Cost of financial advice

DMSnell

I am currently using a IFA to help my wife and I with our retirement planning and pension. He charged us a lump sum for initial advice and getting everything sorted and in the right place and we now pay him an ongoing fee of 1% of the value of our SIPP. But he doesn't seem to be doing a lot for that money! He has invested it in a portfolio of funds but very little changes year on year.

What we are really looking for now is a financial advisor who can keep an eye on things for us and meet with us annually or give us ad hoc financial advice which of course we are prepared to pay for. But we resent having to pay an ongoing 1% of a large amount of money every year. It doesn't seem right to me.

I am unclear as to what the options are. Do I have to be paying 1% every year? Can I just have advice when I want it?

cloud_dog

Hi

You haven't mentioned how much is invested so it is difficult to comment on the IFA charge, i.e. economies of scale etc. The aimed for ongoing fee is ideally around the 0.5% (but can be dependent on the amount involved).

Regarding ongoing advice etc, you are paying for this and your IFA should be providing you with regular updates and or revisions if necessary. you need to prompt them, ask for an annual review and will this be automatic going forward. If the answers are unsatisfactory or if you have perhaps lost a little bit of confidence in your IFA then you may need to consider moving IFAs but that may also involve additional costs.

tacpot12

Are you sure the 1% pa is just for his on-going advice? If so, that is expensive - you are giving him 20-25% of your return while he is taking no financial risk.

I think I would shop around and see if you can do better, then use the better offer to negotiate a new fee arrangement.

wjr4

What is their service agreement? Some companies only provide an annual review and portfolio monitoring but other companies offer a lot more than this. How long have they been your IFA for? There may have been no need to make any portfolio changes yet? What level of service have you asked for? There may be different service options.

Albermarle

Can I just have advice when I want it?

Yes you can pay for 'one off reviews/discussions' . Known as a 'transactional ' relationship as opposed to an 'ongoing' one . Basically you pay by the hour , like with a solicitor.
However some IFA's may be less keen on this arrangement than others, and it seems less popular with the customers as well apparently.

beamyup

What exactly do you mean by "keep an eye on things for us"? What for example would this mean in practice?

IFAs cannot choose the best performance from funds. However they will advise to make changes based on your attitude to risk. If this has not changed then probably your investment portfolio does not need to change.

Have you calculated what this 1 percent will cost you in £££ over 20 or 20 or whatever years including please as of compound growth? Are you happy with that?

It is worth also looking at the other annual charges on your funds as not all IFAs seem to consider this.

wjr4

beamyup wrote: »

It is worth also looking at the other annual charges on your funds as not all IFAs seem to consider this.

IFAs have to show all charges, in percentage terms and pounds and pence. This includes platform/provider charges, fund charges & ongoing advice charges.

SonOf

He has invested it in a portfolio of funds but very little changes year on year.

Good. You dont want too frequent changes. A few adjustments in the percentages and occasional fund changes are the expectation.

What we are really looking for now is a financial advisor who can keep an eye on things for us and meet with us annually or give us ad hoc financial advice which of course we are prepared to pay for. But we resent having to pay an ongoing 1% of a large amount of money every year. It doesn't seem right to me.

1% is relative to the amount invested. 0.5% is the dominant IFA figure but smaller values tend to more towards the 1%.

It is worth also looking at the other annual charges on your funds as not all IFAs seem to consider this.

I think you are mistaken. It is a regulartory requirement and IFA platforms issue statements breaking down each cost area using the MIFIDII requirements (OCF, Transactional charges, Incidental charges, platform and adviser). They show it in both percentage and monetary terms.

beamyup

SonOf wrote: »

re :
It is worth also looking at the other annual charges on your funds as not all IFAs seem to consider this.
Originally posted by beamyup

I think you are mistaken. It is a regulartory requirement and IFA platforms issue statements breaking down each cost area using the MIFIDII requirements (OCF, Transactional charges, Incidental charges, platform and adviser). They show it in both percentage and monetary terms.

No, I am not mistaken, I mean IFAs don't think that this is important, whereas I do.

IMHO IFAs SHOULD do everything they can to reduce the total annual charges as these are so damaging to the long term growth. but they don't - probably as to not draw attention to their huge fees.

wjr4

beamyup wrote: »

No, I am not mistaken, I mean IFAs don't think that this is important, whereas I do.

IMHO IFAs SHOULD do everything they can to reduce the total annual charges as these are so damaging to the long term growth. but they don't - probably as to not draw attention to their huge fees.

Yay, another person on here with hatred for IFAs :rotfl:

SonOf

No, I am not mistaken, I mean IFAs don't think that this is important, whereas I do.

You have spoken to 13,000 IFAs then?

IMHO IFAs SHOULD do everything they can to reduce the total annual charges as these are so damaging to the long term growth. but they don't - probably as to not draw attention to their huge fees.

So, you think everyone should hold their money in cash savings then.