Investing without FA

50Twuncle

We have a fairly substantial lump sum (managed portfolio) - invested in a Discretionary Investment Management company - we pay the company 0.75% to deal with the funds (plus charges for each transaction) - fair enough !!
But every time the company receive a payment - our Financial Adviser receives an identical sum..
He received approx 3% lump sum for the initial introduction - but continues to receive an on-going payment ad-infernitum.
Is this usual practice ?
With this reduction in our "profits" - we are left with about 2% growth
I was wondering whether it was possible to avoid this added reduction by going dircect to the investment company - because what does the FA do for his money ?
An annual review meeting - he takes no risks...

bigadaj

There are different charging models, best thing is to,ask him to detail and justify his charges and those of his recommended method of investing, in this case the dfm, as well as underlying fund charges, trading fees, maybe stamp duty etc

If you managed the portfolio yourself and keen and attentive you might be able to get charges down to around 0.5%, but this obviously requires your time and effort in learning and monitoring, and your not covered by any pi or comeback if things how wrong.

What sort of value fund are we talking about and how long have you held this arrangement, as this may affect things as well.

george4064

A common route to invest without an FA is to invest in a multi-asset fund such as Vanguard LifeStrategy.

This would covers all markets (except for property), and conducts quarterly rebalancing.

50Twuncle

bigadaj wrote: »

There are different charging models, best thing is to,ask him to detail and justify his charges and those of his recommended method of investing, in this case the dfm, as well as underlying fund charges, trading fees, maybe stamp duty etc

If you managed the portfolio yourself and keen and attentive you might be able to get charges down to around 0.5%, but this obviously requires your time and effort in learning and monitoring, and your not covered by any pi or comeback if things how wrong.

What sort of value fund are we talking about and how long have you held this arrangement, as this may affect things as well.

3 years with this company (he advised us to change investments, 3 years ago - with new set-up fees etc)
Almost £200k - I am concerned that any gains we make are disppearing in charges
Is it not possible to remain with the same investment company sans FA ?
What "risk" does the FA take with our funds ?

BananaRepublic

There is something called 'churning'. I have no idea if this was the case here, and how common it is.

coyrls

50Twuncle wrote: »

3 years with this company (he advised us to change investments, 3 years ago - with new set-up fees etc)
Almost £200k - I am concerned that any gains we make are disppearing in charges
Is it not possible to remain with the same investment company sans FA ?
What "risk" does the FA take with our funds ?

It's unlikely that you will be able to stay with the same platform if you want to DIY. It's probable that the platform you are with only deals with Financial Advisors, not consumers. If you want to go down the DIY route you are likely to have to transfer to a consumer facing platform (of which there are many) and make your own investment decisions. Alternatively you could see if you could renegotiate your fee with your FA, e.g. a fixed sum for an annual review.

ManofLeisure_2

50Twuncle wrote: »

What "risk" does the FA take with our funds ?

Isn't this a question for your FA?

Daniel54

50Twuncle wrote: »

I was wondering whether it was possible to avoid this added reduction by going dircect to the investment company - because what does the FA do for his money ?
An annual review meeting - he takes no risks...

It is entirely possible to use a discretionary fund manager (DFM) without using an IFA,but you would need to enquire whether the the platform you are using is IFA only,as coyris suggests.

If you don't feel you get value from the annual review,then cease the arrangement with the IFA in accordance with the original paperwork.

Mr_Costcutter

[QUOTE=50Twuncle;70685251
With this reduction in our "profits" - we are left with about 2% growth .[/QUOTE]

2% growth seems rather poor to me. If you don't wish to go the DIY route, perhaps a chat with another independent FA might be a good idea?

dunstonh

He received approx 3% lump sum for the initial introduction - but continues to receive an on-going payment ad-infernitum.
Is this usual practice ?

Yes. The FA carries the liability whereas the DFM does not. Advice transactions, such as a bed & ISA and risk profiling come under the FA.

I was wondering whether it was possible to avoid this added reduction by going dircect to the investment company - because what does the FA do for his money ?

Personally, I am not a fan of DFMs. They add a layer of charging that can be reduced by not using them and they are a bit of an excuse of the FA to do less work. I know advisers that swear by them and its just another way of investing. And investing is all about opinion. Many DFMs require an adviser firm to be allocated to allow them to do the advice side.

I would look to dump the DFM if you are looking to reduce costs. Plus, if its an FA and not an IFA then look to dump them to. A restricted adviser (which is what an FA is) using a DFM is just cost on top of cost. If you dont want an IFA then you need to DIY.

50Twuncle

dunstonh wrote: »

Yes. The FA carries the liability whereas the DFM does not. Advice transactions, such as a bed & ISA and risk profiling come under the FA.



Personally, I am not a fan of DFMs. They add a layer of charging that can be reduced by not using them and they are a bit of an excuse of the FA to do less work. I know advisers that swear by them and its just another way of investing. And investing is all about opinion. Many DFMs require an adviser firm to be allocated to allow them to do the advice side.

I would look to dump the DFM if you are looking to reduce costs. Plus, if its an FA and not an IFA then look to dump them to. A restricted adviser (which is what an FA is) using a DFM is just cost on top of cost. If you dont want an IFA then you need to DIY.

Sorry - it is an IFA !!