Best source of investment advice

Undervalued

BananaRepublic wrote: »

The question then is whether a good financial advisor - assuming you successfully find one - can outperform a decent DIY investor. I suspect not, but there is a lack of evidence out there.

It is very hard to quantify, perhaps that is what the IFA profession (trade?) relies on.

As discussed in the other thread my attempts to find an IFA I could trust didn't end well. However I lost confidence in them for administrative reasons and didn't get to assess how good or bad their advice would have been.

I suppose you could torture yourself by splitting your assets in two. Do exactly as the IFA suggests with half and DIY with the remainder. However, even then you would need to be very disciplined not to be influenced by what the IFA was suggesting when it came to deciding on the DIY half.

Linton

BananaRepublic wrote: »

The question then is whether a good financial advisor - assuming you successfully find one - can outperform a decent DIY investor.....

Out performance of a decent DIY investor is not the purpose of an IFA. Its easy to outperform if you accept the risk of failing badly. More worthwhile reasons for seeing an IFA are...

1) Outperformance of a poor investor - most newbies and some with longer experience could be regarded as poor investors,
2) Appropriate portfolio for a possibly experienced investor who has more complex objectives than simple maximum capital return over a very long time period in a tax sheltered environment.
3) Achieve acceptable, though less than maximum, performance at an acceptable risk.
4) As a first stage in building up confidence to manage your own financial affairs.

bigfreddiel

BananaRepublic wrote: »

I don't think that is fair, a decent IFA will be able to guide someone, it is not just guessing.



They are selling a product, which in this case is their knowledge of financial markets, and investment products, as well as some aspects of tax law. It is not unreasonable to charge for that. After all, if a financial advisor helps you maximise the money you pass down to your children on your death, is that not of value?



Here I have some sympathy for your views, I feel that financial services are often more about marketing than reality, and perhaps about using Fear, Uncertainty and Doubt, the traditional marketing tool to convince people that something is too difficult for their pretty little heads, and they need an expert. But that is true of many products. That is why tracker funds became popular, but in my experiencd active fund managers do earn their extra fees.

You may be right, all I'm saying is that you need to be very very careful when seeking advice of a financial nature, because this is the field the advisor is an expert in, and you could end up with hidden costs, ongoing charges that weren't made clear.

You need to get in writing exactly what the advice means, how the advisor is liable for any future problems, what the charges will be, and how to complain and seek recompense if it all goes belly up.

Get that nailed and you may be okay, but don't count on it.

Cheers fj

Undervalued

bigfreddiel wrote: »

You may be right, all I'm saying is that you need to be very very careful when seeking advice of a financial nature, because this is the field the advisor is an expert in, and you could end up with hidden costs, ongoing charges that weren't made clear.

You need to get in writing exactly what the advice means, how the advisor is liable for any future problems, what the charges will be, and how to complain and seek recompense if it all goes belly up.

I am surprised there is not a requirement for that to happen? Is there a publicly available code of practice?

MadMoney

Are there any good investment companies out there?

jimjames

MadMoney wrote: »

Are there any good investment companies out there?

Plenty. What are you looking for?

I use Fidelity, HL, F&C and Aberdeen. All are good investment companies.

bowlhead99

jimjames wrote: »

Plenty. What are you looking for?

I use Fidelity, HL, F&C and Aberdeen. All are good investment companies.

While the question as phrased does not imply a list is needed, just a simple "yes" or "no".... which doesn't really help anyone, the above are all reputable and I can add a few of the more well known names in my own portfolios, not in any order of preference:

AJ Bell Youinvest, Apax, Baillie Gifford, Blackrock, Deutsche Asset Management, ETF Securities, First State, GVQ Investment Management, HarbourVest, Henderson, JPM, Lindsell Train, M&G, Pantheon, Personal Assets (Troy), Polar Capital, Ruffer, Standard Life, TD Direct Investing, Templeton, Vanguard, Woodford.

Obviously there are hundreds more out there but you probably don't need more than a couple for every letter of the alphabet or it'd take you over a year investing with a new one every week to get through them...

Going back to the OPs point:

Clearly if your mate has dealt with an advisor for 10 years, and he's done well, you are sorted. But what if you are a Nobby No Mates, or have poor mates?

It's a tricky question because even if your mates and relatives and neighbours have someone they trust, which is better than having someone they don't trust, and they have done broadly OK, the question still remains whether you perceive them to fully understand one end of an investment from another and assess them as competent to critically evaluate the performance of a financial advisor and understand what they could or should have got elsewhere from a better or worse one.

Some people use advisors because they don't understand this stuff and some of their support for their advisor has inevitable elements of blind faith, rather than simply 'trust' that actually got earned fair and square.

Do they understand to what extent their profile of returns and tax savings in the last economic cycle was influenced by smart advice from the IFA compared to what they would have got with another IFA or by going it alone, and what was just a general decent market return that any muppet could have got (any fool makes money when the equities and bonds are both going up).

If not, then their referral to their trusted advisor might not be worth the £0 you paid them for it. It's a useful starting point but to find a decent professional advisor (not just IFA but solicitor, accountant etc) you do need to go into it knowing a lot about what the advisor should know about, IMHO. Perhaps even more so with financial advice, as e.g.solicitors might just be short term transactional using a conveyancing or will-writing checklist, with an IFA perhaps a longer term proposition over an economic cycle or two?

As far as I know advisors do not publish performance charts, unlike trusts.

True, but then the client base of an IFA will often have vastly differing needs, so the "performance" may be measured in different ways against different goals.

So although it is probably a popular idea than IFAs will just put you into a few pigeon holes based on standard classifications and that they could be rated against each other like GCSE league tables, I expect the reality is more complex.

Certainly for example some schools get relatively fewer high passing grades per head, but might actually have done better at working with the calibre of students they were given. So similarly it would be harsh to judge an IFA because his last 3 clients were relative fools who didn't have much money, meaning the fees were high per pound invested and the solutions delivered were low risk because of the clients' lack of understanding, lack of capacity for loss, and few opportunities to give great tax and IHT savings.

bowlhead99

Undervalued wrote: »

I suppose you could torture yourself by splitting your assets in two. Do exactly as the IFA suggests with half and DIY with the remainder. However, even then you would need to be very disciplined not to be influenced by what the IFA was suggesting when it came to deciding on the DIY half.

I think the problem with that approach that it is important that the IFA knows all your affairs and what's going on with all your assets and tax wrappers and what your goals are, if they are to properly advise an efficient solution.

The advice might be different, and limited, if they have say 75k of assets to work with instead of 150k and you are going to do whatever you like with the other half without really telling them or letting them take it into account to help you plug a gap in your portfolio. The advice cost per pound put to work would be different and presumably higher if he is only giving the advice on smaller sums. The total platform cost might be higher than it needs to be if it tapers down at larger levels of assets but you want to put your half of the assets elsewhere. And what about the current year ISA allowance, do you get to use that on your 'half' of the portfolio or does he?

What about when he says the iSA should contain more of your overall bonds for tax efficiency instead of equities (or vice versa) and you are both controlling some of the equities and some of the bonds? What about when he recommends rebalancing to something that completely doubles up on something you just bought, are you going to tell him to change it, or change your own bit, or just keep ruining the two structures in complete isolation?

Seems a bit messy.

I can see why some would be reluctant to have an IFA take charge of advising on their whole life if they only wanted to pay fees based on him doing work on a smaller number. But for example, say you have £400k in cash and are cautious so you decide to leave £200k in cash and take advice on £200k of investment. For a given risk profile, I expect he would take more risk with the equities and bonds and real estate etc if he knows you already have £200k risk free cash to reduce volatility.

But is he allowed to do that? Or do you demand he build you a balanced low risk portfolio and not consider the other £200k because you think you'll keep it in cash but you might not and it's none of his business because it's yours and you don't want to expose yourself to fees so you keep quiet about it.

Seems you should either commit to being advised, or not. Or take infrequent pieces of ad hoc transactional advice but perhaps that's even worse in terms of efficiency as he's always chasing his tail trying to figure out how you've messed up the game plan since you last spoke

MadMoney

Sorry for not giving more details, but I've had little time. I do shares for extra income and would like an investment company to increase my income.

bowlhead99

MadMoney wrote: »

Sorry for not giving more details, but I've had little time. I do shares for extra income and would like an investment company to increase my income.

Jimjames and I also 'do' share based investments and between us have listed over 25 investment firms that have helped us along the way. Some are stockbrokers or investment fund platforms, some are traditional investment fund managers, some run investment trusts or exchange traded funds. Does this help? Or are you looking for an independent financial adviser to help you understand what sort of investments might be suitable for your needs?

If the latter, then finding a good one and how hard that might be, is the whole subject of discussion on this thread. There are many thousands of IFAs across the UK and most will be small firms with only one or a few qualified partners running them, rather than big famous name brands. I don't have a local recommendation for you but you can try https://www.unbiased.co.uk which is a directory, and then perhaps run up against the same issues articulated by the people further up the thread.