It's not you, it's me: taking a break from an IFA?

wjr4

Deleted_User wrote: »

Most IFAs are undereducated marketing people. They are rewarded for sales and that’s where their real experience lies.

Just putting it out there that not all IFAs are 'sales people'. I personally have no marketing or sales experience and only ever do what is in the best interests for my clients. I think you are putting us all in the same category as financial advisers who used to be sales people in the 80s! Hopefully, this is where new (& younger) IFAs will bring a whole new experience to advising and prove that things are different now (if you see the right IFA!) compared to what people used to experience.

Linton

beamyup wrote: »

I see this idea posted quite a lot but I don't think it is as simple as that.

IFAs take a lot of fees off their clients (I cannot comment on how much of these they keep in their pay packet of course). The longer they keep the client, the more the fees.

If the IFA sells a "concept" to the client that is sticky, they are likely to get fees for the rest of the life of that client which is a big value sales win. For example the idea of needing to tailor investments each year, the idea that the IFA will help them reduce risks and / or beat the market by doing this etc etc.

However, If the IFA just says - "based on what I have leaned about you - well, just put your money in this (e.g. LS60 + low cost SIPP) and leave it", there is no stickiness, the client will think (correctly) that the advice is complete and just pay the one off fees.

How often does the latter happen? how often should it happen (in order to benefit the client)? That's where I think there is a problem.

I dont see why IFAs would give themselves unnecessary work if they get the same income without it. And in any case it is not the job of an IFA to chase market beating returns, it should not be the aim of a serious investor either.



More likely I would guess is that the experience of investing changes the client. The IFA puts the client in LS20 as they dont want to lose any money and a year later they are back compaining that the IFA has given them a poor investment because they arent seeing the same returns as their friends and colleagues. At that point explanation and advice would be highly beneficial.

SonOf

How often does the latter happen? how often should it happen (in order to benefit the client)? That's where I think there is a problem.

Extremely often. Especially with general practitioner IFA firms. Probably less so, or none at all, with Wealth management firms.

beamyup

SonOf wrote: »

Extremely often. Especially with general practitioner IFA firms.

Good to hear. Is that due to client "segmentation" (potential profitability) or due to doing what is best for the client?

I wonder if there are any statistics on advice given to wealthy clients, e.g. > £500K to invest. Especially how many get guided towards low costs / one off advice.

SonOf

I wonder if there are any statistics on advice given to wealthy clients, e.g. > £500K to invest. Especially how many get guided towards low costs / one off advice.

Someone on £500k is unlikely to need just one off advice. They are more likely to have ongoing needs. Plus, their portfolio is more likely to be a spread of single sector funds and not a multi-asset fund.

OldMusicGuy

SonOf wrote: »

Someone on £500k is unlikely to need just one off advice. They are more likely to have ongoing needs. Plus, their portfolio is more likely to be a spread of single sector funds and not a multi-asset fund.

Interesting. I took exactly the opposite view. I replaced my expensive FA-created single sector portfolio with a simple one of three multi-asset funds. I reduced my ongoing costs and I don't pay any advisor fees (which would be substantial given the size of my portfolio).

cloud_dog

beamyup wrote: »

Good to hear. Is that due to client "segmentation" (potential profitability) or due to doing what is best for the client?

I wonder if there are any statistics on advice given to wealthy clients, e.g. > £500K to invest. Especially how many get guided towards low costs / one off advice.

"There are three kinds of lies: lies, damned lies, and statistics".

beamyup

OldMusicGuy wrote: »

Interesting. I took exactly the opposite view. I replaced my expensive FA-created single sector portfolio with a simple one of three multi-asset funds. I reduced my ongoing costs and I don't pay any advisor fees (which would be substantial given the size of my portfolio).

I take the same view. Maybe we are both wrong and you should be paying a shed load to an IFA to advise you on something more complex.

DT2001

Deleted_User wrote: »

Saving 8k is awesome but how much do you spend per decade? Someone with 1M (assume constant) in investable assets at 0.5% will have spent 50k on an IFA. We don’t get enough pension reforms to justify this kind of extravaganza. And for a retiree that’s a month and a half of his income every year (assumed 4% of assets per year). And what’s stopping one asking for advice on a case by case basis when there are reforms?

Paying others for hard physical or highly skilled work, requiring years of education and special tools is one thing. Paying every single day for something that has been made quite simple and cannot be delegated is another matter entirely.

You assume my IFA will perform no better than me. He has access to research that I do not.
Our portfolio started at about £500k so 10 year cost, on your basis, £25k. I hope he can more than cover that. As despite your assertion that it is quite simple I do not agree. There are a lot of investors in underperforming funds. When I was younger and child free I invested for myself and didn’t always get it right despite research - I’m aiming to reduce the risk of getting it wrong when it is more important.

How many hours do you spend researching per week and how much do you spend on information?

cloud_dog

OldMusicGuy wrote: »

Interesting. I took exactly the opposite view. I replaced my expensive FA-created single sector portfolio with a simple one of three multi-asset funds. I reduced my ongoing costs and I don't pay any advisor fees (which would be substantial given the size of my portfolio).

But what changed between IFA day and DIY day? I assume you expanded your financial knowledge, your financial experience, your financial confidence, your available time?

So, is it reasonable to say that pre-IFA day you may not have had the time, or skills, or experience, or confidence (or any combination thereof) to undertake the required action but over time you gained those that allowed you to DIY?

I'm not pro or anti IFAs but, I do find it somewhat annoying when some people take a very simplistic approach to the IFA or not IFA discussion. IFAs have their place, and if they are needed then there is no difference to paying for something from an IFA or any other service industry. That is why boards like this one are so very useful, they allow the uninitiated to put some context around their decision making process.