Sipp - To use or not to use an IFA

fred246

One area where prices were 'fixed' was boiler replacement. British Gas started to charge £3K for a boiler.
https://www.boilersprices.co.uk/british-gas-boilers-prices/
All the plumbers started to copy these outrageous prices. I had a plumber round.
"How much for a new boiler?"
"£2.5K"
"Well the boiler is £700. That's £1800 then to connect two water pipes a gas pipe and an electrical cable?"
"Er Er"
"£1800 in labour? How many days to install?"
"Er Er I'll do it in a day."
"£1800 a day labour?"
"OK I'll install it for £1300 £700 boiler £600 labour"
If you challenge outrageous prices you often get a better deal.

OldMusicGuy

Prism wrote: »

This is a really important point that people seem to miss when just looking at returns and charges, especially during retirement. A lower level of volatility is prefered when withdrawing and therefore if the IFA portfolio can produce a good return for a lower level of risk then that is worth considering. If the IFA can also out perform then thats great too.

Way too much time is spent worrying about charges compared to thinking about someone's goals. Things get more complicated when you get close to retirement.

I'll have to disagree that a DIYer can't manage volatility whereas an IFA can. My choice of funds was made to reduce volatility (at the expense of upside) and it appears to work, based on its performance during corrections over the last 18 months. You don't need some specialist skill to do this.

However, I agree that goals are most important, along with understanding your attitude to risk. That's what enabled me to construct an investment strategy that is low cost and lets me sleep at night. The mistake that most people make when they start out on their own is "fund chasing" (I know I did). Once I did some detailed long term planning and defined my objectives, I was able to create a strategy that met those objectives.

Prism

fred246 wrote: »

One area where prices were 'fixed' was boiler replacement. British Gas started to charge £3K for a boiler.
https://www.boilersprices.co.uk/british-gas-boilers-prices/
All the plumbers started to copy these outrageous prices. I had a plumber round.
"How much for a new boiler?"
"£2.5K"
"Well the boiler is £700. That's £1800 then to connect two water pipes a gas pipe and an electrical cable?"
"Er Er"
"£1800 in labour? How many days to install?"
"Er Er I'll do it in a day."
"£1800 a day labour?"
"OK I'll install it for £1300 £700 boiler £600 labour"
If you challenge outrageous prices you often get a better deal.

True but then you could also argue sometimes you get what you pay for. If you pay too little for a service then you can get a poor job. Price isn't everything. If an IFA is doing what you consider a poor job for their cost then find another. Same for a poor fund if doing it yourself. The trouble is you need to leave it a good while before making that decision.

Prism

OldMusicGuy wrote: »

I'll have to disagree that a DIYer can't manage volatility whereas an IFA can. My choice of funds was made to reduce volatility (at the expense of upside) and it appears to work, based on its performance during corrections over the last 18 months. You don't need some specialist skill to do this

I never said a DIY investor couldn't. You do it. I do it. However do you really think the average person in the population is happy managing diversification during variable withdrawal to keep standard deviation within scope. Not many people I know personally would want to do that or have the slightest bit of interest in trying.

waveydavey48

Sadly it's a fact that many people will exploit the ignorance of others to cheat them.

I'm sure there are a great many IFA's who are hardworking, diligent and worth every penny they charge (some of them come on here give great info to the rest of us). I couldn't do what they do so fair play to them.

I think the problem is that the average customer just doesn't have the knowledge to know whether what they are getting is good advice/value for money. If you go to an specialist for their expertise then self-evidently you don't know enough to sort the situation out for yourself and that disparity leaves you open to potential exploitation.

seb2020

Surely some passive tracker funds which provide good diversification (for example only: Vanguard Life Strategy funds) would be sufficient to hold within a Sipp without the need to be constantly managing the fund and requiring an IFA.

Prism

seb2020 wrote: »

Surely some passive tracker funds which provide good diversification (for example only: Vanguard Life Strategy funds) would be sufficient to hold within a Sipp without the need to be constantly managing the fund and requiring an IFA.

Yup, that will likely do it assuming you can pick the correct risk level. Trouble is it seems that a lot don't do that. It can begin to go wrong when investors start picking individual funds to try and increase their returns - chopping and changing too much. It can work but ups the research requirement a bit.

Then later unless you are willing to read up on withdrawal then maybe an IFA to help with that strategy.

OldMusicGuy

seb2020 wrote: »

Surely some passive tracker funds which provide good diversification (for example only: Vanguard Life Strategy funds) would be sufficient to hold within a Sipp without the need to be constantly managing the fund and requiring an IFA.

Absolutely, that's the whole point of them. I'm very happy with that approach, as are many others.

bostonerimus

lisyloo wrote: »

Mine is approx 1.44% but that includes all ongoing advice required about anything.
I say approx because funds have different %s so each switch could alter the figure slightly.

How much time would you expect to spend as an individual managing a self invested portfolio? Including researching funds, assets etc.

How much time in spent gaining the initial knowledge.

This isn’t my bag, I don’t want to take the risk and I don’t want to spend my time doing it but it would be interesting to see the numbers.

And what happens if you are otherwise engaged (I’ll, v.busy, dealing with death etc) and things happen in the market? Is this a risk?

Using and IFA, or not, is a very personal decision and if you don't have the knowledge or confidence to DIY then you should probably seek advice. However, there is a lot of industry mis-information that can make DIY seem more difficult than it really is. With a bit of knowledge and a pretty simple plan you can successfully invest and generate income.
I've been retired for 5 years and most of my money is in a simple 3 fund tracker portfolio. I don't "manage" it at all and I have a simple plan for withdrawals when I need to make them. I'm in the US and by doing DIY with Vanguard funds on the US Vanguard platform I keep my annual costs below 0.1%....that's just fund fees as I have zero platform or IFA fees. I feel that keeping known fixed costs low is better than trusting that and IFA can produce value over and above my simple investments strategy.

seb2020

bostonerimus wrote: »

...
I've been retired for 5 years and most of my money is in a simple 3 fund tracker portfolio...

Which 3 fund tracker are you using?