IFA Fees

BritishInvestor

dunstonh wrote: »

Over half the advisers that attempt to join the profession leave within 2 years as they cannot make a success of it.

Interesting stats. I was wondering if that was from an official study and what the main reasons for failure were - I assume inability to generate sufficient fee income before funds ran out? It's going to be interesting to see where the next generation of advisers come from.

Alexland

dunstonh wrote: »

A smaller investor may use a multi-asset fund. A larger investor may use a model portfolio which involves more work.

Is there any independent analysis to show that model portfolios would on average outperform a fixed or risk managed multi asset fund over a sustained period?

I am not anti-IFA but have the suspicion this aspect is only implemented to create work for the IFA to justify the ongoing charges and give them something to talk about with clients who are in a period in which they do not otherwise require advice.

It seems so much more efficient to have the fund manager do the rebalancing rather than multiply out the activity. I can see how it might help the client feel special but is there any real need for this?

Alex

Prism

Alexland wrote: »

Is there any independent analysis to show that model portfolios would on average outperform a fixed or risk managed multi asset fund over a sustained period?

There seems to be a massive variance in multi asset funds in the same way that I'm sure there is with IFA performance (Trustnet shows 10 year total return ranging from 26% to 174%). I guess the trick is picking the right IFA in the same way you might pick the right multi asset fund.

Alibert

On average, everyone makes the average return.
Less costs

BritishInvestor

Alexland wrote: »

Is there any independent analysis to show that model portfolios would on average outperform a fixed or risk managed multi asset fund over a sustained period?

I am not anti-IFA but have the suspicion this aspect is only implemented to create work for the IFA to justify the ongoing charges and give them something to talk about with clients who are in a period in which they do not otherwise require advice.

It seems so much more efficient to have the fund manager do the rebalancing rather than multiply out the activity. I can see how it might help the client feel special but is there any real need for this?

Alex

Surely there are many more interesting/important things to talk about in client meetings than how portfolios have performed?

BritishInvestor

Prism wrote: »

There seems to be a massive variance in multi asset funds in the same way that I'm sure there is with IFA performance (Trustnet shows 10 year total return ranging from 26% to 174%). I guess the trick is picking the right IFA in the same way you might pick the right multi asset fund.

Not sure what picking the "IFA" has to do with portfolio performance??

Alexland

Prism wrote: »

There seems to be a massive variance in multi asset funds in the same way that I'm sure there is with IFA performance (Trustnet shows 10 year total return ranging from 26% to 174%). I guess the trick is picking the right IFA in the same way you might pick the right multi asset fund.

What I am trying to understand is why a client would ever want to 'progress' from a risk managed mixed asset fund into an IFA defined portfolio? Seriously, what's the point?

Alex

cloud_dog

Alexland wrote: »

What I am trying to understand is why a client would ever want to 'progress' from a risk managed mixed asset fund into an IFA defined portfolio? Seriously, what's the point?

Alex

You seem to be coming at this from a 'how do IFAs justify themselves' perspective in comparison to the DIY option.

Perhaps really, at a very simplistic level, it has nothing to do with IFAs themselves, and has everything to do with people (you, me, them) who either need or want an IFA, or feel they need or want an IFA, to undertake the work or burden of responsibility for them because they cannot or do not want to undertake it themselves.

Whilst I see no need to use an IFA I have no issue with people who choose take the opposite approach. There is soooo much freely available information out there to help but some people don't or can't do this.

dunstonh

Interesting stats. I was wondering if that was from an official study and what the main reasons for failure were - I assume inability to generate sufficient fee income before funds ran out? It's going to be interesting to see where the next generation of advisers come from.

Lack of ability to earn enough is the most common reason. You cant cold call, cant door knock etc.

Is there any independent analysis to show that model portfolios would on average outperform a fixed or risk managed multi asset fund over a sustained period?

Every adviser firm will have its own model portfolio. As such, no such independent analysis will exist. Unless you consider the independent in IFA. Ours is beating VLS.

I am not anti-IFA but have the suspicion this aspect is only implemented to create work for the IFA to justify the ongoing charges and give them something to talk about with clients who are in a period in which they do not otherwise require advice.

Not at all. Why do you think all these single sector funds exist? It is to allow them to be held in a wider portfolio. Now, there are plenty of DIY investors (including a number here) who hold single sector funds in their equivalent of a model portfolio and beat VLS too.

It seems so much more efficient to have the fund manager do the rebalancing rather than multiply out the activity. I can see how it might help the client feel special but is there any real need for this?

And you generally find that managed multi-asset funds are more expensive. And passive multi-asset funds stick to a static allocation that rarely changes.

People who use an IFA typically do so for one of two reasons.
1) they dont want to spend their time doing the work and want someone else to do it
2) they dont have the knowledge and want some to do the work.

Multi-asset funds are not some panacea of perfection. They are effectively a model portfolio within a fund. Single sector funds builts to a model portfolio allows you to pick different funds for different areas. If you take a look at the very good Premier funds you will see they have very good returns but eye-watering charges.

What I am trying to understand is why a client would ever want to 'progress' from a risk managed mixed asset fund into an IFA defined portfolio? Seriously, what's the point?

Potentially better returns. Why does any investor make investment decisions?
Potentially lower charges (our model portfolio OCF plus adviser charge comes in cheaper than most multi-asset funds).

Prism

BritishInvestor wrote: »

Not sure what picking the "IFA" has to do with portfolio performance??

So you don't think that the skill/experience of an IFA has any effect on the returns you might get? Or an IFA can't find a suitable allocation for your needs depending on your risk level, investment time period, age etc