Sipp - To use or not to use an IFA

MallyGirl

bostonerimus is in the US so things are a little different there

Audaxer

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 agree a lower level of volatility is preferred in retirement, but I have read that the benefit of a portfolio single sector funds that aren't all correlated, can be relatively low in volatility overall, although some of the individual funds could be quite volatile. The idea being that you withdraw from the best performing funds and rebalance by to your original weightings. I think this is a difficult strategy for a lot of DIY investors to have the confidence in picking the right active funds and right weightings, myself included.

Even with the higher fees, if you could find a good IFA, maybe they would achieve better returns, net of fees, than many of us DIY investors could achieve with low cost multi asset funds?

bostonerimus

seb2020 wrote: »

Which 3 fund tracker are you using?

A global equity index, a domestic equity index and a domestic bond index fund. In the UK you could do something very similar and choose an allocation that matches your circumstances and appetite for risk......personally I'm around 50% US equity (that's domestic for me), 30% global equity and 20% bonds....or look into a multi-asset fund.

bostonerimus

Audaxer wrote: »

I agree a lower level of volatility is preferred in retirement......

In fact some studies have shown that a rising equity allocation (and presumably volatility) improves the probability of retirement plan success.Of course that has to be balanced against the low probability of a catastrophic failure that would wipe out a plan so the amount of income required relative to the pot size is a critical factor.

beamyup

Audaxer wrote: »

Even with the higher fees, if you could find a good IFA, maybe they would achieve better returns, net of fees, than many of us DIY investors could achieve with low cost multi asset funds?

If only

Any IFA able to consistently beat the market is in the wrong job or is misrepresenting.

Prism

beamyup wrote: »

If only

Any IFA able to consistently beat the market is in the wrong job or is misrepresenting.

I doubt anyone would claim they can consistently beat the market. What would that even mean - every month, every year, each 5 year period?

Having said that, beating the index is entirely possible by choosing the right funds - just not guarenteed

[Deleted User]

The best approach is to educate yourself, write your own investment policy and execute.

The second best approach is to read up about risk, decide on your stock/bond allocation and pick an appropriate multi asset fund with low costs. There is nothing wrong with getting an IFA to review, if you have questions or lack confidence.

Avoid complex IFA-designed mess of a portfolio requiring regular attention and incurring thousands in fees every single year. That’s a guaranteed damage to your and your family’s long term prosperity

bostonerimus

For the vast majority of people if their portfolio is complex enough to require management from an IFA then it's very probably too complicated

bostonerimus

FYI I just got this email from my last employer as I still have some money in one of their retirement funds....it would be nice if more employers/HR&benefits departments could offer this sort of advice, but I think the UK has some pretty strict rules on advice, which is good if it acts as a "quality" control, but bad if it restricts availability and keeps costs high.

I'm going to ignore it as I don't think it would be much use to me, but I'm sure it would be useful for many to have free and unbiased advice like this.

You're invited to schedule a 1-on-1 appointment with Carl xxxxxxxxxx, your Retirement Plan Advisor.

Your Retirement Plan Advisor will:

•

Help you determine a possible retirement age.

•

Help you project your future retirement income from all sources, including: pension, Social Security, the Sxxxx Plan and other retirement accounts.

•

Provide suggestions for your retirement, including savings rate and investment allocation.

* Your spouse is welcome to attend.

Apodemus

bostonerimus wrote: »

For the vast majority of people if their portfolio is complex enough to require management from an IFA then it's very probably too complicated

Bostonerimus, while I agree with you in principle, in practice it is quite easy to find yourself with a complex structure that an IFA might be best-placed to resolve.

I spent several hours yesterday creating a new version of my pension planning spreadsheet and playing out different scenarios. Some of the best scenarios were quite counter-intuitive and would not have been clear to me without the modelling - for those that are not spreadsheet geeks, an IFA might be the next-best approach.

The various income categories to the spreadsheet require me to model 13 input rows and I don’t think my situation is much more complex than average. These include current salary for the years up to retiral, state pension, workplace DB pension, DB pension TFLS, SIPP, SIPP TFLS, Old DC pension, DC Pension TFLS, unwrapped stocks, S&S ISA, Income tax, drawings/payments from/to cash account. At this stage, these can’t be simplified much further and there are fairly frequent threads on the MSE boards where people make mistakes by tackling this complexity with insufficient knowledge. Again these people would benefit from the skills of the IFA.

Personally, I’m just too mean to pay for the advice that I probably need!