Investment brokers +s and -s

Lleucu

I am in touch with one blue chip company. Experience elsewhere in family was pretty good, basically hand over lump sum, they invest having taken preferences eg no arms tobacco high low risk and you get regular reports they take about 1.6% a year. This fee seems quite steep to me.

Any experiences?? One of my relatives built up from £100k to £300k over 20 years which seems pretty good to me. (though my husband was a bit more sniffy and said he could have beaten this).

I don't need income and am more interested in growth. Is there an quality measure for these companies in terms of their performance?

bigadaj

Lleucu wrote: »

I am in touch with one blue chip company. Experience elsewhere in family was pretty good, basically hand over lump sum, they invest having taken preferences eg no arms tobacco high low risk and you get regular reports they take about 1.6% a year. This fee seems quite steep to me.

Any experiences?? One of my relatives built up from £100k to £300k over 20 years which seems pretty good to me. (though my husband was a bit more sniffy and said he could have beaten this).

I don't need income and am more interested in growth. Is there an quality measure for these companies in terms of their performance?

Only two real options for most people, either employ an ifa or diy. The latter can save money and increase returns but there is time an effort involved.

A fee of 1.6% seems high but you need to know what this includes, you also need to be comfortable with risk if you want higher returns, accept volatility and the fact that your portfolio value will go down as well as up, but generally should increase over the longer term.

Malthusian

Investment brokers do not guarantee good performance, and paying higher fees to an investment broker does not mean better performance. There is no evidence that any investment broker has special insight into the stockmarket which will allow him to beat the index over the long term.

If you expect better returns than the market in exchange for your 1.6%pa then you will inevitably be disappointed. To make it worthwhile there needs to be something else that you value, e.g. personal service, advice, reducing tax, taking the hassle of research and administration out of your hands, etc.

Taking your relative's figures at face value, tripling an investment over the last 20 years is below average. Tripling over 20 years is equivalent to 5.6% per annum; the FTSE All Share returned 6.8% and the FTSE World 6.9% over the same period. However, with inexact figures it is dangerous to be that specific. If for example your relative has actually been invested for 18 years and you rounded it up to 20, then the broker hasn't done badly.

dunstonh

A fee of 1.6% sounds reasonable if that is the bottom line (platform, investment and adviser cost totals). If its just the investment cost then that is high nowadays as most investment funds have moved to 1% or lower (although you need to add platform and adviser costs in where appropriate).

(though my husband was a bit more sniffy and said he could have beaten this).

What is his knowledge an experience on investing?

Lleucu

(though my husband was a bit more sniffy and said he could have beaten this).

Armchair investor with PEPs ISA bonds fixed terms. Relative is high anxiety and well suited to the glossy brochure and smooth ways approach.

Point of doing it: many other problems so a one off forget about it approach that hopefully beats high street banks seems attractive though .

Thanks for all your replies - can anyone recommend a good company??

TheTracker

Due to inflation £100k in 1995 money is worth £177k in todays money (£300k in 2015 money is £168k in 1995 money). That means your family friend made 2.6% p.a. over inflation after fees are accounted for. Rather dire. The round numbers of 100 and 300k sound intriguing, so the friend's performance might have been considerably worse/better if it was say £270k or £330k.

My calculations show that your friend paid £112k in fees over 20 years in order to make £200k, in other words the fees consumed 1/3 of the growth. Does that seem steep to you?

These days it is perfectly possible to construct a DIY passive portfolio with ongoing fees of less than 0.3%. You'd need to invest some time into learning the skills, but it isn't that difficult (year 8 maths) and doesn't take that long (a few weeks). Assuming a growth rate of 4% over inflation before fees you'd have £209k after 20 years, in todays money. If you added on or instead used an IFA at say 1.5% initial fee and 0.7%pa ongoing costs you'd have £178k. Only you can decide if that difference of £31k is steep.

If you truly find "a one off forget about it approach that hopefully beats high street banks" attractive then you could invest in a single fund of funds like Vanguard LifeStrategy. Low charge, based on market matching passive science, and fire and forget.