services of an IFA, I'd hope more for insight into my financial blind spots. And here's the rub - I don't know what my blind spots are. There are bound to be some, but I don't know if those blind spots are costing my £100 or £100,000. So I don't know if it is worth buying the services of an IFA.

How does one square that circle?

Yes, that's sort of what I cam on here asking.
In my case it turns out my blind spots were quite obvious.
In your case, I'd take the geometric average (even though Martin doesn't like it) of the reasonable bounds of my estimate of what it would be worth to me and if the advice would cost less than that I'd go for it.
(In your example, geometric average of £100 and £100,000 is £3,162, so if you could get advice for less than £3,162 it is probably worth it.)

racing_blue

Jimmy I really like what you say about taking a geometric average and then taking a plunge. Sounds good.

But how do you know there aren't more biind spots? (May I suggest you can't - that's the thing about blind spots)

JimmyTheWig

You don't - as you say.
That's why all you can do is estimate the savings.

Because it is such an unknown, all you are doing is estimating the magnitude of the savings. Which is why you take the geometric mean not the arithmetic.