How to find a decent IFA - or best not to?

TheTracker

dunstonh wrote: »

Cost is always a secondary requirement and there are plenty of DIY options that are more expensive than intermediary options.

Are there plenty of intermediary options that are less expensive than DIY options?

To illustrate, if I want to buy a TV there are plenty of online options that are more expensive than high street options, but there are few high street options that are less expensive than what I can find online.

dunstonh

Are there plenty of intermediary options that are less expensive than DIY options?

yes there are. Especially since unbundling.

TheTracker

dunstonh wrote: »

yes there are. Especially since unbundling.

Where can I find an published list of such options? I'd happily pay for an IFA if they could find me cheaper funds that at least offset what I was otherwise paying, plus their fee.

On a £1m portfolio I need only pay about £2k pa in fees (0.20%).

If I could find an IFA for, oh I don't know, maybe as cheap as £500pa, then they'd only need to find funds for a 25% discount. Perhaps they could, interesting.

Oh most people don't have portfolios of £1m? Say £250k. Then, oh I see, I'd be paying £500 in fees and they'd have to find me free funds to compensate for their time.

Perhaps fees aren't so secondary after all.

dunstonh

I'd happily pay for an IFA if they could find me cheaper funds that at least offset what I was otherwise paying, plus their fee.

Funds wont be cheaper as they are fixed price now with either clean or superclean pricing.

On a £1m portfolio I need only pay about £2k pa in fees (0.20%).

You can get less than that.

Perhaps fees aren't so secondary after all.

If that was the case then everyone would be driving around in Korean cars.

Plus, fees are always secondary. It would be daft for them to be primary.

Aegis

TheTracker wrote: »

Where can I find an published list of such options? I'd happily pay for an IFA if they could find me cheaper funds that at least offset what I was otherwise paying, plus their fee.

On a £1m portfolio I need only pay about £2k pa in fees (0.20%).

If I could find an IFA for, oh I don't know, maybe as cheap as £500pa, then they'd only need to find funds for a 25% discount. Perhaps they could, interesting.

Oh most people don't have portfolios of £1m? Say £250k. Then, oh I see, I'd be paying £500 in fees and they'd have to find me free funds to compensate for their time.

Perhaps fees aren't so secondary after all.

In my view, the cheapest way to invest is almost always going to be to do it without an adviser. Ultimately we have access to much the same investment universe, so if you're planning to invest in the same way whether advised or not, you can almost certainly do it cheaper directly rather than via an intermediary. Where an intermediary adds value is in helping those who can't or don't want to carry out the investment and review process for themselves, wants assistance in managing cash flows and reducing tax, etc. For that, people are willing to pay a fee, and naturally I don't have a problem with that.

For the record, I certainly wouldn't work on a £1 million portfolio for £500 a year, especially if I thought the person was only interested in driving fees to the lowest possible point (as there would be a lot of work involved and I'd probably not be retained in the long run if my fee was contentious even at that level). I work in London after all, and need to cover my costs when dealing with each client.

Malthusian

If you are a highly motivated DIY investor who puts roughly the same amount of effort in finding the best deal for yourself as an IFA would in finding the best deal for his clients, then you will probably end up with roughly the same charges.

If you are a more "average" DIY investor who goes with the platform / funds that he's heard about in the newspapers and has the first result on Google, then it is likely you will end up with higher charges than an IFA would arrange.

(This ignores the the time cost of doing that research and reading forums like these.)

Undervalued

Malthusian wrote: »

If you are a highly motivated DIY investor who puts roughly the same amount of effort in finding the best deal for yourself as an IFA would in finding the best deal for his clients, then you will probably end up with roughly the same charges.

If you are a more "average" DIY investor who goes with the platform / funds that he's heard about in the newspapers and has the first result on Google, then it is likely you will end up with higher charges than an IFA would arrange.

(This ignores the the time cost of doing that research and reading forums like these.)

Maybe that is true now but a few years ago with IFA two (as described in my opening post) it was the complete opposite.

I was told that allowing them to use their platform would be "far cheaper" than anything I could arrange myself so would in effect significantly reduce the cost of their advice. That was total nonsense and anywhere I looked was cheaper. Frankly it bordered on the dishonest.

Also, I would have had no direct access myself. All transactions would have had to have gone via the IFA. It was a small outfit with a couple of advisors and a couple of admin staff so I was also bothered about what would happen if staff were off sick or on holiday.

dunstonh

Undervalued wrote: »

Maybe that is true now but a few years ago with IFA two (as described in my opening post) it was the complete opposite.

I was told that allowing them to use their platform would be "far cheaper" than anything I could arrange myself so would in effect significantly reduce the cost of their advice. That was total nonsense and anywhere I looked was cheaper. Frankly it bordered on the dishonest.

Also, I would have had no direct access myself. All transactions would have had to have gone via the IFA. It was a small outfit with a couple of advisors and a couple of admin staff so I was also bothered about what would happen if staff were off sick or on holiday.

To be honest, I don't think you are after an IFA and an IFA wouldn't be that interested in dealing with you. You seem to want the cost saving of DIY AND the advice benefit of an IFA. Advice costs money. You cant avoid that. The product selection excluding cost of advice can be cheaper than DIY but, with the exception of a few areas, you do not use an IFA to be cheaper than DIY as the cost of advice will bring the product charge in higher (again, with the caveat that it does not apply to all areas).

TheTracker

It all comes back to what independent financial advice you want? A plumber or carpenter or architect has many services. Plenty of reasons to use an IFA... Tbh sounds like just a bunch of complaints so far.

Do you have non-vanilla circumstances? Very high income, tax situation, many pensions, illness, etc.

Are you about to enter a change of life phase? Want to change strategy and not sure if/how?

Are your returns/volatility out of step with what you see the market doing?

You think you're paying too much in fees?

Don't understand how markets, asset allocation, fund selection, platforms, tax, etc works?

Can't be bothered and just want someone to do it for you?

It sounds to me like you want garden variety guidance not advice with a capital A. You can get that here, in books, on forums, self study, etc.

Undervalued

dunstonh wrote: »

To be honest, I don't think you are after an IFA and an IFA wouldn't be that interested in dealing with you. You seem to want the cost saving of DIY AND the advice benefit of an IFA. Advice costs money. You cant avoid that. The product selection excluding cost of advice can be cheaper than DIY but, with the exception of a few areas, you do not use an IFA to be cheaper than DIY as the cost of advice will bring the product charge in higher (again, with the caveat that it does not apply to all areas).

No, not at all.

As I tried to explain, I am quite willing to pay for the right advice. What I am not willing to do is to be mislead (to put it kindly) about the total costs.

Now it may be that they relied on clients using that platform (which only the IFA could administer) and what they earned from that subsidised the advice charges and only then was the job worthwhile. But if so they should have said so. To tell a potential client something which ten minutes online research could disprove strikes me as either naive or dishonest. Neither are characteristics that I am prepared to tolerate in somebody I am paying to advise me.