Financial Advisor Fees

Dread_Pirate_TripleS

Hi,

I am hoping I can get some advice regarding investing using a Financial Advisor. I had an ISA as well as a self-investment pension plan I had built up over the years with one of the large banks. They split off the pension to a third party company that I was not happy with then contacted me to say that the ISA’s I had (which they advised me to open when I met one of their internal financial advisors several years ago) were under an old scheme and that they wanted to charge me for financial advice to move them to their new structure.

I decided instead to see an independent financial advisor who set me up with an account with one of the leading investment platforms transferring in all my and my wife’s savings into and they recommend the funds and did everything for me. For this there was a fee of 3% of the investment and they charge a 0.5% fee per year to monitor the chosen funds. As there was a chunk of financial work to do this I was OK (not happy of course) for the 3% fee.

I have recently received another chunk of money and I am looking at using it to add to a house deposit when I move in a year (the amount is low 6 figures). In the meantime rather than leaving it in a bank I discussed with the Financial Advisor what to do with it. His suggestion was to transfer it into the fund plat form using the existing funds. For this there would also be the initial fee again.

What I am hoping is a little advice on:

• Is it normal for a financial advisor to charge the fee on all on going deposits rather than just the initial advice and set up? This time he is doing very little work as he is not even changing the chosen funds.

• Is his advice of transferring this into the funds a good one as I intend to withdraw it again in a year? It will have had to earn more than the fee amounts in that time to be worth it.

• Should I be going to a separate financial advisor, maybe one that charges per hour, to check the first one’s advice?

Thanks for your help,
-Dread Pirate TripleS

jem16

Dread_Pirate_TripleS wrote: »

I have recently received another chunk of money and I am looking at using it to add to a house deposit when I move in a year (the amount is low 6 figures). In the meantime rather than leaving it in a bank I discussed with the Financial Advisor what to do with it. His suggestion was to transfer it into the fund plat form using the existing funds. For this there would also be the initial fee again.

If you are planning on using this money in a year I wouldn't put it anywhere near an investment. One year is far too short a timescale for investments. Really should be a minimum of 5 years, preferably more.

Is it normal for a financial advisor to charge the fee on all on going deposits rather than just the initial advice and set up? This time he is doing very little work as he is not even changing the chosen funds.

Many advisors working on an ongoing basis will add incremental amounts without any further fee as it's covered in the ongoing charges but it's really down to the agreement you have with your advisor.

Is his advice of transferring this into the funds a good one as I intend to withdraw it again in a year? It will have had to earn more than the fee amounts in that time to be worth it.

In my opinion it's madness to even consider it.

masonic

Dread_Pirate_TripleS wrote: »

• Is his advice of transferring this into the funds a good one as I intend to withdraw it again in a year? It will have had to earn more than the fee amounts in that time to be worth it.

This is absolutely terrible advice. Completely inappropriate. Bordering on malpractice.

LXdaddy

jem16 wrote: »

If you are planning on using this money in a year I wouldn't put it anywhere near an investment. One year is far too short a timescale for investments. Really should be a minimum of 5 years, preferably more.



Many advisors working on an ongoing basis will add incremental amounts without any further fee as it's covered in the ongoing charges but it's really down to the agreement you have with your advisor.



In my opinion it's madness to even consider it.

+1 spot on

Did you mention the idea of using the funds in a year's time? If you did then the advisor is crazy

1 year in an investment for a six figure sum is crazy

What would you think if the funds dropped 20% in the next year?

ie what is your tolerance to loss over this period of time?

It might go up by 10% or 20% but it equally might go down by 10% or 20%

bigadaj

LXdaddy wrote: »

+1 spot on

Did you mention the idea of using the funds in a year's time? If you did then the advisor is crazy

1 year in an investment for a six figure sum is crazy

What would you think if the funds dropped 20% in the next year?

ie what is your tolerance to loss over this period of time?

It might go up by 10% or 20% but it equally might go down by 10% or 20%

Well seems like a cracking option to me, near risk free returns are always best.

So if it goes up then you take the profit, if it falls you make a claim on the ifa or their insurers for poor advice, and get your capital plus a few percent back.

I'd jump at that chance, seems a very naive ifa.

dunstonh

I have recently received another chunk of money and I am looking at using it to add to a house deposit when I move in a year (the amount is low 6 figures). In the meantime rather than leaving it in a bank I discussed with the Financial Advisor what to do with it. His suggestion was to transfer it into the fund plat form using the existing funds. For this there would also be the initial fee again.

That is really bad advice. Indeed, mis-sale territory and possible fines or other regulatory action if the FCA took an interest.

Is it normal for a financial advisor to charge the fee on all on going deposits rather than just the initial advice and set up? This time he is doing very little work as he is not even changing the chosen funds.

If you employ the adviser on an ongoing basis then you would typically expect a deduction in the initial charge. For smaller investors, it may not be the full amount but for medium to larger size investors, you would expect it at no additional cost.

If you employ the adviser on transactional basis (i.e. no ongoing) then you would expect to pay by the transaction/advice event.

Should I be going to a separate financial advisor, maybe one that charges per hour, to check the first one’s advice?

Few charge by the hour as its the least popular method with consumers. However, you dont need a second opinion. The advice is dreadful. An economic cycle is around 10 years nowadays. Longer than it used to be. So, unless you are prepared to invest for at least an economic cycle, then you are increasing your risks. 5 years is the historic minimum guide for investing. However, are you going to get the good half or the bad half? I have known some companies allow investing for 3 years when the person has the capacity for loss and a high risk profile but just 1 year is absolute madness.

Dread_Pirate_TripleS

Thanks for the advice everyone, it is along the lines of what I was thinking which is why I didn't go ahead on the spot and said to mail out the forms. It is a shame as I only just moved everything to his practice in the last few months and this cost me nearly £10K in fees to do so.

DrSyn

How did you find this financial adviser?


The link below may be of interest to you. It's worth a look lest.

https://www.citizensadvice.org.uk/debt-and-money/savings/getting-financial-advice/

dunstonh

this cost me nearly £10K in fees to do so.

!!!!!!?

That is a disgraceful amount in this day and age. Typically you are looking no more than £2500 unless extremely complicated. Figures around £1000-1500 at more typical.

Dread_Pirate_TripleS

dunstonh wrote: »

!!!!!!?

That is a disgraceful amount in this day and age. Typically you are looking no more than £2500 unless extremely complicated. Figures around £1000-1500 at more typical.

2 ISA's and 2 SIPP pensions transferred at 3% of total value. It was a total of about 5 or 6 forms I had to sign.

ChemistDude

IMO only use a CFP (Chartered+Certified Financial Planner). No offence to financial advisors but they really 2nd rate compared to a CFP. If you need a recommendation try Pete Matthew of Jacksons Wealth Management: http://www.jacksonswealth.com/about/our-people/pete-matthew/

Also listen to his podcast: Meaningful Money.