Initial Costs for IFA....

masonic

savdefriz wrote: »

Aren't there are already products doing exactly that though, things like Nutmeg and Wealth Horizon?

Well quite, and what you end up with seems to be the worst of both worlds (i.e. poor performance and poor value for money).

Al.

Out of interest, why poor performance and poor value for money?

savdefriz

eagertolearn wrote: »

Had a chat with a local IFA (found on unbiased.co.uk) as we have no idea about investment. Their charges are:

3% up to £250k
2% £250k-£500k
1.5% £500k+

The ongoing charge was monthly 0.5% of total portfolio. This sounded expensive to us - they would have to do well to cover their fees! Needles to say we are looking elsewhere

So from what we have learned then:

1) We are both very unlucky and have found very expensive IFAs
or
2) We are unrealistic in the charges we expect to pay and that we were quoted reasonable fees

I suppose it's like any other services, you need to shop around for the best prices. To be honest though the ongoing of 1% for me was the killer, as over the course of 10 to 15 years it will seriously dent the investment more than initial costs.

savdefriz

Al. wrote: »

Out of interest, why poor performance and poor value for money?

I would be interested with thoughts on this too, as I thought that the returns to cost looked good for a pretty simple product. (I saw Nutmeg as a possible Investment platform the uninitiated like myself). I think returns were around 8% annualised for 0.6% total fee. Compared to my IFA and his 6.93 with 1.7% total fees it favoured quite considerably.

gemma.zhang

We spoke to 2 IFA.
One is: initial charge 2.2%, 0.7% yearly on going charge. He recommends one particular fund.

One is: initial charge 500, 1.1%+vat yearly. They provide managed portfolio service. Hence this yearly ongoing fee, which includes management and advisory charges. As our case is simple : just investment, report, reviewing pension, reviewing insurance but no action needed. For the amount of work he did and time spent with us, I think 500 is fair.

Our portfolio is relative small. 90k. Hence the % might be the higher side. Their initial setup fee depends on complexity and amount of work. From the list, it could be up to 1,500 if complicated, or can opt for per hour cost.

We are in London if it helps. Of course, you have to add platform fee and fund management charges, which adds up to extra 1%ish per year.

It's obvious more expensive than DIY, but comparing the 2nd IFA charge with HL portdolio+ charges, it's not much different, however you get face to face service for our relative small size porfolio.

TheTracker

savdefriz wrote: »

So from what we have learned then:

1) We are both very unlucky and have found very expensive IFAs
or
2) We are unrealistic in the charges we expect to pay and that we were quoted reasonable fees

Or (3) We were quoted reasonable fees and we are realistic in the charges we expect to pay. However, the quoted fees were in excess of what we are prepared to pay for the service.

In other words, there is often no business model for a competent IFA to sell to informed and sophisticated customers.

dunstonh

savdefriz wrote: »

I would be interested with thoughts on this too, as I thought that the returns to cost looked good for a pretty simple product. (I saw Nutmeg as a possible Investment platform the uninitiated like myself). I think returns were around 8% annualised for 0.6% total fee. Compared to my IFA and his 6.93 with 1.7% total fees it favoured quite considerably.

underperformance of simple benchmarks and charging the same as most advisers would charge despite offering a non-advised service.

You made a comparison of 8% and 6.93%. However, did the two portfolios have the same volatility risk level? i.e. like for like

masonic

Al. wrote: »

Out of interest, why poor performance and poor value for money?

See discussion from here onwards in a previous Nutmeg thread, but the summary is that Nutmeg has significantly underperformed low cost multi-asset funds like Vanguard Lifestrategy, L&G Multi Index and Blackrock Consensus, while being considerably more expensive than all three. It is also higher risk based on a like for like comparison of top-level asset allocation.

savdefriz

dunstonh wrote: »

underperformance of simple benchmarks and charging the same as most advisers would charge despite offering a non-advised service.

You made a comparison of 8% and 6.93%. However, did the two portfolios have the same volatility risk level? i.e. like for like

The IFA said that the product that he was advising was at Level 4 whereas the Nutmeg that I was looking at was Level 6. I believe that Level 4 returns were around 7.8 or 7.9% annualised. Apologies if I am a little vague as you can imagine from my initial post all of this is new to me... But I'm learning!

dunstonh

savdefriz wrote: »

The IFA said that the product that he was advising was at Level 4 whereas the Nutmeg that I was looking at was Level 6. I believe that Level 4 returns were around 7.8 or 7.9% annualised. Apologies if I am a little vague as you can imagine from my initial post all of this is new to me... But I'm learning!

Without knowing context we cant know for sure but risk 6 sounds higher than risk 4. So, you would expect the projected long term avearge returns to be higher. it doesnt mean they will be. However, the further up the risk scale you move, the higher the projections become.