What % To Invest Myself Rather Than Use IFA?

Twointhebush

I'm due to inherit some money and I'll soon be meeting my IFA. What I'd like to consider before meeting him is should I set aside a percentage of the inheritance to invest myself, in order to avoid his fees? If I was to invest a proportion in Tracker Funds, Premium Bonds etc. I wouldn't need him to do that? I'd also fancy taking a punt on some shares, again I'd be able to do that myself I think? Or should I just stick with the IFA? I've already maxed out this year's pension and ISA contributions (I'm self-employed). Or is it part of my IFAs job to advise me on investments that he doesn't get a fee for, as well as those that he does?

[Deleted User]

My IFA charges a flat fee per year depending on the level of service. So the fee conversation you are having doesn't apply in mine.

Linton

The IFAs job is to assess your circumstances as a whole and provide you with a portfolio that he/she believes is appropriate to your needs providing as reasonable resiliance as possible to whatever happens in the markets. The job is not to "beat the index" if that means taking risks that jeopardise you achieving your objectives.


You running a significant portfolio in parallel destroys the balance you have paid the IFA to provide. And the results are likely to be meaningless. If the market doesnt crash and your portfolio achieves double the return of the IFAs does that mean your portfolio is better? Probably not, it just means that the insurance the IFA provided for you was in the event not needed. Conversely if the market crashes and your portfolio tanks do you say your portfolio was rubbish or do you just curse your bad luck? If the IFA knows you are running a parallel portfolio perhaps he should deliberately de-risk the one he is setting up.



Of course, if you want to just play its difficult to say you shouldnt, but dont come back here and say what a wonderful investor you are.

Albermarle

I think typically an IFA will only include investments when calculating a % fee. Cash savings , premium bonds etc are normally kept separate( unless of course you want them to be included) ..
Not sure though how things like tracker funds being held separately would be handled.

Audaxer

Twointhebush wrote: »

I'm due to inherit some money and I'll soon be meeting my IFA. What I'd like to consider before meeting him is should I set aside a percentage of the inheritance to invest myself, in order to avoid his fees? If I was to invest a proportion in Tracker Funds, Premium Bonds etc. I wouldn't need him to do that? I'd also fancy taking a punt on some shares, again I'd be able to do that myself I think? Or should I just stick with the IFA? I've already maxed out this year's pension and ISA contributions (I'm self-employed). Or is it part of my IFAs job to advise me on investments that he doesn't get a fee for, as well as those that he does?

I would be a bit concerned if the IFA was taking a percentage of money I bought Premium Bonds with. If you think it would be best to put your money in tracker funds that is fine, but if so I wonder why you want to keep the rest of your existing investments with the IFA. What percentage fee are you paying your IFA for managing your existing investments? Are you confident that your existing investments net of fees is producing better returns than you would get by investing in a portfolio of low cost tracker funds?

SonOf

If I was to invest a proportion in Tracker Funds, Premium Bonds etc.

You mention tracker funds. So, that means you are considering investing in a portfolio of single sector funds. Probably around 8-12 to get wide coverage. Do you have experience and knowledge on how to build and manage a portfolio?

Why Premium Bonds? Are you a higher rate taxpayer who has utilised every other option first?

I'd also fancy taking a punt on some shares, again I'd be able to do that myself I think?

IFAs invest your money. They dont take punts. So, you would have to do that yourself.

Or is it part of my IFAs job to advise me on investments that he doesn't get a fee for, as well as those that he does?

I think you have misunderstood the fee arrangements. You pay the IFA for advice. No provider or investment pays the IFA anything.

However, most IFAs will not charge against certain things (deposit based) unless you ask them to do the research. NS&I, for example, gets a lot of referrals from IFAs and even has dedicated websites for IFAs.

cfw1994

SonOf wrote: »

I think you have misunderstood the fee arrangements. You pay the IFA for advice. No provider or investment pays the IFA anything.

Curious: you make it sound like a fixed fee. I appreciate some IFAs will work on that,....but I thought most IFAs charged based on a % of the value of the sum they manage (or perhaps took in to begin with?) - perhaps 0.5-1%?

bowlhead99

cfw1994 wrote: »

Curious: you make it sound like a fixed fee. I appreciate some IFAs will work on that,....but I thought most IFAs charged based on a % of the value of the sum they manage (or perhaps took in to begin with?) - perhaps 0.5-1%?

The fee paid will likely vary depending on pot size because larger pots may be worthy of more complex solutions, and the IFA may be on the hook for life for complaints against unsuitable advice, so his insurance costs will be higher with more assets being advised.

People often like to hear the ballpark IFA cost in percentage terms as other costs, and returns, are also in percentage terms. But if the advice is explained as (say) 1.3% initial on £200k, it could also be explained as £2600. It will not necessarily be £13,000 on £1m or only £13 on £1k.

SonOf

Curious: you make it sound like a fixed fee.

Not sure how you inferred that.

I appreciate some IFAs will work on that,....but I thought most IFAs charged based on a % of the value of the sum they manage (or perhaps took in to begin with?) - perhaps 0.5-1%?

That is correct. However, it doesn't change the fact that it is the investor that pays it. Not the provider.

cfw1994

SonOf wrote: »

Not sure how you inferred that.


That is correct. However, it doesn't change the fact that it is the investor that pays it. Not the provider.

Ahh yes, I misread the post!
As you were :rotfl:

AnotherJoe

Twointhebush wrote: »

I'm due to inherit some money and I'll soon be meeting my IFA. What I'd like to consider before meeting him is should I set aside a percentage of the inheritance to invest myself, in order to avoid his fees? If I was to invest a proportion in Tracker Funds, Premium Bonds etc. I wouldn't need him to do that? I'd also fancy taking a punt on some shares, again I'd be able to do that myself I think? Or should I just stick with the IFA? I've already maxed out this year's pension and ISA contributions (I'm self-employed). Or is it part of my IFAs job to advise me on investments that he doesn't get a fee for, as well as those that he does?

Somewhat late to the party here but I think you are operating under a misunderstanding that just because you've told the IFA you have £X in total they will charge based on £X.

They will charge based on whats under their management.

It would be helpful for them to know that you have decided for whatever reason that there is £Y you are managing yourself and then you can direct them on what basis you want £Y considered - not at all, as a cash buffer (even if some is you investing yourself) and so on.
However if you are happy to buy index trackers and gamble on some shares, do you need an IFA on a % basis? Why not just pay for a couple or whatever hours advice to get you started and have them focus perhaps on enhancing your tax and IHT positions and you then choose on what actual investments are bought?
Depends what function you think the IFA is fulfilling. Is it to choose investments? Minimise tax, be that IHT, CGT income? Determine best order in which to liquidate investments? That is specialist knowledge that can be hard to DIY whereas no one has a crystal ball and no IFA can tell you which investments will do best next year, though they can advise on the % of equities vs bonds for a particular risk level. But once you are happy with that, you can choose within that whether to buy HSBC or VLS or whatever..