How many people use an IFA?

ComicGeek

LHW99 wrote: »

There is nothing inherently wrong about choosing an IFA over DIY, if that helps you sleep at night and you would appreciate a bit of hand holding.

Nothing to do with that at all - it's just choosing the best person to do the job required, and for my pension/investments management that's my IFA and not me. I'm not so arrogant that I believe that a few hours on google is a good substitute for years of experience and doing the job full time. That's not to say that I'm not knowledgeable, interested and involved - we have regular reviews and discussions about future plans, current investments, performance, funds, risk levels etc etc. But I use the experience and time that my IFA can offer to my benefit.

Like all things in life, there are good IFAs and bad IFAs. I've got a good one and am happy to pay for their input.

dunstonh

fred246 wrote: »

I notice you two have totally ignored my other comment on this thread. An IFA saying show me your portfolio and I will tell you how much more I would have made. Totally unprofessional, unethical. Totally crooked.

Nothing wrong with that. IFAs have software that can do it.

fred246

IFAs have software that can find the best performing funds in the last five years so the IFA can say "that's where I would have invested it?

LHW99

ComicGeek wrote: »

Nothing to do with that at all - it's just choosing the best person to do the job required, and for my pension/investments management that's my IFA and not me. I'm not so arrogant that I believe that a few hours on google is a good substitute for years of experience and doing the job full time. That's not to say that I'm not knowledgeable, interested and involved - we have regular reviews and discussions about future plans, current investments, performance, funds, risk levels etc etc. But I use the experience and time that my IFA can offer to my benefit.

Like all things in life, there are good IFAs and bad IFAs. I've got a good one and am happy to pay for their input.

I agree, but was expressing my opinion in relation to the OP's comment

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.

. I probably fall into that same category. As you say, you are knowledgeable and involved and can discuss things through with your IFA. My point is that it is helpful if you are able to do that. Going to see an IFA with absolutely no clue beforehand of what they are likely to need to talk about makes things more difficult (though obviously not impossible) for both parties IMO.

dunstonh

IFAs have software that can find the best performing funds in the last five years so the IFA can say "that's where I would have invested it?

Again, this just highlights your lack of understanding. Doing what you say would be pointless and achieve nothing.

Have you no understanding of the RDR, FAMR and MiFIDII and the requirements and structures that need to be in place when building portfolios and making investment recommendations? You sound as if you are stuck in the 1980s.

fred246

The customer has a portfolio. The IFA is saying "show it me and I will show you one that I would have sold you which would have been better". The IFA can show him any portfolio he wishes. All it shows is that the IFA can construct a portfolio that did very well. There is no proof that he would have been sold that. There are lots of regulations controlling IFAs. IFAs have proved that they need them.

Malthusian

fred246 wrote: »

I notice you two have totally ignored my other comment on this thread.

Shame they didn't ignore both your comments as then we wouldn't have sidetracked the OP's thread with a nonsensical argument about how it is crooked to use Morningstar.

cfw1994

Malthusian wrote: »

Shame they didn't ignore both your comments as then we wouldn't have sidetracked the OP's thread with a nonsensical argument about how it is crooked to use Morningstar.

So: back on topic!

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.

Can we listen to the IFA and just ask him to sign the paperwork re the pension transfer providing he agrees that it is in our best interests to do it?

If anyone has used one how did you decide whether to go with them or not?

We have no IFA.
I don’t have a DB issue, but think that last bit is about right...but I do not know if they have to sign the paperwork if they vehemently disagree.
It is tough: what I would hope is that all IFAs would, with appropriate caveats to CYA for them!

More broadly on topic:
I would describe myself as interested in our finances (always had spreadsheets and goals!)

Approaching mid-50s, plan is to be able to retire if I wish in the next year or two (but still spending too much;), and actually quite enjoying work right now!), and am still pondering whether to get one.

Grateful to dunstonh for all the useful posts and responses here: remember, members who post and lurk on this sub-board are likely to be reasonably financially savvy!)

Have what looks like a decent company member scheme with Aviva. Low charges, over 80 funds to chose from.
Did some analysis with a pal when we moved to it many years ago, tweaked the default choices, & have further tweaked the choices a handful of times over the years.
Factsheets show we have “averaged” over 10% over the 10 year periods shown, which I’m not unhappy with.

Could an IFA taken that pot and improved it?
Who knows.

fred246 wrote: »

The customer has a portfolio. The IFA is saying "show it me and I will show you one that I would have sold you which would have been better". The IFA can show him any portfolio he wishes. All it shows is that the IFA can construct a portfolio that did very well. There is no proof that he would have been sold that. There are lots of regulations controlling IFAs. IFAs have proved that they need them.

I know fred’s posts are borderline trolling, but the financial industry is littered with challenges and examples: we are all fallible humans, and I fear there could be an element of truth in his words!
Around 25-30 years ago, a pal of mine became a FA.... I knew him to be hopeless with money, & I suspect my internal scepticism may have started there!

I would welcome input here from an example large portfolio that an IFA has used here for a client, but obviously I doubt that would be desirable to them!
I’d be surprised if the regulations could prevent an IFA saying “for one client we averaged a 13% growth over x years”. Sales puff is a ‘thing’, plus they may have 10-100 clients:assuming they are not all identikit models, chances are one may have done that...but what I would be asking is “give me the best, worst and average client performance, & please show your workings”.
How would they “prove” that without betraying client confidentiality?

A buddy of mine retired about a year go: using a large finance firm to manage his decent pot. I have not spoken precise numbers with him, and clearly this was a terrible year (timing wise in the markets!) to make that step, but he is returning to employment because the pot had “languished”. I suspect my amateur choices may well have done a bit better.


These days, it is very easy to get information. For example, over the years we have shifted & extended mortgages a few times, one doesn’t need a specialist for that.
Pensions & investments are a curious case where one will always wonder if they are “missing a trick”, and I suspect a paid for “health check” would be a good service for IFAsto offer...and perhaps is what we need!

Apologies: very long winded, but I woke early! Have a nice weekend all

enthusiasticsaver

Some very good points cfw1994 and many I agree with. I will approach any modelling of better performing portfolios with scepticism because as some other PPs point out anyone can beat on return if the level of risk is different. A few posters, Dunston particularly has made me question my choices of funds over the last few days. I picked some income funds mainly based on my preferred strategy of multi asset funds to reduce volatility and on yield which has been around 4.5%. However the funds are not cheap and the capital has dropped in value and I am now considering using my DB pension which pays out next year rather than transferring it and changing the income funds into accumulation units. I think I am really just second guessing myself and wonder if an IFA could offer advice.

I am like yourself, love spreadsheets and goals and have achieved them really but not sure now if that is more through luck than judgement. I have picked up a lot of information along the way and applied some of the advice given on this forum to my investment strategy but I struggle with picking funds which is why 75% of ours is in a Vanguard life strategy which is popular on here.

Even though I have decided against transferring the pension we still intend to see the IFA. Thanks again for all advice.

dunstonh

Around 25-30 years ago, a pal of mine became a FA.... I knew him to be hopeless with money, & I suspect my internal scepticism may have started there!

25-30 years ago, it was a sales industry with over 300,000 sales reps, agents and advisers. Polarisation took place 31 years ago (what defined an IFA vs FA). There have been a progressive raising of standards over the decades and today there are just 20,000.

A donkey could have been a FA 30 years ago. Even fred could have been. It was little more than read this manual over the weekend and as if by magic, you were an adviser. One of the biggest mistakes the PIA did was allow sales reps to refer to themselves as advisers. It should have protected the "adviser" word. You cannot compare the level of due diligence and research that is required today with 10 years ago, let alone 20 or 30. And there is more to come with the SMCR coming this year. That doesn't affect investments but regulated individuals holding control functions (which includes FAs and IFAs).

I know fred’s posts are borderline trolling, but the financial industry is littered with challenges and examples: we are all fallible humans, and I fear there could be an element of truth in his words!

There is if it was still in the 80s or 90s. However, today, you have investment governance in place with audit trails. This is why advisers today know the makeup of the funds that will be used. e.g if the client is best suited for a model portfolio then the model portfolio won't be built for them. It will already exist. They may be a risk level X with a 15 year+ term portfolio for example (names and style vary with firms) and there will be a built model portfolio already researched and documented as part of the firm governance.

There are individual variances and adjustments to suit needs (e.g. someone may already hold investments and you can't move them to you model all in one go so you progressively do it over the years and adjust the weightings to make sure the risk level is maintained).

Bottom line is that what should be done today resembles nothing like how it was done 10 years ago, let alone 20 or 30 years ago.

I would welcome input here from an example large portfolio that an IFA has used here for a client, but obviously I doubt that would be desirable to them!
I’d be surprised if the regulations could prevent an IFA saying “for one client we averaged a 13% growth over x years”. Sales puff is a ‘thing’, plus they may have 10-100 clients:assuming they are not all identikit models, chances are one may have done that...

It has moved to firm level model portfolios rather than individual adviser built model portfolios on a client by client basis. You sometimes still have to do bespoke individual portfolios (as mentioned higher up).

If the adviser decides you are, say, risk 4 long term, they can press a button on their software which generates a full report of what that portfolio is, how it is made up, the governance behind each fund. Different advisers will have different ways and different software but they can show the whole research behind the recommendation.

If you then said "how does that compare with the SJP managed fund that the lovely SJP guy is telling me about", the adviser can press a few more buttons and not just compare performance but also the underlying assets, risk levels, regional, sectors, unquoted stocks etc

but what I would be asking is “give me the best, worst and average client performance, & please show your workings”.
How would they “prove” that without betraying client confidentiality?

Not possible and not sensible. An adviser can have clients going back 30 years. What you did for them in the past is not the same as what you do today. They could be risk 4 and you could be risk 5. What benefit is it to compare them with you? you are investing today not 30 years ago.

One client may have said they want to invest in the lowest cost option going. i.e. they are cost focused rather than returns focused. The adviser gives advice on that instruction. Another says they have ethical concerns and the portfolio is built with that in mind. Another had a portfolio of funds already but you couldnt adjust them fully because of tax. So, they have a bit of a mix and match. You may have a high quantity of low knowledge consumers on your books where you use simple solutions rather than your model that is used for more advanced investors.

We used to run passive only, managed only and hybrid portfolios to suit different people. We dropped the managed only portfolio and stopped proactively using the passive only. Today the hybrid portfolio is by far the most popular as it outperformed managed and passive consistently. We still have a few on passive who are insistent on staying that way. So, should we include the periods people were on different strategies?

So, whilst you can supply some history, you have to remember that things change.

Finally, above all else, an IFA is primarily there to provide advice and planning and put in place suitable solutions which have due diligence and research carried out on them and are structured and understandable. Nowhere in the requirements of an IFA does it say you should aim for outperformance. An IFA is not an investment manager.