IFA charges and recommendations- thoughts please.

havingaball74

Hi all,
Sorry if this is duplicating a thread...

I have between around 50-60k currently sitting in premium bonds and various accounts. I haven't used my ISA allowance yet.
I am a total novice but am starting to read some literature. My problem is that I am incredibly indecisive so deciding how to proceed with investing is tricky!

I have had quotes from 2 IFAs to help.

1) 3% of initial amount up yo £50k and £1000 plus 1% over 50k.
1% ongoing fee. All deducted out of the investment. Advice= 20k in a S and S ISA and then create a general portfolio with the rest. 1.11% active funds charges.
Dividend income- 3% growth (asset price increase). Price increase- 10%.

2) From a brief phone conversation- 3% initial cost. Ongoing- 0.5%-1% ongoing charges. Plus transitional costs. Seems pretty similar costs and charges.

I am confused how you would split the lump sum into an ISA and a general portfolio.
Presumably the idea is that you move the money from the general portfolio into the ISA yearly to use up the allowance?

I am low/medium risk (a bit of a worrier).

How do these charges sound to you?
Am I better doing it DIY?
How easy is it to take money out if it were needed (beyond my emergency fund)? I have been advised that accumulation also means that you can sell. But at a charge?

Thanks in advance.

dunstonh

How do these charges sound to you?

With your value, they sound ballpark. Investment values under £100k (amount varies with firms) tend to pay more than higher investments.

Am I better doing it DIY?

it is like any job in life. Do you pay someone to do it for you or do you DIY. If you DIY well, you can save money. if you DIY badly it can cost you far more.

How easy is it to take money out if it were needed (beyond my emergency fund)?

If you use a modern provider (advised or non-advised) very easily.

I have been advised that accumulation also means that you can sell. But at a charge?

Sorry, I don't know what you mean there. If you are referring to the type of unit, then it is doesnt matter if its income or accumulation. And charges are unusual unless you have an illiquid investment or a product with a fixed term tie in (unusual nowadays but still exist).

havingaball74

Thanks for your speedy reply.


Sorry, I don't know what you mean there. If you are referring to the type of unit, then it is doesnt matter if its income or accumulation. And charges are unusual unless you have an illiquid investment or a product with a fixed term tie in (unusual nowadays but still exist).[/QUOTE]

Sorry for being unclear. I read that there is a unit type that gets reinvested or one where the income gets put into a separate account. Is that right? With the one where it is reinvested, you can withdraw easily?

havingaball74

If I were to do it DIY, I set up the S and S ISA, but how do I go about setting up a 'general' portfolio which is not wrapped in an ISA?

There is a potential 0.5% annual fee difference between the 2 IFAs. How much difference would that make? Could that be renegotiated or is that an IFA faux pas?

Linton

havingaball74 wrote: »

If I were to do it DIY, I set up the S and S ISA, but how do I go about setting up a 'general' portfolio which is not wrapped in an ISA?

There is a potential 0.5% annual fee difference between the 2 IFAs. How much difference would that make? Could that be renegotiated or is that an IFA faux pas?

1) In general you get an unwrapped investment account from the same people who supply S&S ISAs. The process is the same, the online user interfaces are the same. Its just the account name which is different. Any fund you buy in an ISA you can also buy in an unwrapped account, there are a few more esoteric investments you may be able to buy unwrapped but not in an ISA but these shouldnt concern you.

2) 0.5% of 60K is £300 per year. Whether it would make any other difference is impossible to say. Individual IFA's will make their own assesment of the work involved and how keen they are to get your business. Anything can be negotiated.

dunstonh

Sorry for being unclear. I read that there is a unit type that gets reinvested or one where the income gets put into a separate account. Is that right? With the one where it is reinvested, you can withdraw easily?

Absolutely no difference. Personally, I prefer income units. Especially on unwrapped. However, it depends on which platform I am using.

There is a potential 0.5% annual fee difference between the 2 IFAs. How much difference would that make? Could that be renegotiated or is that an IFA faux pas?

Anything can be negotiated (or attempted to negotiate). However, this is only around £50k. So, its small for an IFA. If it was a family IFA then you would normally benefit from family rates. If it a new IFA or you just happened to get them in a quiet period then they may do it. For many IFAs, they are not interested in amounts that size. Often, rather than say no, they will intentionally price themselves high as they dont really want it. There are lots of models out there and you will find cheap and expensive, just as any job people do.

bostonerimus

It's good that you are doing research and I think you'll find that with that and a few posts here you won't need to pay an IFA to successfully invest your money. DIY is the way to go, but there's no rush, so take the time to understand what you are buying.

After you have an emergency cash fund of 6 months and have paid off all high interest debt
I would look at the low cost platforms and open a S&S ISA. If you think you'll be investing more than your annual ISA allowance then open a regular investing account too. Consider putting you money into a multi-asset fund that includes a rage of equity and bond tracker funds all in one so that you don't have to worry about constructing a diversified portfolio yourself, but make sure you understand how your money is invested and that is is the right mix for your requirements. As a "medium risk" investor you might want 60% equities. Don't get distracted by the vast number of funds you can choose from, stick with a single multi-asset fund for now and as you learn you can decide if you want to take a bit more control yourself and buy complimentary funds.

I'll probably be called out for pushing Vanguard, but I don't care, I've invested with them in the US for 20 years and I like the way they operate. So check out the Vanguard website. It has some informative videos and sections and they will step you through the process of opening an account and funding it.

Audaxer

bostonerimus wrote: »

It's good that you are doing research and I think you'll find that with that and a few posts here you won't need to pay an IFA to successfully invest your money. DIY is the way to go, but there's no rush, so take the time to understand what you are buying.

After you have an emergency cash fund of 6 months and have paid off all high interest debt
I would look at the low cost platforms and open a S&S ISA. If you think you'll be investing more than your annual ISA allowance then open a regular investing account too. Consider putting you money into a multi-asset fund that includes a rage of equity and bond tracker funds all in one so that you don't have to worry about constructing a diversified portfolio yourself, but make sure you understand how your money is invested and that is is the right mix for your requirements. As a "medium risk" investor you might want 60% equities. Don't get distracted by the vast number of funds you can choose from, stick with a single multi-asset fund for now and as you learn you can decide if you want to take a bit more control yourself and buy complimentary funds.

I'll probably be called out for pushing Vanguard, but I don't care, I've invested with them in the US for 20 years and I like the way they operate. So check out the Vanguard website. It has some informative videos and sections and they will step you through the process of opening an account and funding it.

Agree with above. I would just add that rather than invest the whole £60k at once you could invest £20k ISA allowance per year, maybe drip feeding in monthly amounts.

I personally think £1,800 up front fee is a lot of money to pay. Try to find out as much about DIY investing before making a decision. You can learn a lot by reading this forum.

bostonerimus

I would also encourage the OP to be pretty lazy once they have funded their ISA. Monitor it's value once a month at most and make contributions automatically. You should be in an accumulation fund if you are looking to grow your capital as those reinvest dividends. Don't be tempted to sell if you see the fund value fall, but make sure you understand why that has happen. I put a small amount of money in a Vanguard multi-asset fund back in 1997, I've never sold any of those shares and their value has tripled.

ARandomMiser

For such investments, in this technology era, I would suggest that an IFA doesn't bring a lot to the table (just my opinion). They may provide some ideas but I would suggest you look at some of the offerings often talked about on this board such as Vanguard, Nutmeg or Moneyfarm (just examples). They really do make things easy including handling risk assessment.

If you want to be more selective about your funds then look at something like Fidelity or Charles Stanley (others to choose from as well).

Could you get a better return from an IFA? The reality is about 50:50 ... they are guessing as much as anybody else where the market is heading but might be able to offer something more tailored towards your needs ... but do you really want to throw away a couple of thousand quid on something you can do very easily yourself?

I was in your situation a couple of years ago (although it was a much larger portfolio) and am really happy going down the DIY root (after I lost all faith in the IFAs I had been using).

Audaxer

ARandomMiser wrote: »

Could you get a better return from an IFA? The reality is about 50:50 ... they are guessing as much as anybody else where the market is heading but might be able to offer something more tailored towards your needs ... but do you really want to throw away a couple of thousand quid on something you can do very easily yourself?

Agree and also think it would probably be less costly and less room for getting it wrong by inexperienced DIYing by going down the passive route.