How many people use an IFA?

bugslett

ComicGeek wrote: »

I run my own business, work long hours and have a young family. I don't have time to DIY my own investments. For me, our IFA is well worth their fee - I can make more money running my business than spending that time trying to DIY. Others may have more time available.

In my own work I come across lots of clients who have googled something and think they know better than someone with 20+ years experience in a specific field - a little bit of knowledge is dangerous....

Much my thoughts. My hours until this year have ranged from 100+ to 55 + commuting. I could in theory learn about investing ( I have a basic understanding from been a long term reader of this forum), but I don't imagine that I could out do my IFA. His returns have been very good and I've been very happy with his advice and the returns.

Similarly to you, I've seen people come into my specialism and depart quickly with their tails between their legs. A little bit of knowledge spread thinly is no knowledge at all.

Spreadsheetman

bugslett wrote: »

Much my thoughts. My hours until this year have ranged from 100+ to 55 + commuting. I could in theory learn about investing ( I have a basic understanding from been a long term reader of this forum), but I don't imagine that I could out do my IFA. His returns have been very good and I've been very happy with his advice and the returns.

Similarly to you, I've seen people come into my specialism and depart quickly with their tails between their legs. A little bit of knowledge spread thinly is no knowledge at all.

Ditto - I have quite a complicated tax situation including a company sale, property owned in one sipp plus various personal things going on that take up all my time. Having an IFA means that I don't have the extra load to carry of keeping on top of this too.

enthusiasticsaver

Thanks for all the responses and it looks like quite a lot of you use IFAs. My next question is how do you know if they are good and know their stuff? Are there questions I should be asking beyond the length of time they have been in business or numbers of clients they have? Is there anything which should make me run for the hills if they say something which is definitely not adviseable?

I take the point about my DB pension which is the main reason for me consulting the IFA although more and more I am leaning towards keeping it rather than transferring it. It will be useful to see what he says about our other investments though so we will still keep the appointment.

dunstonh

My next question is how do you know if they are good and know their stuff?

A bit of common sense should give you what you need to know. Is the adviser deflecting questions or answering them? Are they trying to be overly reassuring without being specific about why etc.

Are there questions I should be asking beyond the length of time they have been in business or numbers of clients they have?

The number of clients is irrelevant and gives you nothing to interpret.
Would you pick the one with 50 clients or 250 clients?
The one with 250 clients could have admin support behind them and be able to handle the workload. Or it could be that those behond the scenes are the ones with the knowledge. Or it could be someone that is going to be too busy to commit the ncecessary time.The one with 50 clients may have found that is the optimal level.
So, number doesnt matter.

Linton

enthusiasticsaver wrote: »

.....

So my question is, as most of the forum members on here are financially savvy how many use IFAS to deal with their investments rather than DIY and how do I decide whether their fees add value to our portfolio? He said he can model what our investments would have done had he invested them rather than them being put in diversified index trackers like many others have done on this forum.

....

Do not use an IFA to "add value to your portfolio", if by that you mean increase the return. Increasing the potential returns of a portfolio is easy - just increase the risk, avoiding scams and anything too wild. Of course you are also increasing the potential losses as well.

I see the IFA's essential role to be more to advise on what your financial strategy should be and what sort of portfolio or other financial options you should use to meet your objectives given your overall financial position, attitudes to risk, and wishes. Fund picking is a relatively unimportant activity as long as the set of funds together are appropriate for the requirements. How well the individual funds will perform in the future is unpredictable, the best that can be done is to use funds that have a reasonable potential to perform, or avoid those that dont.

bugslett

I confess I was very lazy in my choice. A fellow haulier recommended one and I went with him. Unfortunately he fell ill a few years later and recommended another IFA. He#s been very good too. I may have been very lucky but on the other hand the fellow haulier was pretty savvy and I trusted his judgement.

enthusiasticsaver

So it seems many of you agree that they are not there necessarily to advise on investments and get the best returns but suggest a strategy to achieve our financial objectives and take account of our risk profile?

I have spent the morning making a list of our current assets, factsheets for the funds we invest in and a spreadsheet showing current income being received and current expenditure.

We know our risk profile is cautious (I am ok with our portfolio dropping around 15-20% but would panic beyond that although I don't think I would cash out seeing as we have a large cash buffer). My husband is even more so as he has had no experience with investing and panicked a little this morning when he saw one of our funds was down 7% since the last valuation last autumn. We did a profile questionnaire a few years ago with another IFA when my husband was retiring and both came out cautious with them too.


I am having difficulty getting to grips with objectives though. We are already early retired with no debts or mortgage. We have a comfortable income and our non property assets are split 25% cash and 75% invested so in my mind we have already achieved our financial objectives. We have gifted money to our daughters and they are both financially independent. We have enough cash for immediate home improvements, to change our cars when they need changing and to pay for big holidays. I think he may talk about inheritance tax and minimising that but I think we are too young to think about that. I certainly do not want to get into trusts as we are way below the IHT threshold and we do not know what our care needs will be later in life.

Is there anything else we should be thinking about before the appointment? Considering this is a first appointment I guess it is mainly to see if we like and agree with what he says and decide to let him have some involvement with our financial setup and if he can maybe suggest ways to move forward. Having always sorted our finances out myself though I am not sure I am the type of person to let go of the financial reins. My husband is of the opinion I should carry on as we are being that we achieved our objectives of saving for early retirement, paid off our mortgage and have more than sufficient income to lead the lifestyle we want to. We are lucky I know but what can an IFA add to that?

Tardigrade1

bugslett wrote: »

Much my thoughts. My hours until this year have ranged from 100+ to 55 + commuting. I could in theory learn about investing ( I have a basic understanding from been a long term reader of this forum), but I don't imagine that I could out do my IFA. His returns have been very good and I've been very happy with his advice and the returns.

Similarly to you, I've seen people come into my specialism and depart quickly with their tails between their legs. A little bit of knowledge spread thinly is no knowledge at all.

If it works for you both, great. But some food for thought:
1) A 1% IFA fee is typical.

2) IFAs often feel bound to put you in funds with active management, whether at the asset level or a DFM ovelay with passive components. These charge more. Anything from 0.5% to 1.5% is not wholly suprising.
3) Active management is a proven loser over long time horizons in the vast majority of cases vs passive. The difference can very reasonably be in the large single digit percentages. Most IFAs have absolutely zero skill here. Most top fund managers don't really. It's a sham. But IFAs take the mickey - they'll often just pick eg highest Morningstar rating and call that due dilligence.

4) IFAs tend to pick platforms by ease of use. Not necessarily lowest cost, as they spend a ton of time managing through them, getting reports etc. So you may lose eg. 0.1% over DIY platform selection.
5) So to sum up, youre looking at anything from 1% to much much more in charges or (relative) investment loss vs DIY. 1.5-2.5% is a reasonable range for a largely passive managed advised fund portfolio on platform inc. advice fee.
6) Put simply, this means a good third or more of your lifetime savings growth is likely to be taken in excess fees. This is a vast amount for most people that can run to the hundreds of thousands. Most people have zero appreciation of the losses they suffer, particularly when in strong bull markets. Your IFA gives you a fund with 10% retun and you have a huge smile...not realising passive returned 13% and cost a further 1% less. When returns are more typical, eg 5%, this loss is even more meaningful. With the compounding effect over time, the costs add up to stagering amounts.

7) It really isn't difficult to learn the basics of risk / return, asset class investment profiles and to find some decent, cheap mutual funds that suit your needs. You'd be staggered at how shallow some IFA kno0wledge is on the investment front. This is just a way better route than paying an IFA £xxx,xxx's.


But as I said before....complex estate/tax planning? Sure, there is some tricky accrued knowledge. Pay a fixed fee for a consultation and probably worth it. But investment = stay very clear, IMO.

dunstonh

1) A 1% IFA fee is typical.

0.5% is the dominant figure. 1% is more typical for smaller amounts.

2) IFAs often feel bound to put you in funds with active management, whether at the asset level or a DFM ovelay with passive components. These charge more. Anything from 0.5% to 1.5% is not wholly suprising.

I disagree. Plenty of IFAs run trackers in their portfolio. Mix and match is typical. DFMs tend to be used more by wealth management firms and I agree that mostly (but not all) DFMs add a layer of charges that are largely unnecessary.

Most IFAs have absolutely zero skill here.

And you have interviewed 20,000 advisers to come up with that opinion?

But IFAs take the mickey - they'll often just pick eg highest Morningstar rating and call that due dilligence.

Have you not come across MIFID II? Even before that, the FAMR increased requirements and the RDR prior to that.

4) IFAs tend to pick platforms by ease of use. Not necessarily lowest cost, as they spend a ton of time managing through them, getting reports etc. So you may lose eg. 0.1% over DIY platform selection.

There is an element of that with some. However, again, you are bundling all on that basis which is unfair. For example, we use platforms in the 0.2x% range. Half the cost of HL on the DIY side.

5) So to sum up, youre looking at anything from 1% to much much more in charges or (relative) investment loss vs DIY. 1.5-2.5% is a reasonable range for a largely passive managed advised fund portfolio on platform inc. advice fee.

Where on earth are you getting your figures from? The advisers on this site that have mentioned their charges tend to fall in the 0.9-1.5 range all on a mixed portfolio.

HappyHarry

Tardigrade1 wrote: »

If it works for you both, great. But some food for thought:
1) A 1% IFA fee is typical.

2) IFAs often feel bound to put you in funds with active management, whether at the asset level or a DFM ovelay with passive components. These charge more. Anything from 0.5% to 1.5% is not wholly suprising.
3) Active management is a proven loser over long time horizons in the vast majority of cases vs passive. The difference can very reasonably be in the large single digit percentages. Most IFAs have absolutely zero skill here. Most top fund managers don't really. It's a sham. But IFAs take the mickey - they'll often just pick eg highest Morningstar rating and call that due dilligence.

4) IFAs tend to pick platforms by ease of use. Not necessarily lowest cost, as they spend a ton of time managing through them, getting reports etc. So you may lose eg. 0.1% over DIY platform selection.
5) So to sum up, youre looking at anything from 1% to much much more in charges or (relative) investment loss vs DIY. 1.5-2.5% is a reasonable range for a largely passive managed advised fund portfolio on platform inc. advice fee.
6) Put simply, this means a good third or more of your lifetime savings growth is likely to be taken in excess fees. This is a vast amount for most people that can run to the hundreds of thousands. Most people have zero appreciation of the losses they suffer, particularly when in strong bull markets. Your IFA gives you a fund with 10% retun and you have a huge smile...not realising passive returned 13% and cost a further 1% less. When returns are more typical, eg 5%, this loss is even more meaningful. With the compounding effect over time, the costs add up to stagering amounts.

7) It really isn't difficult to learn the basics of risk / return, asset class investment profiles and to find some decent, cheap mutual funds that suit your needs. You'd be staggered at how shallow some IFA kno0wledge is on the investment front. This is just a way better route than paying an IFA £xxx,xxx's.


But as I said before....complex estate/tax planning? Sure, there is some tricky accrued knowledge. Pay a fixed fee for a consultation and probably worth it. But investment = stay very clear, IMO.

What utter rubbish you are spouting.

Sorry, but really, that's just poor posting, and I suspect, trolling.

e.g. IFAs are more than happy to advise on passive funds if that's more suited to a client.

e.g. IFAs do not only look at Morningstar ratings and call that due diligence.

e.g. IFAs have plenty of skill in chosing a portfolio of funds. You clearly haven't spoken to any IFAs that I know.

e.g. 1.5-2.5% is not a reasonable range for a largely passive managed advised fund portfolio on platform inc. advice fee. Are you just making these figures up?

Please at least be accurate with your posts. I recognise that you don't think IFAs are useful to you, but to the vast majority of people, including first time posters here looking for assistance, IFAs can greatly remove the risk of someone losing a lot of money, and help people to ensure they end up with a regularly reviewed, tax-efficient investment strategy that is aligned with their attitude to risk.