IFA Ongoing Fees

bostonerimus

If someone isn't confident enough to DIY then employing an IFA will probably give them some peace of mind. Whether the fee is value for money will depend on what the IFA does and how that is perceived by the client. I would never pay an IFA on an ongoing basis because I have a simple portfolio that requires minimal management. If you have a portfolio that requires management then maybe you should simplify as investment complexity is often a way to extract fees from customers.

Comparing IFA performance to DIY is fraught with difficulty, but I do know that with DIY you'll start at least 0.5% ahead.

Crabby

With respect Lisyloo, as I said hindsight is a wonderful thing, if the 2007-09 crash hadn't happened or I hadn't been made redundant till 2009 and invested then, I'd probably think my "ex" IFA was the best thing since sliced bread. But it did and my EX IFA advised me to take risks at what is now known to be the top of the market, then advised me to to take less risk when it bottomed out. So excuse me if I have a slightly different veiw of IFAs.
For the record, a quick fag packet calculation puts my pot up about 12% from its starting position, in 11.5 years, so in real terms it's worth less than in 2007. If I'd stuck it in a low cost FTSE tracker it would have done a lot better.
My ex IFA was taking 1% pa (through thick and thin) and the platform he used was taking a further 0.29% pa. So between them they've probably gobbled up about 50% of any profits.

lisyloo

bostonerimus wrote: »

I
Comparing IFA performance to DIY is fraught with difficulty, but I do know that with DIY you'll start at least 0.5% ahead.

You may start very slightly ahead but if you’re one of the people that invested in LFC or someone that doesn’t have a clue then you’re likely to end up worse off and very possibly by a lot more.

I believe there is widespread evidence people not being able to manage their finances.

E.g. millions of endowment mortgages, widespread phi mis-selling.
These have affected millions of people.

bostonerimus

lisyloo wrote: »

You may start very slightly ahead but if you’re one of the people that invested in LFC or someone that doesn’t have a clue then you’re likely to end up worse off and very possibly by a lot more.

I believe there is widespread evidence people not being able to manage their finances.

E.g. millions of endowment mortgages, widespread phi mis-selling.
These have affected millions of people.

Sure, silly decisions lead to losses. The thing is that things don't need to be complicated and there are a few simple rules that people can follow that will increase the chances of success. I'm positive that I can do anything a good IFA can do and I have the ability to make sensible choices. I think most people can do that as well and the aura around the IFA is really just that, a feeling of safety and that they can't produce much benefit as long as the DIYer is sensible....in the best case the IFA is just selling that common sense and that can be had free of charge.

segovia

bostonerimus wrote: »

If someone isn't confident enough to DIY then employing an IFA will probably give them some peace of mind. Whether the fee is value for money will depend on what the IFA does and how that is perceived by the client. I would never pay an IFA on an ongoing basis because I have a simple portfolio that requires minimal management. If you have a portfolio that requires management then maybe you should simplify as investment complexity is often a way to extract fees from customers.

Comparing IFA performance to DIY is fraught with difficulty, but I do know that with DIY you'll start at least 0.5% ahead.

I think this summarises my position. I will also have a simple portfolio with just one investment fund, my wife has the identical fund and we both expect to run it for a similar period of time. I am struggling to see what I would get for the £8,000.00 + ongoing IFA' fees over the period of the investment. If it goes well then no change, if it does not go so well then what kind of advice would I get for my 8K and would it represent value for money?

bostonerimus

segovia wrote: »

I think this summarises my position. I will also have a simple portfolio with just one investment fund, my wife has the identical fund and we both expect to run it for a similar period of time. I am struggling to see what I would get for the £8,000.00 + ongoing IFA' fees over the period of the investment. If it goes well then no change, if it does not go so well then what kind of advice would I get for my 8K and would it represent value for money?

There's a lot of numerology associated with finance and many financial advisers trade on both fear and greed....but there are many who provide good advice and can help their clients. Still if people have a bit of self confidence and a bit of common sense I firmly believe that they don't need on going help from an IFA.

I've followed a simple indexing strategy for 30 years and managed to get a 8.5% average annual return and that satisfies me.

segovia

Crabby wrote: »

With respect Lisyloo, as I said hindsight is a wonderful thing, if the 2007-09 crash hadn't happened or I hadn't been made redundant till 2009 and invested then, I'd probably think my "ex" IFA was the best thing since sliced bread. But it did and my EX IFA advised me to take risks at what is now known to be the top of the market, then advised me to to take less risk when it bottomed out. So excuse me if I have a slightly different veiw of IFAs.
For the record, a quick fag packet calculation puts my pot up about 12% from its starting position, in 11.5 years, so in real terms it's worth less than in 2007. If I'd stuck it in a low cost FTSE tracker it would have done a lot better.
My ex IFA was taking 1% pa (through thick and thin) and the platform he used was taking a further 0.29% pa. So between them they've probably gobbled up about 50% of any profits.

Al least my IFA is being honest, he is forecasting 2.9% growth which is the mid-growth rate for the fund that equates £11,600.00 profit less fees which in total at 1.68% = £6914.88 which represents 59.61% of my profit.

bostonerimus

segovia wrote: »

Al least my IFA is being honest, he is forecasting 2.9% growth which is the mid-growth rate for the fund that equates £11,600.00 profit less fees which in total at 1.68% = £6914.88 which represents 59.61% of my profit.

Let's hope your return is higher as giving 60% of your profits to your IFA is ridiculous (IMO). That's a a pretty good recipe for financial failure.

segovia

bostonerimus wrote: »

Let's hope your return is higher as giving 60% of your profits to your IFA is ridiculous (IMO). That's a a pretty good recipe for financial failure.

That's total charges as its a DMF, IFA's cut is £2,469.00 which is 35% of the profit.

bostonerimus

Giving up 60% of your profit to platform, fund and advisor fees is ridiculous.....sorry, but you are being fleeced. As a comparison my portfolio fees are 0.07% and I’ve been averaging 8.5% annual return so I’m paying 0.8% of my profits in fees