IFA Ongoing Fees

bostonerimus

lisyloo wrote: »

They are not bad rules but aren’t taught in schools so you average van driver, fork lift driver, soldier, supermarket worker i.e. Ordinary people don’t have access to them.

Auto enrolment is good, but not sure how that works for the self employed or gig economy.

I don’t have anything against DIY for the sophisticated, just think it’s for the few not the many (bus drivers, train drivers, warehouse operatives etc.)

Everyone has access to information.....one of the good things about the internet. The constant chorus that tells people they need to be particularly clever or special to deal with their finances is one of the problems and the fear of investing and money management goes right through British society from the bus driver to the doctor and the lawyers. The financial industry has done a fantastic job to make things complicated and expensive and people need to fight back against this and take charge of their money rather than handing it over to many financial advisors that don't do much of anything and if they do do something it's often unnecessary.

I'm not saying that financial advice is worthless in all circumstances, sometimes people need help. Financial advice is often compared to getting a plumber in to fix something ie you need a skilled person to do the job. Well I'd compare most people's financial problems to a leaky tap washer and that's easy to fix yourself. If you need a new boiler installed then you do need a plumber.....so only use an financial advisor if you need the money equivalent of a boiler install. Saving money and contributing to a multi-asset fund in a pension plan and an ISA is the money equivalent of changing a tap washer.

bostonerimus

cloud_dog wrote: »

We have been round this house with bostonerimus, many many times, and they are unwilling to simply acknowledge that a large percentage of people are either unable or unwilling to consider DIYing financial planning/management.

I agree that many people are unwilling to DIY, but the vast majority are perfectly capable of doing it because it involves just a few simple rules.

[Deleted User]

bostonerimus wrote: »

Lots of the money is in tax deferred accounts so there’s no tax until I make withdrawals and then I just include it on my tax return as income. For the general accounts Vanguard sends me 1099s each year with dividends, capital gains etc and I just include those on my annual return. If I return to the U.K. things would get more complicated as I’d be liable for tax in both the U.K. and US, but I wouldn’t end up paying more tax.

You are paying foreign withholding taxes even within 401k

JoeCrystal

bostonerimus wrote: »

I agree that many people are unwilling to DIY, but the vast majority are perfectly capable of doing it because it involves just a few simple rules.

This may be the case in a few decades once the vast majority of people have more significant DC pension funds thanks to auto-enrollment. I don't think the DC pension funds are that large at the moment for most people to pay attention to it. If I remember correctly, the median DC fund in 2016 is £4,800 with £2000 for those aged 25 to 35 up to £15,000 for those aged 55 to 64. Quite depressing, especially with auto-enrollment, the numbers are likely to go down due to new members in the private sectors who never had pension schemes. I, for one, would love to know the population in this country that took advice from an IFA, my personal experience with others at work that indifference towards the retirement savings to be the most significant issues.

bostonerimus

Deleted_User wrote: »

You are paying foreign withholding taxes even within 401k

All my funds are US domiciled so I don't have any personal foreign withholding to deal with and I'll let the funds deal with their internal workings themselves. I currently have no personal non-US tax liabilities.

[Deleted User]

bostonerimus wrote: »

All my funds are US domiciled so I don't have any personal foreign withholding to deal with and I'll let the funds deal with their internal workings themselves. I currently have no personal non-US tax liabilities.

Foreign withholding taxes are withdrawn before dividends are paid to you. They are personal as they are applied to your dividends. The way to avoid them is by having non-US domiciled funds but it’s usually not worth it.

For example, if I own US domiciled ETFs in a certain wrapper I get 100% of dividends vs 15% withholding tax if I hold the exact same fund but via Canadian domiciled ETF. It’s the same with other countries but their individual proportion is smaller so not worth messing with. It’s there though, unless there is an agreement with a particular country

In a perfect world we should be accounting for all these charges, including taxes when estimating costs. Some people do. Too much work though.

bostonerimus

Deleted_User wrote: »

Foreign withholding taxes are withdrawn before dividends are paid to you. They are personal as they are applied to your dividends. The way to avoid them is by having non-US domiciled funds but it’s usually not worth it.

For example, if I own US domiciled ETFs in a certain wrapper I get 100% of dividends vs 15% withholding tax if I hold the exact same fund but via Canadian domiciled ETF. It’s the same with other countries but their individual proportion is smaller so not worth messing with. It’s there though, unless there is an agreement with a particular country

In a perfect world we should be accounting for all these charges, including taxes when estimating costs. Some people do. Too much work though.

Obviously it's a terrible idea for a US resident to own non-US domiciled funds and expose themselves to PFIC issues. If a US fund owns foreign stocks then there will be costs associated with that, but I simply don't worry about that as I have better things to do with my time.

LHW99

Everyone has access to information.....one of the good things about the internet. The constant chorus that tells people they need to be particularly clever or special to deal with their finances is one of the problems

This is true, but as ever, you do need to know what you are looking for, and have an ability to see through the vested interests (think HL / Woodford) and lazy journalism (think tabloid and more).
Younger persons won't necessarily have that ability, and older people will have built up much of their pensions (if they have any) well before the internet was even available.
IMO the ability to access good independent financial advice for those who feel unsure or are uninterested is actually going to be more, rather than less, important going forward.

bostonerimus

LHW99 wrote: »

This is true, but as ever, you do need to know what you are looking for, and have an ability to see through the vested interests (think HL / Woodford) and lazy journalism (think tabloid and more).
Younger persons won't necessarily have that ability, and older people will have built up much of their pensions (if they have any) well before the internet was even available.
IMO the ability to access good independent financial advice for those who feel unsure or are uninterested is actually going to be more, rather than less, important going forward.

Seeing the "wood for (or Woodford) the trees" is a big problem. There is a lot of choice and people can become paralysed. So one of the rules is ignore everything except multi-asset or index tracker funds. Stick with simple asset allocations and don't tinker. Most people will be perfectly well served by shoving money into something like VLS60 for 40 years. They'll miss out on the highs of Fundsmith and also the lows of something like Woodford. But the idea is not to maximise return, but to maximise the chances of success and I think that is achieved by keeping costs down and keeping things simple.