IFA versus HL

dunstonh

Regarding the IFA, they are liable for nothing if your pot does not do well. That's the beauty of their business model, they get paid regardless of what happens to your investments. That's one of the reasons that many people (like me) prefer to DIY.

It would be daft for IFAs to be liable for it as the IFA has no control over short term events (like CV, credit crunch, dot.com etc).   The IFAs primary requirement is getting the suitability of the investments right for the individual.      The more in line the investment is with the individual's situation, capacity for loss, behaviour, risk profile etc then the more likely the end result will be closer to the level of expectation.

IFAs are not investment managers.   They are advisers.  Yes, it does involve the selection of investments but IFAs generally buy in that sort of data, due diligence and research information nowadays (e.g. the asset allocation weightings for each risk profile, external fund research etc).  

Thrugelmir

flopsy1973 said:

I have decided to stay invested in the original portfolio for now as i would be making small losses on some of my funds and big ones on the individual shares i hold. So hopefully when things improve slightly i can at least get out without too much loss. 

 

You'd be far better off with somebody managing your portfolio for you. That's another cardinal sin of investing broken.

flopsy1973

Well if that is cardinal sin surely it better I learn more about it because I don't seem to be getting very far with IFA. 
But is my plan to stay in the funds I have now waiting for bounce back a better idea than selling everything now 

badger09

flopsy1973 said:

Well if that is cardinal sin surely it better I learn more about it because I don't seem to be getting very far with IFA. 
But is my plan to stay in the funds I have now waiting for bounce back a better idea than selling everything now 

How long are you going to wait until they 'bounce back'? Bounce back to what level - when you bought them? when they reached their peak? before this latest drop?

dunstonh

flopsy1973 said:

Well if that is cardinal sin surely it better I learn more about it because I don't seem to be getting very far with IFA. 
But is my plan to stay in the funds I have now waiting for bounce back a better idea than selling everything now 

Lets be honest, you are not getting very far with DIY either.  As I said before, you seem stuck in a rut.

The general rule of thumb is that you should be invested in the way you would if you were putting new money in today.  Unless there are contractual or taxation or other issues that need to be considered.

So sitting back on a sub-optimal investment waiting for it to recover can be far more costly than fixing it now.

bowlhead99

flopsy1973 said:

Well if that is cardinal sin surely it better I learn more about it because I don't seem to be getting very far with IFA. 

dunstonh said:
Lets be honest, you are not getting very far with DIY either.  As I said before, you seem stuck in a rut.

The general rule of thumb is that you should be invested in the way you would if you were putting new money in today.  Unless there are contractual or taxation or other issues that need to be considered.

So sitting back on a sub-optimal investment waiting for it to recover can be far more costly than fixing it now.

heh, is this thread still going? Which was the same comment someone else made last time it came back  

I took a look back through it to remind myself how we'd got to the point where you don't seem to be getting very far with an IFA solution:

2 November you mentioned that you were with HL and you'd had a recent meeting with HSBC about perhaps moving to them. You asked - "shall I also speak to IFA to see what they can offer . Have lost faith with HL recently never had advice of them just used them for diy".
 

Within half an hour, 4 posters had all agreed with you that an IFA would seem a good approach if you don't want to self-manage, because they would find you a cheaper platform than HL and unlike HSBC, would offer an independent view rather than only the products from that company. Several others concurred later that day.

On page 2 of the thread you said HSBC were going to have a look but that maybe an IFA could help tidy things up and advise going forward

On page 3 you posted your portfolio which was really a mixed bag with no structure as you had run it yourself without a plan

On page 4 you said you knew it needed spring cleaning and asked several times for expert opinion

On page 5 you asked again for views on where to start trimming it down and which funds you should be dumping.

At this point it was 2 December so a whole month in. The answer was coming back that "it goes back to the thread title in some respects - you either get an IFA to do it or you use an expensive in-house option from your platform or you read up about investing and learn about it and DIY".

So you asked for more DIY help and views to 'understand more about which funds to sell'

On page 6 another couple of weeks later, you said you would try to weed down your holdings and wondered what questions you should ask an IFA if you decide to use one.

A couple of months later you had spoken to two of them, and one had said you ought to be able to get the same returns for lower volatility and charges (though you were sceptical on the charges aspect), and you thought perhaps you could do better DIY if you 'tidy up the portfolio'.

People were a bit surprised that after three and a half months in, you still hadn't taken any action at all to change the portfolio that you didn't want.

On page 7 you asked again what *we* would do to rationalise the holdings.

You said at this point that you were "thinking more diy and getting rid of most of these holdings as I don't see any advantage of getting IFA to do it if I'm not going to get better returns?" and asked about redress for unsuitable advice if you went the IFA route, which was explained.

You didn't think the same returns for lower volatility was useful but asked for 'experiences of using IFA versus diy regarding fees and returns'. Some said that they had saved fees by DIYing, others noted that the IFA solution was not just about size of the returns but alignment with your requirements.

At this point you were four months in to the thread.  

On page 8, five months into the thread, you mentioned that you had been researching and waiting to speak to another IFA, and asked if it was still worth moving to different funds given the market downturn, admitting that you had been dithering.

A fortnight after that, you said you were going to stay with the original portfolio and were in it for the long term, but would look to expand your knowledge to make changes to the portfolio 'when the time is right'. This despite knowing five and a half months earlier that the portfolio was unstructured and not really suitable for what you wanted. 

On page 9, having done nothing with the portfolio for the last 165 days, you ask again if waiting for your funds to bounce back is better than selling the unsuitable portfolio that you don't want, and you mention that you, "don't seem to be getting very far with IFA".

To me it seems like the reason you don't seem to be getting far with IFA, is because you really haven't applied yourself to the problem at hand, which is that:

- you have a portfolio that you don't want, but won't admit that you don't know how or why to make changes, as you don't have experience with portfolio construction and your research has not been fruitful, other than knowing 'it needs some changes'

- you saw a couple of IFAs and weren't convinced you should hop on board just to get a lower volatility solution if the eventual long-term returns wouldn't be higher (subsequently, the portfolio fell tens of thousands...)

- you haven't chased up these IFAs or met any further IFAs because it is nice to believe you can do it yourself cheaply and effectively, though the experience of the last  almost 6 months has not borne this out.

In fairness, IFAs are probably busy at the moment as existing customers probably have concerns about their portfolios and new customers can't easily have face-to-face meetings due to lockdown - I expect everything goes more slowly near the end of a tax year or start of a new one, especially while admin/ support staff are trying to work somewhat inefficiently from home.  Still, one would think that IFAs with an appetite to take on a £250-300k portfolio would still be open to new business conversations by call, videocall, email, etc. 

flopsy1973

Fair comment yes I have taken my time as I wanted not to make the mistake of previous and learn more and yes gain some help and opinions of others on here. The IFA I have seen I have not been that impressed with and charges are higher than what people have been quoting I should be paying.
I just wanted to know if moving the funds now was a bad idea
Thanks

bowlhead99

flopsy1973 said:

I just wanted to know if moving the funds now was a bad idea
Thanks

It is never a bad idea to move from a portfolio of funds you don't want into a portfolio of funds you do want.  You seem to be getting a bit hung up on waiting for your funds to recover, when they are not funds you want anyway. 

The way I see it: If your funds were worth 100 and have fallen 20% they are worth 80 today. For the 80 to go back to 100, the 80 will need to grow by 25%. Of course, we don't know what will happen to the markets tomorrow and the 80 could fall further, instead.  But you know your 80 is currently invested in a somewhat haphazard mix of funds  and direct shareholdings and is not really suitable for your needs.  What you are thinking is, I should wait until the 80 has grown 25% into 100 again, and then I haven't lost anything, so I can proudly go forwards as a successful investor who never lost anything, despite gambling on an obscure and haphazard selection of investments with no structure.

What you should instead do is cash out the 80, and buy 80 of better investments, and have *them* grow by 25% instead to get you back to your 100 (while of course, still risking temporary further falls below 80).  

When you posted your portfolio last year, you had over £100k of your portfolio in the first account printout, that didn't say it was an ISA and showed a value greater than its cost. If it isn't an ISA or pension account, selling investments from that account could lead to tax consequences if you are making unwrapped gains in excess of unwrapped losses, and the net gain is more than your annual CGT exemption of £12300. So, selling investments now while valuations are generally depressed will help in that regard, because your net gains won't be so high, or you'll create losses to carry forward for future years.

For example, in November your Barclays shares were worth £18.4k having cost £13.4k, a £5k gain. But now the 10,788 shares at only 88p each would only be worth £9.4k, which is about a £4k loss instead of a £5k gain.  With generally lower share prices this year than last, it is a good time to sell investments from outside an ISA and buy new investments within your annual 2020/21 ISA allowance (or pension allowance) because you will fit more shares into that annual allowance if they are at lower prices.

You ask if keeping the bad investment selection that you don't really want for the long term, waiting for it to recover, is a better idea than selling up and getting a new portfolio now. I wholeheartedly agree with the comment from Dunstonh above:

The general rule of thumb is that you should be invested in the way you would if you were putting new money in today.  Unless there are contractual or taxation or other issues that need to be considered.

So sitting back on a sub-optimal investment waiting for it to recover can be far more costly than fixing it now.

coyrls

On the other hand you could think about it for a few more months........