IFA ongoing fee..Why pay?

dmelife

There are a lot of very patient people on this forum who are intent on explaining to Zong Pong Zap the principles of investment, when he is incapable of seeing past his ill-informed nose. Don’t feed the soon to be bankrupt troll!

Daniel54

bigadaj wrote: »

No, you only need four companies, six is extra diversification.

Why not put it all into Berkshire Hathaway ? Reducto ad absurdum.

[Deleted User]

Daniel54 wrote: »

Have a look at the change over 10 years to 2018

Which ones would you have chosen ?

https://milfordasset.com/insights/largest-companies-2008-vs-2018-lot-changed

Sobering, that, Daniel.
Good link.
Guess I've been outrageously lucky!
Good luck to your sister and yourself, though I still reckon she'll be happier when she kicks her adviser to the curb!

Thrugelmir

Daniel54 wrote: »

Why not put it all into Berkshire Hathaway ? Reducto ad absurdum.

Hasn't performed well in the past decade. Remember the poor judgement in buying into Tesco's stock. Lost £287m in the process .....

cfw1994

I have to say I do find it mildly crazy how ZPW has chosen to DIY into just half a dozen companies...hindsight is an easy thing to use, but knowing where things are moving is quite another thing: a wise man once said "you think things are moving fast today - they will never move this slowly again!".

A couple of people have mentioned getting a global outlook from their IFA during an annual update - I assume this is just the 'relatively' obvious platitudes that are often put out by finance companies that don't really commit or say much? For example, this one from Moola.
Anyone learned something really useful and changed tack because of such conversations?

We don't use an IFA, but I think that is partly (like many here) because we have a strong interest in the subject of finances.

I do firmly believe the best advisor you can possibly have is yourself - no-one else has YOUR interests solely at heart....

.....BUT I also realise that there are a HUGE number of people without the interest or confidence. They might waver incessantly, worrying about getting the "best" tracker or ISA, instead of realising it is ok to be in a decent enough one.
Many of my pals, in sometimes well paid jobs with responsibilities, simply don't know the first thing about passive v active, ISA/LISA/GIA, how their pensions work, etc, etc.
I don't think 'good' IFAs (perhaps even FAs....) are bad for them to use - managing finances is also about having a view on your life, family, activities, hopes & aspirations: it can be helpful to have an experienced sounding board on any/all of those things.

Most important to me is that people have clear sight and understanding of the fees they are paying.
Knowing the effect of 0.5% pa disappearing over a 25+ year timeframe might be enough to make them consider DIYing, but if not, at least knowing what things are costing you - in bad years as well as a good - is important.

Jaynishriya

bowlhead99 wrote: »

For some, getting everything right (or close to it) feels like it may be difficult, hence using an IFA may be the lesser of two evils (the annual cost of an IFA can be lower than the cost of getting things wrong).

In an otherwise very sound and enlightening piece of advice, bowlhead99, the trade-off highlighted above – ‘the annual cost of an IFA can be lower than the cost of getting things wrong’ - does not seem very straight-forward to me.

One can make mistakes as a beginner or inexperienced DIYer, no doubt. But, in my view, once you enter IFA territory, the ball game shifts: it’s not same level playing field as DIY, I’m afraid. You have higher costs to contend with and, to compensate for that (particularly for someone in accumulation phase) you would need higher returns. The IFAs are not immune from failing to deliver that.

cfw1994 wrote: »

We don't use an IFA, but I think that is partly (like many here) because we have a strong interest in the subject of finances.

I do firmly believe the best advisor you can possibly have is yourself - no-one else has YOUR interests solely at heart.....

My sentiments reflect yours in many ways. About a decade ago, we know the markets had turned south and remained depressed for a while. At that time, as a newbie, I had contemplated whether to DIY or IFA (owing to work pressures). I had enough cash savings, income from work and property to live on. It is debatable whether I could have done any worse or better than IFA. But, with hindsight, I know that I have saved handsomely from costs, and importantly, my investment in learning, research and planning has been very rewarding, thanks to advice generously offered by experts on this forum.

SonOf

In an otherwise very sound and enlightening piece of advice, bowlhead99, the trade-off highlighted above – ‘the annual cost of an IFA can be lower than the cost of getting things wrong’ - does not seem very straight-forward to me.

One can make mistakes as a beginner or inexperienced DIYer, no doubt. But, in my view, once you enter IFA territory, the ball game shifts: it’s not same level playing field as DIY, I’m afraid. You have higher costs to contend with and, to compensate for that (particularly for someone in accumulation phase) you would need higher returns. The IFAs are not immune from failing to deliver that.

Not necessarily.

The biggest DIY platform in the UK is HL. They hold more than every other DIY platform put together. Their platform charge is 0.45%. An IFA platform charge is around 0.15-0.27% for the good value and good functionality ones, The most common is around 0.25%. So, that is a 0.20% saving. The most common IFA charge is 0.50%. So, that makes the net position of an IFA 0.30% p.a. more expensive.

We frequently see HL clients and move them from DIY to advised and many of them in the HL MM funds which are damned expensive. Our portfolios tend to be around 0.18 to 0.45% per annum (depending on risk profile - higher risk being more expensive than lower risk as expected). So, that puts the IFA around 0.80% to 1.2% p.a. bottom line. So, it can be cheaper to use an adviser than DIY.

DIY does not mean it is cheaper. If you DIY badly or just poorly even, then you can end up paying more than advised.

We frequently see inexperienced DIY investors going way above their risk profile and be more prone to switching frequently for poor reasons. They also tend to fashion invest based on what they read in the media. The portfolios nearly always lack structure and are much higher risk than the actual tolerance of the individual.

Then there are those that do not understand tax wrappers. Indeed, there is another thread at the moment where the person is missing the pension wrapper because they dont understand it. With higher rate relief, that is costing the individual thousands of pounds a year lost. Far more than the cost of an IFA who would have told them to utilise the pension.

It really does boil down to the capability of the individual to understand and know what they are doing. DIY well and you can save money. DIY badly and it can be a costly mistake.

It is also important to understand that an IFA's primary requirement is suitability. Not getting the best investment returns. And all those people who lost money in scams or mini-bonds etc would not have done so if they had an IFA.

[Deleted User]

SonOf wrote: »

We frequently see HL clients and move them from DIY to advised and many of them in the HL MM funds which are damned expensive.

Good work.

DIY is a terrible term, though, and a bit of a misnomer for those who invest in funds.

segovia

ZingPowZing wrote: »

I get why people go to a Financial Adviser initially, and I get why people may revisit when circumstances change, but why in the world pay an FA or IFA when the investment plan is ticking over?

If there were to be a seismic event affecting financial mkts., your FA is likely to spew more dust than Krakatoa, but unlikely to elevate your fortunes above the herd.

Before you commit to an ongoing IFA fee please check your investments: - if they are in funds then those funds have managers and you are already paying THEIR fees.

A £500,000 investment under an IFA charging 0.5% means you are paying £50 per week for the privilege; a bit like insurance except you have no claim.

Because that is how IFA's make their wages, the job isn't viable unless they have a regular income stream. I don't agree with it but that is how it is, the industry norm is 0.5% - 0.75%. An IFA with 50 clients with avg pots of 300K would make 112K a year in charges (commission). I think 0.25% is more realistic with a regular review and an agreement to terminate at any time.

[Deleted User]

Amen.
The background is that the fortunes of clients of my age have - until recently - been totally in the hands of people in the financial services industry who barely deigned to notify you once a year, six months after the snapshot.
The complacency bred by that relationship still exists, to a large extent. Insofar as the UK financial services industry has become more user friendly, it has been dragged to its current position by international competition and regulation.