investment advice

celt80

I spoke to a financial advisor today about investing roughly £250000. He's going to come back to me with a plan on what the next steps are, he said that they hoped for a 5% net growth per year and the fee for that amount of money would be £7500 plus a management fee of 0.7%. The company have a good reputation as I looked them up, I was just wondering how much other people have paid and have gained?

jaybeetoo

Did you see a financial advisor or an independent financial advisor?

celt80

he was an independent financial advisor

dunstonh

he fee for that amount of money would be £7500 plus a management fee of 0.7%.

£7500 is far too high. Aim for a third of that.

is the 0.7% the total charge or the adviser charge?

The company have a good reputation as I looked them up,

Most IFA firms have no internet coverage about them at all. They are usually small local firms of 1-4 advisers. Larger ones may have better internet coverage but the personal service and cost often goes up with the larger ones as they have more people to pay (advisers not getting all the fee income as they have to pay the owners and support staff etc)

I was just wondering how much other people have paid and have gained?

Impossible to say what you will gain as you dont mention the risk profile and investments. A lower risk portfolio will typically perform lower than a higher risk one over the long term. The initial fee is the concern here. Its way too high.

Linton

celt80 wrote: »

I spoke to a financial advisor today about investing roughly £250000. He's going to come back to me with a plan on what the next steps are, he said that they hoped for a 5% net growth per year and the fee for that amount of money would be £7500 plus a management fee of 0.7%. The company have a good reputation as I looked them up, I was just wondering how much other people have paid and have gained?

Its impossible to say what people would have gained had they not taken advice because it all depends on how they would have invested. The levels of risk would be likely to be different. The non advised person may have, posssibly unwittingly, taken a large gamble which either did or did not happen to have paid off. An IFA portfolio is more likely to be based on providing what you need the return to be in order to meet your requirements within your risk acceptance rather than taking on extra risk which may cause you sleepless nights for possible additional return you do not need.

dkmee90

Hi Celt,

I am assuming that the £7,500 and 0.70% are simply the advisers costs?

There will also be a charge for holding the investment on a platform (anywhere between 0.25% and 0.50%) and also the cost of the funds that you will be invested in (typically around 1% - 1.5% depending on the strategy utilised).

If we assume the lower of each you will be looking at an aggregated annual charge of 1.95% made up of:

0.70% Adviser Charge
0.25% Platform Charge
1.00% Investment Fund Charge

You will therefore need an investment that will return of nearly 7% per annum to achieve the net return of 5%. There is obviously no guarantee of those sort of returns as your investment can go down as well as up - you just need to go in with your eyes open.

If the initial charge is coming from the original £250,000 you will obviously also need to make this back as well before you start making any profit.

Personally, I would say that the initial fee is quite high but charges will vary from firm to firm.

It may be worth contacting a couple of different advisers so that you can compare not only cost but also the level of service you can expect to receive. It is important to find someone that you are comfortable with as it is likely you will be investing for a number of years.

Hope the above helps, happy to answer any further questions.

Brown_Bear

Have you spoken to any of the clients of the adviser?

If they're going to advise you to do anything 'high-risk' or 'alternative' then it may be worth it - as you get some kind of insurance from the IFA - if it turns out to be a scam or completely unsuitable etc.

But if the IFA is just going to advise you to invest in a global tracker or multi-asset fund - then it seems you'd be paying them money for little reason.

What would you do if there was no IFA? How would you invest?

celt80

The adviser said a medium risk strategy is what he would advise for my circumstances. The £7500 fee was for the them taking the money and investing it then the 0.7% was for running the investment. I'm very new to this so I'm want all and any advice as I'm not rushing into anything and I'm not going to make a mistake. This money is my wifes legacy to our kids so I intend to make it work for us, just not to sure how yet. I am going to get an isa sorted tonight then another in the new financial year over and above the money I've mentioned above.

Brown_Bear

celt80 wrote: »

The adviser said a medium risk strategy is what he would advise for my circumstances. The £7500 fee was for the them taking the money and investing it then the 0.7% was for running the investment. I'm very new to this so I'm want all and any advice as I'm not rushing into anything and I'm not going to make a mistake. This money is my wifes legacy to our kids so I intend to make it work for us, just not to sure how yet. I am going to get an isa sorted tonight then another in the new financial year over and above the money I've mentioned above.

So probably just a 50/50 bond and equity fund then?

Did they mention anything to do with asset protection? Or are you paying them to trust the UK govt forever?

Brown_Bear

Remember risk is not just about investment risk.
You should also consider risks such as computer hacking, bank fraud, burglary, counter-party and confiscation risks etc.

eskbanker

Brown_Bear wrote: »

Did they mention anything to do with asset protection? Or are you paying them to trust the UK govt forever?

Brown_Bear wrote: »

Remember risk is not just about investment risk.
You should also consider risks such as computer hacking, bank fraud, burglary, counter-party and confiscation risks etc.

All the tinfoil hat stuff is probably best kept to the other threads that are more appropriate locations for that sort of thing - OP here is recently widowed and looking for assistance with sensible options for their kids' legacy, so I'd suggest that clouding the issue with that sort of talk is unlikely to be helpful....