investments and IFA's

dunstonh

Ok, as someone who has a not insignificant sum invested through Nutmeg, I'm interested in your concerns & comments. Putting aside the numbers themselves, which are obviously "challenging" in volume terms, but not unusual for what is, essentially, a tech startup, what risks (other than an interruption risk) do you believe they pose investors capital?

With actual fund holdings, its not a major issue. Worst case scenario would be an inability to trade your assets until they get registered to a new manager/platform. With platforms, it would be expected that it would continue to trade whilst in administration as an administrator would be able to find a buyer. Off platform and a small outfit with not much under management, there won't be much demand but there are buyers out there who look to consolidate who may consider it.

Mountaindues wrote: »

Secondly, you say they charge the same as "most" IFA's, surely that's a rather misleading remark? When investing with an IFA, you will have a) initial advice charges of maybe 2-3% to set up the portfolio, then FMC's (plus extras!) on the funds plus/or dealing costs on ETF's etc, plus a platform fee, plus an annual (trail like) charge for "rebalancing" etc of typically 50bp. I'm paying 60bp for a discretionary managed risk rated portfolio, plus c20bp for the etf's. Nothing else, so less than 1% a year for a discretionary managed service with no additional costs for trading. Sure, I could run it myself, but I think it would actually cost a fair bit as my own pot has about 14 constituents.

What makes you think all IFAs charge an initial charge. Whilst some do, the amount of the initial charge has been coming down over the years. Yes, there are still some greedy ones. However, there are plenty that charge 1% or less or even nothing.

You say you are paying 0.80% p.a for a non-advised service. Your figures suggest it is £100k plus. With £100k plus I wouldnt have an initial charge for most cases any more (some complicated ones may see a few hundred). If you were less than £100k then I would probably introduce some. That said, I took £50k today with no initial. With £100k plus you would have 0.5% advice fee, 0.25%-0.32% platform fee (I dont believe one platform fits everyone so wont restrict to one) and 0.1%-0.75% fund charge. I have some 100% tracker portfolios but most are a mixture or tracker and managed. So, I can easily do 0.85% if I had a totally cost focused client. I consider that to be in the same ballpark.

I know a number of IFAs from other businesses. Most are small local firms focusing on higher net worth. The director/partner/owner IFAs tend to have similar charges to me. Employee advisers tend to charge more because they have to. That is because the owner/partner/directors take a cut of what they earn. I know a couple of really greedy advisers too who are dinosaurs. So, you can find expensive and cheap in the other distribution channels.

Al.

It wasn't risk averse in that it was counter business; rather, it scrutinised (in this case, my nascent https://www.fiveraday.co.uk proposition) it to the Nth degree. Yes, I fought my corner far more vociferously than I'd have liked to at times (!!) but the Fiver proposition is far more compliant and robust as a result of the network dissection.

If my clients were caught up in a 166 trawl that had nothing to do with me, I'd be spitting feathers. Who wouldn't? The network had a Regulator visit the other month, one that lasted a while and included process. It left satisfied. Yes, it's pricy and I'm sure it could be had cheaper, but what price quality and peace of mind?

Eg; I love the Majedie UK equity fund, the Premier income funds and one or two others and am including them in my face to face core listings. I have to demonstrate to the network I know those funds inside out and just haven't plucked them from thin air.. I like that, I'd rather they be a critical friend than a supplicant sop.

Al.

Mountaindues wrote: »

Ok, as someone who has a not insignificant sum invested through Nutmeg, I'm interested in your concerns & comments. Putting aside the numbers themselves, which are obviously "challenging" in volume terms, but not unusual for what is, essentially, a tech startup, what risks (other than an interruption risk) do you believe they pose investors capital?
Secondly, you say they charge the same as "most" IFA's, surely that's a rather misleading remark? When investing with an IFA, you will have a) initial advice charges of maybe 2-3% to set up the portfolio, then FMC's (plus extras!) on the funds plus/or dealing costs on ETF's etc, plus a platform fee, plus an annual (trail like) charge for "rebalancing" etc of typically 50bp. I'm paying 60bp for a discretionary managed risk rated portfolio, plus c20bp for the etf's. Nothing else, so less than 1% a year for a discretionary managed service with no additional costs for trading. Sure, I could run it myself, but I think it would actually cost a fair bit as my own pot has about 14 constituents.

Some fair points. I'm waiting to see how the Schroders buy-in pans out. It needs to be more transparent to move on.

Those sorts of figures (that you quote) are from a bygone age, I agree largely with Dunston and his comments. Incidentally, I think mine has Nutmeg's licked..! I'm biased though.. ��

JohnJonestheformer

Al and dunstonh, who are your networks? and do they offer advice themselves?

Al.

Dunston is about to leave his so that might not be relevant. I'll message you other details. Mine doesn't offer advice unless via its members (ie, the likes of me). If they did, they'd be de facto DA advisers. There is a move in vogue right now for platforms to but up advisory companies and create effectively, he olde sales networks which'll have the same feel to more constructive, restrictive networks.

JohnJonestheformer

Thanks Al

I have read about a firm called seseme. Am I right in thinking they are a network? Sounds like they have issues. Is this normal?

Al.

Well, if you call this normal. How not to do it (link below). Bought, sold, chopped about, no leadership, moral hazard, low morale from the sounds of it.. a dreadful business. When networks get it right, they free an adviser to advise. When they get it wrong, as we saw here, you (the client) is exposed to the institutional risk, in that if it happened to one client, it could have happened to others too. Because poor practice was allowed to go unchecked.

An example of this is bank misselling when an entire pool was converted to a swamp because there was no proper risk assessment - Sesame allowed the Keydata debacle to go unchecked. I sound like the worse advert for the network model. I'm only an advert for a good network model. Similarly, many DA firms can quietly remain off the radar too, causing mayhem. I hate to say it, but I was fleeced by an IFA too, many years back, who offered me expensive, unsuitable and inappropriate advice.

http://citywire.co.uk/new-model-adviser/news/fca-fines-sesame-6m-over-advice-failings/a683911?section=new-model-adviser

jem16

JohnJonestheformer wrote: »

I have read about a firm called seseme. Am I right in thinking they are a network?

Sesame is a network. Is there any reason why you seem to be focusing on networks rather than focusing on finding yourself a good adviser?

Look for a small firm where you can work with the owner/director. That way you can build up a relationship with the adviser which should last over the years. As it's the owner/director he/she will be far more interested in building that relationship and is not going to be hampered by the staff turnover often found at large firms.

Al.

Outsourcing isn't always good, I tried it with my para planning function and felt totally dislocated from the process. I love getting around a table and chewing the fat over for each new client. A planner has to sometimes get inside the adviser's brain without a word being passed and offer guidance and objective wisdom. He/she has to synthase the clutter and act, almost, like a Chief of Staff clarifying the commander's intent (sorry, military background!). You can't get that level of intimacy with an outsourced planner (ime); the process is dislocated, remote and dogmatic. Similarly, the client has to get the adviser 'fit' right too. Usually, that means a smaller firm, yes (imho).

JohnJonestheformer

Interested, as I want to get a good adviser. It appears you can find a good adviser in a bad network and sometime down the line can have a bad outcome as Dunstonh mentioned with writing to everyone about bad advice.
I am trying to establish whether it is best to go with an adviser in a network or not and if there is any difference?