Ifa

bcfclee27

Morning, so I invested 100k with my IFA split between me and my wife. 20k in a S&S ISA and 30k in a GIA.

Started investing in December with him and he put us in Brewin Dolphin balanced and cautious funds which matched our risk profiles.

He charged us 2.25% on the initial investment and 0.75% ongoing.

The fees for BD and the IFA are 2% ongoing. At first with little knowledge I thought ah well 2% is nothing but I didn't realise that basically if in the year the funds make me 4% I've basically given half the profit to the IFA and platform and not 2% of the profit as I initially thought.

Since then I have really gotten into the world of passive investing in multi asset funds. I have done a lot of research and reading on here.

I have come to realise that the charges are high so have set out to reduce how much is invested with the IFA and go the DIY route.

I have invested on my own 5k into each of the following
- HSBC dynamic
- HSBC global
- VLS 60
- VLS 80
- Orbis Global balanced funds

These all roughly make up 70% equities and I think are a good mix.

My main questions revolve around the IFA - am I tied in with him and his investments or can I leave at any time ?

My plan is to leave the 20k already invested with him in the S&S ISA.
In April I will then take out the 30k in my GIA held with him (Brewin dolphin through aviva) and then put 20k split between the 2 VLS funds (invested with Vanguard platform).
Year after that I will put 20k into another S&S ISA with the HSBC pots invested with cavendish.

At the end of April 2019 I will have in S&S ISAs....
20k - Brewin Dolpnhin balanced funds
20k - VLS (10k vls80 / 10k vls60)
20k - HSBC (10k dynamic / 10k balanced)

Then I can see how each ISA compares and if suspected the Brewin dolphin lags due to charges I can move this into the others.

Is this a decent plan ? I imagine the IFA will try to advise against this but I really believe in this strategy and aim to eventually be completely DIY and with my wife's allocation if I can convince her :rotfl:.

Can the IFA block this or could I literally just pull all my money out and say thanks see you later.

Thanks in advance for everyone's help - love this board :T

dunstonh

My main questions revolve around the IFA - am I tied in with him and his investments or can I leave at any time ?

You can leave at any time

Is this a decent plan ?

Only time will tell. Our model portfolio exceeds the returns of VLS60 (risk matched) despite being more expensive. Charges are an important consideration but secondary to where you invest. However, if you want to focus on charges first, then fair enough.

Although I am not a fan of BD and do think that adds a layer of charges unnecessarily. We have our model portfolio on advisory or discretionary basis. Discretionary costs an extra 0.25% p.a. plus VAT and virtually no-one goes for it and uses the advisory version instead.

Can the IFA block this or could I literally just pull all my money out and say thanks see you later.

Cant block it. However, with such a low value remaining they may end their ongoing service.

bowlhead99

bcfclee27 wrote: »

I have invested on my own 5k into each of the following
- HSBC dynamic
- HSBC global
- VLS 60
- VLS 80
- Orbis Global balanced funds

These all roughly make up 70% equities and I think are a good mix.

They are a mix of things all trying to do the same sort of thing with different levels of risk. Whether they are a good mix depends on what you want.

You had said that the IFA has put you into a mix between balanced and cautious funds. But here you are going for a mix between balanced and aggressive. So, if the markets are good you may 'beat the IFA' and the recommendations he gave you which you had been happy with from a risk perspective ; and if markets are sour, you will likely lose more money than you were hoping to lose. As a 'challenge the IFA for which way is best' it is not a great comparison.

My plan is to leave the 20k already invested with him in the S&S ISA.
In April I will then take out the 30k in my GIA held with him (Brewin dolphin through aviva) and then put 20k split between the 2 VLS funds (invested with Vanguard platform).
Year after that I will put 20k into another S&S ISA with the HSBC pots invested with cavendish.

At the end of April 2019 I will have in S&S ISAs....
20k - Brewin Dolpnhin balanced funds
20k - VLS (10k vls80 / 10k vls60)
20k - HSBC (10k dynamic / 10k balanced)

Then I can see how each ISA compares and if suspected the Brewin dolphin lags due to charges I can move this into the others

Well, at April 2019 you probably won't have £20k in each because the £20k in the ISA now at BD will likely grow or contract over a two year period, while some of the 'self managed' ISA will only just have been invested and will be at £20k (assuming no change to allowances). But I see what you are saying.

Unfortunately in order to then see what 'does the best' you have to wait 10-15 years to get through an entire economic cycle or two, to see the ups and the downs of the markets which will change from year to year, and then work out what did 'best'. Doing best does not necessarily mean top performance - for example, the IFA money is very deliberately in cautious and balanced funds to be less volatile and give downside protection. If it does that it has met its objectives.

Your funds have not really been selected to do that. You just picked them to be 'a good mix' and included the Dynamic fund with high equity content and mostly foreign-listed investments, and the VLS80 likewise, to complement the more balanced funds. Whereas be contrast the IFA used cautious funds to complement the more balanced funds because that's where your risk profile came out.

You mention "if brewin dolphin lags -due to charges- you can move it. Firstly as mentioned we are talking ten years plus to see how the respective funds handle the rough with the smooth. But secondly if BD underperforms how do you know it is 'due to the charges'? The charges are inherent in delivering their performance the way it's delivered. Really what you mean is the net result of gross performance and charges and IFA fees is what you will compare to the net result of the other.

Once you get your head around the concept that 'performance' relates to the performance of delivering an objective (which might be income, low volatility, capital preserved in a downturn etc) you can measure them all against that objective. Obviously the IFA fees are a drag on one of the pots if you and wife are happy that you don't need the IFA.

Is this a decent plan ? I imagine the IFA will try to advise against this but I really believe in this strategy and aim to eventually be completely DIY and with my wife's allocation if I can convince her :rotfl:.

If you believe your allocations are better than the IFAs because having bought the initial advice you have since undertaken greater learning so discovered a way to get the same results net of fees and cut out the IFA fee layer for advice you no longer need, then fair enough. But if that is the case, surely you would take out more than just £20k per person per year under your own control - just self manage the lot.

Of course the IFA will be resistant to the idea of you pulling out bits of the fund assets and throwing them into your own plan. An IFA is best used when advising on all your assets to give you advice on your overall situation, seeing the big picture. It is hard to manage the ups and downs and control for risk on your personal financial assets as a whole, when you are going to independently be putting loads of money into a self managed portfolio that he can't see.

Is he supposed to take account of your self managed assets while running the IFA-advised portion, ie when you buy lots of stuff off higher risk than your target he has to go even lower to get your overall assets back to the cautious/balanced profile that your wife wants? That doesn't seem like you'll get a great performance figure from him (except during down markets and crashes).

Or is he supposed to completely disregard your other assets so he ends up with just something like £20-30k under management which he has to advise on a cautious/balanced solution and not give any advice on tax wrappers or the majority of your portfolio because you're handling that stuff? The costs of advising on a £20k 'chunk' of portfolio but with regard to the allocations and risks of the other £80k, being informed of what's on it on a regular basis, might be similar to advising on the whole £100k, so you won't necessarily save IFA fees if that is the goal. And certainly the IFA fees on managing £20k are going to be more than 0.75% anyway because you can't run an IFA business on £150 a year.

So, it seems you are setting the IFA up to fall and there is no point in you setting up a bad solution that's doomed to fail just to prove you are investment savvy and don't need an IFA because you won the competition by making the other player pay with an arm and leg tied behind his back.

My main questions revolve around the IFA - am I tied in with him and his investments or can I leave at any time ?

Can the IFA block this or could I literally just pull all my money out and say thanks see you later.

You have paid a fee for initial advice on the £100k. If you don't want to follow the advice, you can take back the assets, though you can't get back the fee. But you can avoid future fees by not taking future services and terminating your agreement. Unless the IFA has told you otherwise in the documentation you were given, there won't be a significant exit fee to get the money or of the BD accounts but there may of course be a bid-offer spread on the asset values depending on the funds structure.

bcfclee27

bowlhead99 wrote: »

They are a mix of things all trying to do the same sort of thing with different levels of risk. Whether they are a good mix depends on what you want.

You had said that the IFA has put you into a mix between balanced and cautious funds. But here you are going for a mix between balanced and aggressive. So, if the markets are good you may 'beat the IFA' and the recommendations he gave you which you had been happy with from a risk perspective ; and if markets are sour, you will likely lose more money than you were hoping to lose. As a 'challenge the IFA for which way is best' it is not a great comparison.


Well, at April 2019 you probably won't have £20k in each because the £20k in the ISA now at BD will likely grow or contract over a two year period, while some of the 'self managed' ISA will only just have been invested and will be at £20k (assuming no change to allowances). But I see what you are saying.

Unfortunately in order to then see what 'does the best' you have to wait 10-15 years to get through an entire economic cycle or two, to see the ups and the downs of the markets which will change from year to year, and then work out what did 'best'. Doing best does not necessarily mean top performance - for example, the IFA money is very deliberately in cautious and balanced funds to be less volatile and give downside protection. If it does that it has met its objectives.

Your funds have not really been selected to do that. You just picked them to be 'a good mix' and included the Dynamic fund with high equity content and mostly foreign-listed investments, and the VLS80 likewise, to complement the more balanced funds. Whereas be contrast the IFA used cautious funds to complement the more balanced funds because that's where your risk profile came out.

You mention "if brewin dolphin lags -due to charges- you can move it. Firstly as mentioned we are talking ten years plus to see how the respective funds handle the rough with the smooth. But secondly if BD underperforms how do you know it is 'due to the charges'? The charges are inherent in delivering their performance the way it's delivered. Really what you mean is the net result of gross performance and charges and IFA fees is what you will compare to the net result of the other.

Once you get your head around the concept that 'performance' relates to the performance of delivering an objective (which might be income, low volatility, capital preserved in a downturn etc) you can measure them all against that objective. Obviously the IFA fees are a drag on one of the pots if you and wife are happy that you don't need the IFA.


If you believe your allocations are better than the IFAs because having bought the initial advice you have since undertaken greater learning so discovered a way to get the same results net of fees and cut out the IFA fee layer for advice you no longer need, then fair enough. But if that is the case, surely you would take out more than just £20k per person per year under your own control - just self manage the lot.

Of course the IFA will be resistant to the idea of you pulling out bits of the fund assets and throwing them into your own plan. An IFA is best used when advising on all your assets to give you advice on your overall situation, seeing the big picture. It is hard to manage the ups and downs and control for risk on your personal financial assets as a whole, when you are going to independently be putting loads of money into a self managed portfolio that he can't see.

Is he supposed to take account of your self managed assets while running the IFA-advised portion, ie when you buy lots of stuff off higher risk than your target he has to go even lower to get your overall assets back to the cautious/balanced profile that your wife wants? That doesn't seem like you'll get a great performance figure from him (except during down markets and crashes).

Or is he supposed to completely disregard your other assets so he ends up with just something like £20-30k under management which he has to advise on a cautious/balanced solution and not give any advice on tax wrappers or the majority of your portfolio because you're handling that stuff? The costs of advising on a £20k 'chunk' of portfolio but with regard to the allocations and risks of the other £80k, being informed of what's on it on a regular basis, might be similar to advising on the whole £100k, so you won't necessarily save IFA fees if that is the goal. And certainly the IFA fees on managing £20k are going to be more than 0.75% anyway because you can't run an IFA business on £150 a year.

So, it seems you are setting the IFA up to fall and there is no point in you setting up a bad solution that's doomed to fail just to prove you are investment savvy and don't need an IFA because you won the competition by making the other player pay with an arm and leg tied behind his back.



You have paid a fee for initial advice on the £100k. If you don't want to follow the advice, you can take back the assets, though you can't get back the fee. But you can avoid future fees by not taking future services and terminating your agreement. Unless the IFA has told you otherwise in the documentation you were given, there won't be a significant exit fee to get the money or of the BD accounts but there may of course be a bid-offer spread on the asset values depending on the funds structure.

Fantastic post Bowlhead and a lot of things I hadn't even considered.
A lot to think about....

I think the overriding concern is how much they take in fees every year which is a real headwind.

Another alternative I suppose is if I just ask to take out the 30k for me to invest. This way he has my 20k invested as planned and he will have my wife's whole share to invest.

In this case I'm basically taking slightly more risk in my share which I'm happy with and don't have to contend with large fees every year.

Best of both worlds in a way.

I just have a massive urge to do at least some DIY on my investments.

The other concern especially with my wife's cautious fund is that if returns are fairly low then after fees we would have been better off chucking it at our mortgage.

I completely get what you are saying Bowlhead in respect of the IFA keeping risk down and volatility etc.
I would not be adverse or worried about managing the whole lot myself but would rather it was somewhere in the middle IE he just manages my wife's half as that way her cautious part balances out the overall pot.

It's a tricky one indeed....