Investing without FA

dunstonh

50Twuncle wrote: »

Sorry - it is an IFA !!

In which case, you have the following options

1 - go DIY
2 - Change to another IFA
3 - Tell your IFA you dont want a DFM and want a conventional product/investment option.

As it is an IFA, they cannot refuse option 3 because they cannot call themselves an IFA if they refuse.

Aegis

50Twuncle wrote: »

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...

You can ask the discretionary manager if they would be happy to continue looking after you without an adviser. Some companies will take on the suitability of your investment themselves, but can charge extra for that. Going rate is likely to be between 0.25% and 0.50%, so potentially a reduction on the 0.75% you're currently paying.

A combined management fee of 1.5% plus VAT between the IFA and the DFM is far too high in my view.

50Twuncle

We are dumping the IFA, and staying on the same platform saving, a not inconsiderable 0.75%

bigadaj

Just looked at the thread title again and one interpretation is that you might just be starting out on the savings and investment game!

eskbanker

....much like winning the FA Cup didn't do much for Louis van Gaal's career prospects!

50Twuncle

I am new to the investment game - having been at the whims of my IFA for7 years

bigadaj

50Twuncle wrote: »

I am new to the investment game - having been at the whims of my IFA for7 years

Good luck, unfortunately excessive fees and charges are one of the things you can't complain about, so long as they were set out.

Malthusian

dunstonh wrote: »

3 - Tell your IFA you dont want a DFM and want a conventional product/investment option.

As it is an IFA, they cannot refuse option 3 because they cannot call themselves an IFA if they refuse.

I'm intrigued by this statement because I don't think it's right. All the IFA has to do is say "I have considered the whole of the market including conventional platforms but I feel the DFM is the most suitable option to monitor your investments and ensure they remain suitable for your attitude to risk." [Note at this point that like DunstonH I think DFMs are a waste of money in most cases, I'm just saying what the IFA would probably say.] "If you are unwilling to accept my recommendations then I don't think we're going to be able to work together."

All IFAs have their own way of working. As long as they have considered all the options before arriving at that way of working and made a reasonable conclusion that their way is the best for their clients, they have satisfied the requirements to call themselves "independent". There may be some leeway but in general if a client is totally against their way of working then they probably aren't going to be clients. There's no obligation to recommend something you don't think is suitable to retain "independent" status.

bigadaj wrote:

Good luck, unfortunately excessive fees and charges are one of the things you can't complain about, so long as they were set out.

Which is pretty much the same in every industry. I think £3 for a coffee is grossly overpriced but if I walk into Starbucks, see the price list at the back and hand over my money I have no cause for complaint. Only in financial services is there this idea that overcharging someone is a crime.

Rollinghome

Malthusian wrote: »

Which is pretty much the same in every industry. I think £3 for a coffee is grossly overpriced but if I walk into Starbucks, see the price list at the back and hand over my money I have no cause for complaint. Only in financial services is there this idea that overcharging someone is a crime.

A question of degree I'd have thought.

Around here, with high rents and overheads, the cheapest coffee will cost about £2.50. Paying an extra 0.50p doesn't seem an excessively big deal especially if for some reason you prefer one brand to another.

On the other hand, if a garage, or a plumber, or a financial advisor takes advantage of his customer's ignorance to charge way, way over the going rate then that will rightly be open to criticism. Especially so when the reason for using an advisor is presumably to optimise investment returns but paying high fees is likely to have the opposite effect.

If IFAs openly published a menu of their charges, as do coffee-shops, that could be seen on on their websites for example so that potential clients could compare costs then much of the criticism could be avoided. Very few do. The website of this IFA is one of the rare exceptions: www.candidfinancialadvice.com/what-you-pay

What about you? You know the price of coffee at Starbucks because it's on the wall. Do you put your own prices "on the wall" as they do or is it more a case of catch as catch can?

dunstonh

I'm intrigued by this statement because I don't think it's right. All the IFA has to do is say "I have considered the whole of the market including conventional platforms but I feel the DFM is the most suitable option to monitor your investments and ensure they remain suitable for your attitude to risk." [Note at this point that like DunstonH I think DFMs are a waste of money in most cases, I'm just saying what the IFA would probably say.] "If you are unwilling to accept my recommendations then I don't think we're going to be able to work together."

IMO, there is no way an IFA could justify using a DFM with every client. If they are, they would fail the independence check. If they were restricted, they would not have that issue. Could you imagine an IFA with a provider mix of 100% with one provider being allowed to get away with that if the FCA came knocking?

There are certainly firms that do put most of their business that way. Indeed, a survey earlier this year found 43% used a DFM for some needs whilst 8% used it to meet all needs. That 8% has to be at risk unless they go restricted. If they are 100% with one provider they would have to show that every case has a DFM as the suitable. This would have to be on a case by case basis. Unless they are turning business away and only focusing on a certain type of client, then it would be damned hard for them to do that. If they are turning away people then I suppose it is possible. It would still not sit easily with me that they are doing what is best in their client interests and would be better suited to being restricted.