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

Parking_Trouble

My wife took the CETV for her DB pension and we've retained the IFA to manage the £414k investment from April 2018 in Standard Life SIPP.

Our assessment came out as a cautious approach.

Initial IFA fee was £3100

We took out £20k tax free (whole point was wife wanted access to funds at 55 to supplement her paltry NHS salary).

Ongoing advisor charges are around £165 per month.

Withdrew another £8k last week and planning to withdraw 2% twice a year to fund holidays and major expenditure. Subject to no major dips in market.

Only had one proactive communication from the IFA about 6 months ago. Telling us about a correction in the market causing a dip and not to worry because the funds are actively managed.

12 months in at around March/April 2019 we planned to dispense with his services but asked him about whether we should have an annual review before we dumped him. However he said wait for Brexit. We agreed but date has slipped.

Funds now stand at £399k.

Have to question what value the IFA is adding for the circa £2500 in ongoing fees in the past 16 months.

OldMusicGuy

cloud_dog wrote: »

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?

A mix of things. Like many "busy" professionals I didn't give much thought to my pension investments. I always selected the lowest risk investments or default funds, and, aged 55, had six different DC funds. I then started thinking about retirement and how I would fund it. Even though I was still "too busy" I realised I had to get my pension plans in order.

So I got an FA from HL look at my investments and create a portfolio for me, which he did. Now although not an IFA he did a pretty good job and as I was transferring all my pensions to HL (where I had my SIPP), he was choosing from a pretty wide selection (he did not recommend their multi-manager funds). Good start, but the problem was I told him I was very risk averse so the portfolio was all active, low risk funds.

The suggested portfolio of 13 funds seemed complex, so I started to do some reading. I came across this forum and started reading, and also read a bit on Monevator and the Escape Artist. That's where I started to learn about low cost, (more) passive investing and multi-asset funds. I also read a long post by jamesd on safe withdrawal rates and that was a real eye-opener, as for the first time there seemed to be a way of getting an idea how much money you needed to fund retirement.

Then over the next three years I read more (the Edwards books, Kroijer and McClung) and came to the conclusion that for what I wanted to achieve, I just could not swallow slicing a percentage off the top of my large DC pot every year and giving it to an IFA.

Over the whole time I've gradually shifted my portfolio until I am at a point where I have a strategy that allows me to sleep at night. I did invest in an actively managed income fund but I didn't like the direction that was taking so pulled out of that and my experience there prompted me to go all multi-asset. That fund was Woodford Income Focus, so I did well to get out of that when I did.

If you are like me and have no DB pensions and no retirement income other than SP, then IMO understanding how to manage you DC pot is probably the most important decision in what's left of your life. I felt it was worth spending a bit of time and effort to "take back control" (sorry!). It hasn't been complicated but it has required a bit of time and effort. But that has been spread over 3 to 5 years and hasn't required hours of intensive studying.

The most important things for me were to do long term financial planning and thus define clear objectives for my investments. I also needed to really think about my attitude to risk to help me decide how to invest.

beamyup

Parking_Trouble wrote: »

My wife took the CETV for her DB pension and we've retained the IFA to manage the £414k investment from April 2018 in Standard Life SIPP.

Our assessment came out as a cautious approach.

Initial IFA fee was £3100

We took out £20k tax free (whole point was wife wanted access to funds at 55 to supplement her paltry NHS salary).

Ongoing advisor charges are around £165 per month.

Withdrew another £8k last week and planning to withdraw 2% twice a year to fund holidays and major expenditure. Subject to no major dips in market.

Only had one proactive communication from the IFA about 6 months ago. Telling us about a correction in the market causing a dip and not to worry because the funds are actively managed.

12 months in at around March/April 2019 we planned to dispense with his services but asked him about whether we should have an annual review before we dumped him. However he said wait for Brexit. We agreed but date has slipped.

Funds now stand at £399k.

Have to question what value the IFA is adding for the circa £2500 in ongoing fees in the past 16 months.

I think you already know the answer to your question. Think of it from the IFA point of view, of course they are concerned that you may lose out because of Brexit, and they can jump in to help you.

Can you DIY do you think, save yourself the ££££ and immediately dump this IFA?

You say you have a "cautious approach" to investing meaning probably bonds right (low risk)? but you have this actively managed (which adds risks and charges) + you have the IFA to pay.

Linton

Parking_Trouble wrote: »

...

Have to question what value the IFA is adding for the circa £2500 in ongoing fees in the past 16 months.

The £2500 is effectively a retainer for him to keep you on his books, monitor what is happening, keep you informed, respond to any questions you may have, deal with any issues that arise, assign time to prepare for and hold an annual review etc etc. If you now believe you can manage entirely on your own then you may well decide to dispense with his services.


However if you should subsequently need help it is likely to be more expensive as he may need to start from scratch or you may find that he is unable or unwilling to take on the new business.

beamyup

Linton wrote: »

The £2500 is effectively a retainer for him to keep you on his books, monitor what is happening, keep you informed, respond to any questions you may have, deal with any issues that arise, assign time to prepare for and hold an annual review etc etc. If you now believe you can manage entirely on your own then you may well decide to dispense with his services.

However if you should subsequently need help it is likely to be more expensive as he may need to start from scratch or you may find that he is unable or unwilling to take on the new business.

That's the sad reality. Seems like a rip off to me but i'm sure others may not agree. Depends whether you are on the paying or receiving end I guess.

[Deleted User]

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.

Wrong. I have significantly more than that and I only ever need specific advice on one off issues. And single sector funds are a bad idea, almost all of the time.

[Deleted User]

DT2001 wrote: »

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?

I spend zero time researching. My investment policy statement says that asset allocations are fixed and only ever reviewed on a 5 year basis with the objective to keep them constant. I read books on the subject just because I find it interesting but I don’t spend time trying to outperform the market.

IFAs are not Warren Buffetts, they do not do independent research and whatever is available to them is available to the rest of the market. And even if they had tools they won’t understand what’s going on - have a look at the contents of their 9 months qualification course. They don’t have the knowledge of even fairly basic statistics easily accessible to anyone with a financial, maths or engineering degree.

There will be some who are highly educated and a few lucky/successful but for the most part would take a miracle for an IFA to beat the market, let alone with a 0.5% handicap.

[Deleted User]

wjr4 wrote: »

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.

1. You sell your advice to clients. That makes you a salesperson. That’s not a bad thing, merely a fact.

2. You are rewarded for getting more clients to use your service (aka sales).

3. IFAs have strong incentives to recommend unnecessarily complex products as quickly as possible and to hook people on annual fees.

There will be some IFAs who really do the right thing, spend the time, recommend appropriate and simple cheap products and give clients the tools to manage investments going forward.

There will be some who will be completely and shamelessly unscrupulous.

Most will subconsciously respond to incentives which is not helpful to clients’ success.

Not the fault of IFAs. Doctors are the same. You incentivise a particular type of operation and suddenly every patient needs it.

dmelife

9 months?! F@‘k you Mordko. 11 exams over 5yrs and I’m still learning. You haven’t got a clue.

DT2001

Deleted_User wrote: »

I spend zero time researching. My investment policy statement says that asset allocations are fixed and only ever reviewed on a 5 year basis with the objective to keep them constant. I read books on the subject just because I find it interesting but I don’t spend time trying to outperform the market.

IFAs are not Warren Buffetts, they do not do independent research and whatever is available to them is available to the rest of the market. And even if they had tools they won’t understand what’s going on - have a look at the contents of their 9 months qualification course. They don’t have the knowledge of even fairly basic statistics easily accessible to anyone with a financial, maths or engineering degree.

There will be some who are highly educated and a few lucky/successful but for the most part it would take a miracle for an IFA to beat the market, let alone with a 0.5% handicap.

Are you withdrawing, if so is it safe to not change/review for so long a period?

Within your asset allocation how do you choose which fund if you do no research?

IFAs are there to create a strategy to get you where you need to go. Mine utilises outside research to find funds appropriate to that end target.

I was suggesting that anIFA could, in all probability, do better than me.