Do we need a ifa?

Teaandscones

Albermarle wrote: »

Also something not often discussed in this long running debate , is that some people just prefer that a professional looks after their financial affairs, and some just prefer to DIY, as they are interested by the subject and don't feel comfortable delegating everything to someone else.

I DIY partly because I am interested in the subject, but my elderly father uses a good local IFA.

I don't find it a problem to organise my own investments though you do have to accept that you will sometimes have to look at the idiot fund manager in the mirror. However, although that is fine in my 50's, if I live to my 90's I will probably need an IFA.

zagfles

dunstonh wrote: »

Not quite as simple as that though.

An IFA may cost between 0.5% and 1%. The dominant figure is 0.5%. So, I will use that. So, using an IFA will add 0.5% that DIY investors wont pay.

However, that is just one bit of it. Platform charge and investment charge need to be considered.

HL, the UK's most popular DIY platform is 0.45%.

I'm paying 0.25% with HL for funds. If you use ETFs HL's platform charge is capped at £200. It's not always 0.45%, whatever you keep saying.

Most IFA platforms are in the 0.2x% range now. Whilst you dont have to use HL, it is worth noting that HL have more assets under management for DIY investors and all the other DIY platforms put together. So, that adds 0.2x% compared to IFA version. (lets say 0.20%).
Investment funds cost exactly the same whether you use an IFA or DIY.

Not necessarily. HL do discounts on some funds.

However, lets note that two of the top selling funds to DIY invesrtors are HL's own brand funds costing 1.49% or 1.31% So, a significant proportion of DIY investors are paying 0.45% pllus 1.49% = 1.94% pa.

According to the HL website https://www.hl.co.uk/funds their most popular 10 funds currently are:
Fundsmith Equity Class I - Accumulation (GBP)
Legal & General International Index Trust Class C - Accumulation (GBP)
Legal & General US Index Class C - Accumulation (GBP)
LF Lindsell Train UK Equity Class D - Accumulation (GBP)
LF Woodford Equity Income Class Z - Accumulation (GBP)

Lindsell Train Global Equity Inclusive - Class A - Income (GBP)
Lindsell Train Global Equity Class D - Income (GBP)
Marlborough UK Micro-Cap Growth Class P - Accumulation (GBP)
Rathbone Global Opportunities Class S - Accumulation (GBP)
Royal London Sterling Extra Yield Bond Class Y - Income (GBP)


None of which have charges anywhere near 1.49%. Most of them are around 0.5%, and two of them are 0.08% and 0.06%. So if you want to selectievly pick 2, why not those 2? Together with my negotiated platform charge of 0.25%, that makes 0.31% or 0.33%. If I want to be selective.

We know from the IFAs that post on this site that their model portfolios tend to be around the 0.3-0.6% range.Lets use the upper figure

No, how about using 1.9% like in this thread https://forums.moneysavingexpert.com/discussion/5553079/sipp-fee-question where you tried to justify this level of charging for a bog standard multi-asset fund.

dunstonh

I'm paying 0.25% with HL for funds. If you use ETFs HL's platform charge is capped at £200. It's not always 0.45%, whatever you keep saying.

And how many of HL's investors are paying 0.25% compared to 0.45%?

Not necessarily. HL do discounts on some funds.

As do virtually all platforms and HL do not have the widest range of superclean.

None of which have charges anywhere near 1.49%. Most of them are around 0.5%, and two of them are 0.08% and 0.06%. So if you want to selectievly pick 2, why not those 2? Together with my negotiated platform charge of 0.25%, that makes 0.31% or 0.33%. If I want to be selective.

You have chosen the wrong link. If you select the top 10 selling funds on HL you go to this link:
https://www.hl.co.uk/funds/research-and-news/popular-funds

No, how about using 1.9% like in this thread https://forums.moneysavingexpert.com/discussion/5553079/sipp-fee-question where you tried to justify this level of charging for a bog standard multi-asset fund.

You mean the thread where I say in my very first response that "The SL Myfolio funds are at the more expensive end of the scale". But I say the adviser charge (of 0.5%) is fine and platform charge of 0.30% is fine.

Plus, after charges, the fund has outperformed the equivalent VLS fund over 5 years.

zagfles

dunstonh wrote: »

And how many of HL's investors are paying 0.25% compared to 0.45%?

I don't know how many others have negotiated a platform discount like I have, or how many use ETFs and so get capped at £200. Point is it's not always 0.45% whatever you keep saying.

As do virtually all platforms and HL do not have the widest range of superclean.

Why did you say they're all the same then?

You have chosen the wrong link.

My link showed the most popular funds in the last week. Yours was from Feb.

If you select the top 10 selling funds on HL you go to this link:
https://www.hl.co.uk/funds/research-and-news/popular-funds

Even your out of date list has the two cheap trackers I mentioned above. 0.06% and 0.08%. Plus some actively managed funds at around 0.5%. But doesn't really suit your argument to mention those I guess. Just selectively choose the expensive multi manager ones from an out of date list.

You mean the thread where I say in my very first response that "The SL Myfolio funds are at the more expensive end of the scale".

Yes, you use the expensive end of the scale for the HL funds, ie picking the 2 most expensive from an out of date list of 10. So why not use the expensive end of the scale for the IFA comparison?

dunstonh

I don't know how many others have negotiated a platform discount like I have, or how many use ETFs and so get capped at £200. Point is it's not always 0.45% whatever you keep saying.

It doesn't matter. Their published charge is 0.45% and the vast majority are paying that. We are talking about the typical. What most are doing.

Why did you say they're all the same then?

Its an insignificant difference and with most platforms having the same superclean, it is not the differentiator you seem to make it out to be.

My link showed the most popular funds in the last week. Yours was from Feb.

And you think one week is a better sample than one month?
How about a whole tax year?
https://www.hl.co.uk/news/articles/archive/the-tax-years-10-most-popular-isa-funds

There will always be funds that come and go but they were there in Dec 2016 too:
https://www.hl.co.uk/news/articles/archive/10-most-popular-isa-funds-in-december

zagfles

dunstonh wrote: »

It doesn't matter. Their published charge is 0.45% and the vast majority are paying that. We are talking about the typical. What most are doing.

So why have you selectively picked the two most expensive HL funds for comparison? Do you think it's "typical" to invest in just those 2 funds, not any of the others in their top 10 (from whatever list)?

bostonerimus

Sensible people will try to get the best deal if they go with an IFA or do DIY. So that means looking at costs and fees and minimizing what you pay. Pointing out that people make mistakes and do dumb things isn't much of a revelation. To avoid making mistakes I advocate a simple buy and hold portfolio of a few broad index funds...or a multi-asset fund.

I'm lucky enough to have access to Vanguards US platform which is "full service" as it has a brokerage and I could buy anything, but I stick to Vanguard funds because there are zero transaction and platform fees for owning those. The only cost is the actual fund fee which are very low as I stick almost entirely to index funds....my "Total stock market Index" fund has fees of 0.04%. With a simple 60/40 ish portfolio of a few index funds over the last 30 years I've averaged 8.5% annual return. I retired in 2014 and over the last 5 years my annual average return has been 7% so things are going to plan and I don't have to do much if anything to manage my portfolio. I don't do anything clever and I don't pay anyone to do nothing clever either.

dunstonh

So why have you selectively picked the two most expensive HL funds for comparison?

perhaps if you actually read the thread in context rather than trying to pick holes in selective areas whilst ignoring the rest you would have got it. It was to highlight the point that DIY doesn't automatically mean cheaper.

Some of the actually suggest other frequent failings of DIY investors. i.e. fashion investing and going above risk profile.

Do you think it's "typical" to invest in just those 2 funds, not any of the others in their top 10 (from whatever list)?

Maybe. Maybe not. Given there are around 30,000 investment options available, nothing can really be classed as typical. However, anything in the top 10 to the DIY platform that is bigger than all the other DIY platforms put together has to have a high volume going into it.

[Deleted User]

It was to highlight the point that DIY doesn't automatically mean cheaper.

Investors make mistakes. Of course. So do IFAs. In the last few days we saw a couple of terrible, expensive portfolios put together by IFAs. IFAs have inherent problems:

- not that well educated. Nine months courses don’t make them able to compete against people with good finance or maths degrees.
- rewarded purely based on their marketing skills. They must be able to impress naive punters. Knowledgeable ones don’t tend to need any help with their portfolios any more.
- to charge annual fees in thousands or tens of thousands they need to show level of complexity above and beyond a few simple index funds. That drives them to complex and meaningless and expensive portfolios.

Bottom line: there are good and bad IFAs. There are good and bad investors. Returns are not guaranteed either way. IFA fee is guaranteed. Nothing else. Every. Single. Year. On the same money pot. It’s a rip-off fee structure.

Some of the actually suggest other frequent failings of DIY investors. i.e. fashion investing and going above risk profile

And IFAs don’t make these mistakes? I have my doubts. For starters, risk is misunderstood in the industry. Wrong questions are being asked. Answers depend on how the questions are phrased. And in any case, the same investor gives different answers, depending on what’s going on in his life, in the stock market and the weather. The only person who can properly evaluate risk is the investor himself. And for that he has to educate himself about risks. And that takes more than a form and a chat.

zagfles

dunstonh wrote: »

perhaps if you actually read the thread in context rather than trying to pick holes in selective areas whilst ignoring the rest you would have got it. It was to highlight

:rotfl:Pot..kettle... You keep ignoring the point about why you pretend you're looking at "typical" "DIY" yet choose the most expensive 2 out of a list of 10 for comparison. So I thought I'd keep my last reply just to that point to see if you'd actually address it, rather than selectively ignoring it as you have in the last few posts.

the point that DIY doesn't automatically mean cheaper.

Automatically? You mean always? Obviously not. But I thought you wanted to compare "typical"?

Some of the actually suggest other frequent failings of DIY investors. i.e. fashion investing and going above risk profile.

People using HL MM funds aren't DIY. The complete oppoosite. They're using professionals to select funds managed by professionals (ie 2 layers of charges, hence the high charges). Similar to using an IFA for the first level (yes I know the service isn't the same, but same principle, pay someone to select your funds and pay 2 layers of charges).

As said in another thread, using funds/ETFs isn't DIY any more than using IKEA is.

Maybe. Maybe not. Given there are around 30,000 investment options available, nothing can really be classed as typical. However, anything in the top 10 to the DIY platform that is bigger than all the other DIY platforms put together has to have a high volume going into it.

Like the 0.06% and 0.08% funds in their top 10? Why don't you mention those, eh? No, just pick the 2 highest charge ones because it suits your argument. And then object when thy're compared against the expensive end of IFA managed portfolios.