Finding an IFA you can trust...

TheTracker

dunstonh wrote: »

I would say about the same. Most of the clients of the firm have been with the same adviser for over 20 years. Many would refer to us as the family IFA. We know them. They know us. We have seen each others children grow up. Some clients bake us cakes when we see them or give us pots of jam or honey. Even making us lunch when we turn up. One routinely drops in runner beans, cabbage or whatever is in season. Anther drops in some bedding plants. One has recently started making his own wine and drops in a bottle or two a week.

That's nice.

What lovely gifts do you bestow upon them, apart from the 20x annual invoices for 0.5% of their lifetime savings?

HappyHarry

TheTracker wrote: »

That's nice.

What lovely gifts do you bestow upon them, apart from the 20x annual invoices for 0.5% of their lifetime savings?

Peace of mind that their financial affairs are in good hands and they do not need to worry about their financial future maybe?

Maybe a portfolio that they are comfortable with, retuning an average of 4% per year instead of the 1% per year that they previously had in their savings accounts?

Maybe the knowledge that their care costs in the future can be provided for?

Maybe knowing that they can retire three years before their normal retirement date on a good level of sustainable income?

My clients see their annual fee as very good value.

bigadaj

TheTracker wrote: »

That's nice.

What lovely gifts do you bestow upon them, apart from the 20x annual invoices for 0.5% of their lifetime savings?

Didn't you watch normal for Norfolk?

Matt002

dunstonh wrote: »

I would say about the same. Most of the clients of the firm have been with the same adviser for over 20 years. Many would refer to us as the family IFA. We know them. They know us. We have seen each others children grow up. Some clients bake us cakes when we see them or give us pots of jam or honey. Even making us lunch when we turn up. One routinely drops in runner beans, cabbage or whatever is in season. Anther drops in some bedding plants. One has recently started making his own wine and drops in a bottle or two a week.

Just my opinion but that seems like a bit of a blur on the professional boundaries front. If I had a dodgy heart I wouldn't expect my cardiologist to nip around my house so that I could supply them cake and if I did offer I would expect them to turn it down. I don't want him to be my best buddy I just want him to be a damn fine cardiologist and provide the best possible advice.

dunstonh wrote: »

We have people who ask how much they can spend that year on their holiday and refer to us for all their main spending needs. We more or less control their capital purchases. Despite all the effort, we put into their investments, that is often the least focused area they use us for.

Wow, I had no idea people relinquished that much control! Certainly quite an eye opener on what the chap on the other side of the table might be expecting to have to provide. Very interesting, thanks dunstonh.

dunstonh

What lovely gifts do you bestow upon them, apart from the 20x annual invoices for 0.5% of their lifetime savings?

Generally, we don't give them any gifts. We give them the services they employ us to do. Although the one we saved £24,000 for last week may think of that as a gift.

Just my opinion but that seems like a bit of a blur on the professional boundaries front. If I had a dodgy heart I wouldn't expect my cardiologist to nip around my house so that I could supply them cake and if I did offer I would expect them to turn it down. I don't want him to be my best buddy I just want him to be a damn fine cardiologist and provide the best possible advice.

I said in my earlier post that you sounded like the sort of person that didnt want that. A city firm may be more appropriate for you. However, most IFAs will adapt to what you want. If you prefer a clinical, more remote service then that will be fine. Some firms, particularly boutique firms, can be focused on a certain model type and will only take on clients that fit their model.

It is also a generational thing and a rural vs city mentality. The older clients have different expectations and a different business relationship than the younger ones. Turning down a gift or a cake that has been baked especially would be rude.

Audaxer

HappyHarry wrote: »

Maybe a portfolio that they are comfortable with, retuning an average of 4% per year instead of the 1% per year that they previously had in their savings accounts?

Is the 4% pa income after your IFA fees and platform fees are deducted? I looked at an IFA website which showed income portfolios with about a 3.8% yield, but that was before their platform fee of 1.2% and it said other additional portfolio charges were not taken into account, which I assumed it meant IFA ongoing fees for annual reviews etc.

If your clients are receiving 4% pa after all charges, is the capital value of their portfolios also expected to continue to grow over the long term?

Reaper

I don't really understand those who complain about IFA fees. Paying an accountant an eye watering hourly rate seems to be perfectly acceptable but an IFA receiving payment is not?

You have the option of managing your own financial affairs or paying somebody else to do it. Like almost everything in life.

dunstonh

I looked at an IFA website which showed income portfolios with about a 3.8% yield, but that was before their platform fee of 1.2% and it said other additional portfolio charges were not taken into account, which I assumed it meant IFA ongoing fees for annual reviews etc.

Yield is only one part of the return.

but that was before their platform fee of 1.2%

Perhaps they meant all in charge of 1.2% as that is more typical of the total. No just the platform charge (not aware of any platform that charges anywhere near as much as that.

If your clients are receiving 4% pa after all charges, is the capital value of their portfolios also expected to continue to grow over the long term?

That was a hypothetical figure thrown into a conversation.

charoniv

dunstonh wrote: »

I would say about the same. Most of the clients of the firm have been with the same adviser for over 20 years. Many would refer to us as the family IFA. We know them. They know us. We have seen each others children grow up. Some clients bake us cakes when we see them or give us pots of jam or honey. Even making us lunch when we turn up. One routinely drops in runner beans, cabbage or whatever is in season. Anther drops in some bedding plants. One has recently started making his own wine and drops in a bottle or two a week. We have people who ask how much they can spend that year on their holiday and refer to us for all their main spending needs. We more or less control their capital purchases. Despite all the effort, we put into their investments, that is often the least focused area they use us for.

Not sure the OP is looking for an old fashioned business relationship of that style. And I am not sure the more clinical boutique style would fit either.

Sounds a bit Atticus Finch. Probably depends on the area. My parents (and I) did something similar when I was in Suffolk but don't do it in London. There always seemed to be more time available. Also our family would always know the family of the tradesmen so it wasn't so much just a commercial transaction. You knew you weren't going to get ripped off because it would affect more than just the business - equally keeping dealings within the community was useful for your own prosperity (I can remember my father explaining why I had to use a local car dealer). The Christmas visits to anyone we had had dealings with tended to take quite a long time.

charoniv

bowlhead99 wrote: »

You're right that generally, everything about investing / wealth management and asset allocations is about having proportionality rather than binary either /or.

However, deciding to employ an IFA is something that gets more efficient with more pounds invested.

If you decide you will do your own thing for all of your money except £50k, the IFA is going to have to spend a couple of hours of discussing your goals for that £50k and considering solutions and presenting them to you, as well as a couple of hours documenting the rationale for the solution and implementing it. So he spends 4 hours and the cost of running his business including a profit margin might be £250 per chargeable hour, so it costs you £1000 which is a hefty 2% on your £50k

However, if instead you give him £250k to manage, it doesn't take him 5x as long to discuss with you and consider and evaluate and propose and implement the solution. Maybe the solution is more complex, so it takes him 8 hours instead of 4, and the liability insurance and FCA fees are 5x higher, but overall it does not warrant a 5x fee to the customer. Perhaps you end up paying 1% on the £250k instead of 2% on the £50k. Which is a much more affordable implementation cost. Likewise the ongoing monitoring and servicing cost would be lower.

So if you want to have a bit of everything and do a proportion IFA and a proportion DIY, that's going to be relatively expensive for the IFA bit. Also, you might expect the IFA to be relatively less effective if he is not responsible for, or in control of, the whole set of assets you have.

For example, say you want an overall "medium" amount of risk for your wealth as a whole. You tell him you are going to invest £200k in index trackers (60:40 equity index: bond index) yourself, in ISAs, and want him to advise on just the remaining £50k with the goal of creating an overall medium level of volatility. So, he builds a small £50k portfolio to do that.

However, when you meet up after a year you mention that actually you read something on a forum that encouraged you to change to a higher equity concentration so you did that part-way through the year on "your" £200k DIY piece but didn't go back to him to give him extra instructions on the £50k bit - because you thought it would cost you more - so you just went extra risky on your bit to average it out. Then after a good year in global equity markets you think your portfolio (in high risk assets and wrapped in ISAs and unencumbered by the 2% implementation fee) did much better than the IFA portfolio so you are going to dump the IFA - even though he came up with s sensible solution for the original remit.

Or maybe you don't max out your pension and ISA allowances and dividend allowances like the IFA assumed you would, so the IFA solution misses out on taking advantage of using them; and the IFA is buying medium assets all the way but you change your own DIY piece once a quarter on a whim based on your personal convictions -so whatever the IFA portfolio plus DIY mix produces overall, it ain't "medium". So, asking an IFA to take account of certain allocations but not actively monitor or advise on or manage them, seems like a poor compromise.

Personally I can't imagine feeling confident about dealing with a big portion of my portfolio handled on a DIY basis but then giving the IFA a small isolated piece just to see what he does, as part of my overall wealth. Either I can DIY the lot (which at the moment, I can) - or I need help - at which point I would seek help on my personal financial affairs, to make sure I'm not missing a trick; not merely engage him on some residual bit of my wealth while assuming I know best for a big chunk of it and accepting a really inefficient fee scale.

In that situation it sounds like you don't believe the IFA advice so it's not cost effective to use one and you should be all DIY which you would end up with anyway - a more likely option is to rebalance so the IFA gets more. The idea of the IFA is that you are more comfortable paying for someone else to handle your affairs - if that ends up as a small proportions of your available funds then it's a bit pointless - unless you are expecting to transfer a larger proportion in the future and the IFA understands that.
DIY doing better than the IFA in the short term (or vice versa) would be expected and is probably fashion investing. That same person could put it all with the IFA and then realise he could have done better and so withdraw it all - probably a worse option.

Not saying this is how people would act but it seems sensible - have a plan an stick to it. Short term gains in an area probably means that area increases in risk.