What will a financial adviser do for me?

eskbanker

Smed wrote: »

The problem as I see it is that this is a price comparison website where the lowest cost and the highest return is compared. That's fine when considering interest paying bank accounts, bonds and insurance where the return is guaranteed and can be determined in advance. But the problem in appraising medium to long term investments is that the return is not guaranteed and cannot be determined in advance. So the result of the price comparison of investments is then confined to a comparison of cost alone so the fund or fund manager with the lowest fees is seen to be best regardless of the personal circumstances of the person being advised.

While you're right that investment choice shouldn't be largely fees-driven, I haven't really seen much evidence that it is on this forum.

Yes, the fees are inevitably discussed as they're readily quantifiable, and within a given risk profile or product range why would one pay higher fees for the same thing (so it's appropriate to highlight funds or platforms renowned for high costs), but I think it's an over-simplification to assert that price is seen as the primary factor.

Any idiot can look up published fund fees but an IFA (or an experienced DIY investor) needs to look some way beyond that when identifying and evaluating options, which is no doubt at least partly why this site (main site not forum) doesn't claim to compare investment prices, to the best of my knowledge....

Having said that, there are various external sites that do offer a price comparison of platforms but the consistent line on here seems to be that picking the right fund for an investor's requirements is way more important than trying to shave minor fractions of percentages off platform fees.

Jon_W

I met another one yesterday, I liked him.

His approach is to do a risk profile questionnaire then recommend one of his company's existing models for that risk profile.

Can't remember exact breakdown (going to post me an original) but it is split between passive funds holding various world equities, commercial property, commodities shares, corporate bonds.

When the mix strays from the %s in the original mix due to value fluctuations it is rebalanced back to their model's original asset class and country mix.

IFA charge of 4% implementation and around 1.8% ongoing.

They also hedge against currency risk. I don't know how and he didn't go into it.

One meeting a year and risk profile completed. I think I am happy with this. I think I am happy as long as I have a vague understanding about the currency risk hedging.

JohnRo

IFA charge of 4% implementation and around 1.8% ongoing.

That's excessive in my opinion, especially the ongoing. Is the 1.8% an explicit IFA charge on the portfolio valuation or a TER type number?

Either way it's very high.

Al.

Jon_W wrote: »

I met another one yesterday, I liked him

Whatever most advisers will tell you, we're in sales - you're supposed to like him! Sales isn't a bad word by the way, we just look on it as such. I've had to push really hard sometimes, to sell the right idea to a number of clients, and I do it in a fiduciary way. The client always comes first. They sometimes don't realise it though..

Jon_W wrote: »

IFA charge of 4% implementation and around 1.8% ongoing.

They also hedge against currency risk. I don't know how and he didn't go into it.

One meeting a year and risk profile completed. I think I am happy with this. I think I am happy as long as I have a vague understanding about the currency risk hedging.

4% upfront is tasty, unless you have a small amount and that's how the fee works out. And if you do have a small amount, consider kicking the hedging nonsense into touch. And if you haven't had it properly explained, or if you don't understand it, AND AGREE WITH IT, walk away from it. In fact, no. Run.

I look at some pension paperwork (Met Life, I'm looking at you boy) and I wonder what planet they're on. Keep it simple.

richyg

!!!!!!

For the lord sake run away

"IFA charge of 4% implementation and around 1.8% ongoing. "

Do anything other than this.

Go for a Vanguard 60/40 or 40/60.

Go for a Blackrock Concensus Fund 60 or 80

Go for shares eg Personal Assets Trust, or Ruffer , or Edinburgh (EDIN.L) or RIT Capital Partners, or even Fundsmith or Woodford (these last two are 100% equity so beware) the others are not and are more balanced and have been around for a long time


Please just understand the maths. I think you will just make your FA richer at your expense.


If you put in 10,000 with a 4% upfront then you will end up only putting in 9,600. If your assets grow at eg 3.6% then the FA will be getting 50% of the growth while you take 100% of the risk. , year on year. In a down year you may make nothing, zilch , zero and they will still take 1.8% of your total pot of money.

I really think you may be best just chucking it all at fund or etf that has a cost of 0.5% or so and just leaving it with them to deal with

dunstonh

Do anything other than this.

Go for a Vanguard 60/40 or 40/60.

Why?
Our comparable portfolios (in terms of volatility) outperform VLS60. They cost more.

Please just understand the maths. I think you will just make your FA richer at your expense.

And paying less could result in you getting less. Costs are a secondary consideration. Not the primary one.

richyg

Dunstonsh,

Do they perform better after all costs incurred for an equivalent risk rating ?

Whilst it wouldn't be an exact comparison , an idea of the funds or shares that made up the portfolio at a date eg 1/7/2012 would at least be an opportunity for discussion. Could you post.

I would expect that you may take an active approach with your clients and as such the portfolio today might be quite different and as such irrelevant to post but if it happened to be the same event if the % part were a bit different it would still be a great exercise to post it.

R.

dunstonh

Do they perform better after all costs incurred for an equivalent risk rating ?

Yes.

Whilst it wouldn't be an exact comparison , an idea of the funds or shares that made up the portfolio at a date eg 1/7/2012 would at least be an opportunity for discussion. Could you post.

No. However, it is not difficult for people to out-perform VLS if they wanted to DIY. I am not doing anything that anyone else could not do themselves as long as they are not blinkered into thinking VLS is the be-all-and-end-all.

I would expect that you may take an active approach with your clients and as such the portfolio today might be quite different and as such irrelevant to post but if it happened to be the same event if the % part were a bit different it would still be a great exercise to post it.

The portfolios are rebalanced to a fluid sector allocation. The funds are a mixture of passive and active.

Smed

bigadaj wrote: »

Though there are two conflated issues here.

First there is the option whether to use an ifa or diy.

Secondly there is the passive versus active debate.

On the first issue then it's largely personal choice and knowledge, or the ability to accrue it.

In terms of active versus passive then there are no guarantees but there are historical track records, which stretch across individual managers, funds, fund houses, sectors etc

Good managers can have bad stretches and short term outperformance can disappear, but it does appear to me that varying between passive and active across different sectors may well be worthwhile. It's rare for an active manager to do well in large cap us stocks for example, but passive funds seem to underperform in uk equity income, and also equity income more widely.

You pays your money, to a greater or lesser extent, and take a your choice.

Confusion. Are we talking here about Independent financial advisers or fund managers or something else? But whichever way, fees and costs are related to the quality of the service provided and service provided by the office boy is likely to be cheaper than service provided by a qualified and experienced manager and good financial advice is always ongoing and active and never passive

JohnRo

Smed wrote: »

Confusion. Are we talking here about Independent financial advisers or fund managers or something else? But whichever way, fees and costs are related to the quality of the service provided and service provided by the office boy is likely to be cheaper than service provided by a qualified and experienced manager and good financial advice is always ongoing and active and never passive

If only it were that simple, it is not. I'm not interested in IFA bashing, however there are clearly some IFAs prepared to do far more work than others. Some are simply better organised and geared towards offering a quality service.

The RDR might have shaken things up but I'm sure there are still more than a handful left over from the good old commission paying days who aim to do the least amount of work possible for the maximum fee possible. Perhaps making an extra effort with an initial marketing push and then seeing their ongoing fee as payback and money for old rope.

I've personal experience of the extremes, thankfully resolved now.