IFA ongoing fee..Why pay?

Mothman

NottinghamKnight said:

BananaRepublic said:

Mothman said:

BananaRepublic said:

Mothman said:

I don't have a downer on IFA's perse, and no doubt my wife will need to use one should I decide to depart this mortal coil before her. However I do feel that the IFA's which regularly post on this forum are a 'cut above' those that I have so far have come into contact with. For instance my Mum's IFA has done nothing with her investments despite collecting at least £25k in fees over the last 21yrs. I guess it's easier to just collect the trail commissions\ongoing servicing fees rather than actually doing something for it.
Like all professions there will be good,bad & just plain lazy IFA's like my Mum's, the hard part seems to be finding the good ones.

How well did your mum’s investments do? I’m sure you are right, some will be good, some not. 

Some are not great. The IFA chose 3 onshore investment bonds (Pru, Aviva & Scot Widows) all With Profits Funds . The Pru bond performance has been acceptable but the Aviva & Scot Widows has been poor, for instance Mum just received a valuation for the Aviva bond and value is the same as it was in Feb 2019. Also the IFA has made no effort  to move the investments from tax paying investment bonds into ISA's, the usual tax advantages of investment bonds don't apply to Mum as she has never been a higher rate tax payer.

The rest of the money was put in a Canada Life Intl offshore investment bond (in trust), this was chosen at the time for IHT mitigation purposes which was fair enough. The bond is invested in four funds, currently split approx 80% equities (43% Europe, 25% UK, 6% USA, 6% R.O.W,) & 20% Bonds (majority corporate). From Jun 2012 - Jun 2020 perfomance has largely been in line with VLS80 but since Jun 2020 it has outperformed VLS80 mainly due to the volatile European fund. Trustnet portfolio risk score = 70 (VLS80=64), the risk profile of the portfolio has ramped up over the years as no rebalancing has ever been done

Not bothering to move funds into ISA’s is shocking, it suggests he doesn’t give a damn. Some years back I discovered I had been paying 1% a year from a fund to an advisor for nothing, that was back in the days when hidden commissions were allowed, it cost me thousands. Such disreputable practices were widespread. These days they are supposed to work for a living. 

Though the real lesson is to keep an eye on things and not trust anyone else, sadly.

Unfortunately "keeping an eye on things" requires a certin level of knowledge which many people using an IFA simply won't have, that is why they are using an IFA in the first place.

NottinghamKnight

Mothman said:

NottinghamKnight said:

BananaRepublic said:

Mothman said:

BananaRepublic said:

Mothman said:

I don't have a downer on IFA's perse, and no doubt my wife will need to use one should I decide to depart this mortal coil before her. However I do feel that the IFA's which regularly post on this forum are a 'cut above' those that I have so far have come into contact with. For instance my Mum's IFA has done nothing with her investments despite collecting at least £25k in fees over the last 21yrs. I guess it's easier to just collect the trail commissions\ongoing servicing fees rather than actually doing something for it.
Like all professions there will be good,bad & just plain lazy IFA's like my Mum's, the hard part seems to be finding the good ones.

How well did your mum’s investments do? I’m sure you are right, some will be good, some not. 

Some are not great. The IFA chose 3 onshore investment bonds (Pru, Aviva & Scot Widows) all With Profits Funds . The Pru bond performance has been acceptable but the Aviva & Scot Widows has been poor, for instance Mum just received a valuation for the Aviva bond and value is the same as it was in Feb 2019. Also the IFA has made no effort  to move the investments from tax paying investment bonds into ISA's, the usual tax advantages of investment bonds don't apply to Mum as she has never been a higher rate tax payer.

The rest of the money was put in a Canada Life Intl offshore investment bond (in trust), this was chosen at the time for IHT mitigation purposes which was fair enough. The bond is invested in four funds, currently split approx 80% equities (43% Europe, 25% UK, 6% USA, 6% R.O.W,) & 20% Bonds (majority corporate). From Jun 2012 - Jun 2020 perfomance has largely been in line with VLS80 but since Jun 2020 it has outperformed VLS80 mainly due to the volatile European fund. Trustnet portfolio risk score = 70 (VLS80=64), the risk profile of the portfolio has ramped up over the years as no rebalancing has ever been done

Not bothering to move funds into ISA’s is shocking, it suggests he doesn’t give a damn. Some years back I discovered I had been paying 1% a year from a fund to an advisor for nothing, that was back in the days when hidden commissions were allowed, it cost me thousands. Such disreputable practices were widespread. These days they are supposed to work for a living. 

Though the real lesson is to keep an eye on things and not trust anyone else, sadly.

Unfortunately "keeping an eye on things" requires a certin level of knowledge which many people using an IFA simply won't have, that is why they are using an IFA in the first place.

Yes, doesn't mean my statement isn't true. Who audits the auditors after all. Shows the usefulness of these forums in terms of scrutiny and checking, and it's healthy that people will become more sceptical as they have over recent decades. Let's not forget it was very difficult to DIY until maybe 25 years ago and now that is an option for many if not most.

BananaRepublic

dunstonh said:

Please explain how it is dishonest?    I am open minded to be corrected but I visited a website that gave the levels for various medical roles and they gave 4-7 as the range required.  If you have more accurate information then please give it.  Maybe you should clarify the role as there is a large range and the requirements at the upper end of the medical professions are significantly higher than at the lower end.

See the post by cus. 

BananaRepublic

NottinghamKnight said:

Mothman said:

NottinghamKnight said:

BananaRepublic said:

Mothman said:

BananaRepublic said:

Mothman said:

I don't have a downer on IFA's perse, and no doubt my wife will need to use one should I decide to depart this mortal coil before her. However I do feel that the IFA's which regularly post on this forum are a 'cut above' those that I have so far have come into contact with. For instance my Mum's IFA has done nothing with her investments despite collecting at least £25k in fees over the last 21yrs. I guess it's easier to just collect the trail commissions\ongoing servicing fees rather than actually doing something for it.
Like all professions there will be good,bad & just plain lazy IFA's like my Mum's, the hard part seems to be finding the good ones.

How well did your mum’s investments do? I’m sure you are right, some will be good, some not. 

Some are not great. The IFA chose 3 onshore investment bonds (Pru, Aviva & Scot Widows) all With Profits Funds . The Pru bond performance has been acceptable but the Aviva & Scot Widows has been poor, for instance Mum just received a valuation for the Aviva bond and value is the same as it was in Feb 2019. Also the IFA has made no effort  to move the investments from tax paying investment bonds into ISA's, the usual tax advantages of investment bonds don't apply to Mum as she has never been a higher rate tax payer.

The rest of the money was put in a Canada Life Intl offshore investment bond (in trust), this was chosen at the time for IHT mitigation purposes which was fair enough. The bond is invested in four funds, currently split approx 80% equities (43% Europe, 25% UK, 6% USA, 6% R.O.W,) & 20% Bonds (majority corporate). From Jun 2012 - Jun 2020 perfomance has largely been in line with VLS80 but since Jun 2020 it has outperformed VLS80 mainly due to the volatile European fund. Trustnet portfolio risk score = 70 (VLS80=64), the risk profile of the portfolio has ramped up over the years as no rebalancing has ever been done

Not bothering to move funds into ISA’s is shocking, it suggests he doesn’t give a damn. Some years back I discovered I had been paying 1% a year from a fund to an advisor for nothing, that was back in the days when hidden commissions were allowed, it cost me thousands. Such disreputable practices were widespread. These days they are supposed to work for a living. 

Though the real lesson is to keep an eye on things and not trust anyone else, sadly.

Unfortunately "keeping an eye on things" requires a certin level of knowledge which many people using an IFA simply won't have, that is why they are using an IFA in the first place.

Yes, doesn't mean my statement isn't true. Who audits the auditors after all. Shows the usefulness of these forums in terms of scrutiny and checking, and it's healthy that people will become more sceptical as they have over recent decades. Let's not forget it was very difficult to DIY until maybe 25 years ago and now that is an option for many if not most.

Very true. 20 years ago it was hard, or even impossible, for an amateur to research funds and markets. Today it’s easy to track performance of funds over the last 10 years, sometimes more. My first fund was bought on the basis of an ad in the Sunday Times, soon sold when I realised my mistake. And many people paid an upfront 5% charge plus 1% yearly commission. 

Mickey666

BananaRepublic said:

NottinghamKnight said:

BananaRepublic said:

Mothman said:

BananaRepublic said:

Mothman said:

I don't have a downer on IFA's perse, and no doubt my wife will need to use one should I decide to depart this mortal coil before her. However I do feel that the IFA's which regularly post on this forum are a 'cut above' those that I have so far have come into contact with. For instance my Mum's IFA has done nothing with her investments despite collecting at least £25k in fees over the last 21yrs. I guess it's easier to just collect the trail commissions\ongoing servicing fees rather than actually doing something for it.
Like all professions there will be good,bad & just plain lazy IFA's like my Mum's, the hard part seems to be finding the good ones.

How well did your mum’s investments do? I’m sure you are right, some will be good, some not. 

Some are not great. The IFA chose 3 onshore investment bonds (Pru, Aviva & Scot Widows) all With Profits Funds . The Pru bond performance has been acceptable but the Aviva & Scot Widows has been poor, for instance Mum just received a valuation for the Aviva bond and value is the same as it was in Feb 2019. Also the IFA has made no effort  to move the investments from tax paying investment bonds into ISA's, the usual tax advantages of investment bonds don't apply to Mum as she has never been a higher rate tax payer.

The rest of the money was put in a Canada Life Intl offshore investment bond (in trust), this was chosen at the time for IHT mitigation purposes which was fair enough. The bond is invested in four funds, currently split approx 80% equities (43% Europe, 25% UK, 6% USA, 6% R.O.W,) & 20% Bonds (majority corporate). From Jun 2012 - Jun 2020 perfomance has largely been in line with VLS80 but since Jun 2020 it has outperformed VLS80 mainly due to the volatile European fund. Trustnet portfolio risk score = 70 (VLS80=64), the risk profile of the portfolio has ramped up over the years as no rebalancing has ever been done

Not bothering to move funds into ISA’s is shocking, it suggests he doesn’t give a damn. Some years back I discovered I had been paying 1% a year from a fund to an advisor for nothing, that was back in the days when hidden commissions were allowed, it cost me thousands. Such disreputable practices were widespread. These days they are supposed to work for a living. 

Though the real lesson is to keep an eye on things and not trust anyone else, sadly.

That is certainly a lesson, but I still consider the practice disreputable and it is surely part of the reason many distrust finance professionals.  

Perhaps another reason is that finance professionals get paid their fees regardless of how good their advice turns out to be.  They don't seem to have their own skin in the game.  Being paid a percentage of the gains they might make for you is one thing but how about they also bear a percentage of any losses as well?

NottinghamKnight

Mickey666 said:

BananaRepublic said:

NottinghamKnight said:

BananaRepublic said:

Mothman said:

BananaRepublic said:

Mothman said:

I don't have a downer on IFA's perse, and no doubt my wife will need to use one should I decide to depart this mortal coil before her. However I do feel that the IFA's which regularly post on this forum are a 'cut above' those that I have so far have come into contact with. For instance my Mum's IFA has done nothing with her investments despite collecting at least £25k in fees over the last 21yrs. I guess it's easier to just collect the trail commissions\ongoing servicing fees rather than actually doing something for it.
Like all professions there will be good,bad & just plain lazy IFA's like my Mum's, the hard part seems to be finding the good ones.

How well did your mum’s investments do? I’m sure you are right, some will be good, some not. 

Some are not great. The IFA chose 3 onshore investment bonds (Pru, Aviva & Scot Widows) all With Profits Funds . The Pru bond performance has been acceptable but the Aviva & Scot Widows has been poor, for instance Mum just received a valuation for the Aviva bond and value is the same as it was in Feb 2019. Also the IFA has made no effort  to move the investments from tax paying investment bonds into ISA's, the usual tax advantages of investment bonds don't apply to Mum as she has never been a higher rate tax payer.

The rest of the money was put in a Canada Life Intl offshore investment bond (in trust), this was chosen at the time for IHT mitigation purposes which was fair enough. The bond is invested in four funds, currently split approx 80% equities (43% Europe, 25% UK, 6% USA, 6% R.O.W,) & 20% Bonds (majority corporate). From Jun 2012 - Jun 2020 perfomance has largely been in line with VLS80 but since Jun 2020 it has outperformed VLS80 mainly due to the volatile European fund. Trustnet portfolio risk score = 70 (VLS80=64), the risk profile of the portfolio has ramped up over the years as no rebalancing has ever been done

Not bothering to move funds into ISA’s is shocking, it suggests he doesn’t give a damn. Some years back I discovered I had been paying 1% a year from a fund to an advisor for nothing, that was back in the days when hidden commissions were allowed, it cost me thousands. Such disreputable practices were widespread. These days they are supposed to work for a living. 

Though the real lesson is to keep an eye on things and not trust anyone else, sadly.

That is certainly a lesson, but I still consider the practice disreputable and it is surely part of the reason many distrust finance professionals.  

Perhaps another reason is that finance professionals get paid their fees regardless of how good their advice turns out to be.  They don't seem to have their own skin in the game.  Being paid a percentage of the gains they might make for you is one thing but how about they also bear a percentage of any losses as well?

Though a number of fund managers will have that skin in the game, not IFAs obviously and with a very different remit but a useful sign of commitment.

bowlhead99

NottinghamKnight said:

Mickey666 said:
Perhaps another reason is that finance professionals get paid their fees regardless of how good their advice turns out to be.  They don't seem to have their own skin in the game.  Being paid a percentage of the gains they might make for you is one thing but how about they also bear a percentage of any losses as well?

Though a number of fund managers will have that skin in the game, not IFAs obviously and with a very different remit but a useful sign of commitment.

Yes, if I was invested in an actively managed fund I would want the fund manager to have their risks and rewards somewhat aligned with mine. A combination of them holding investments in their own fund, together with (for some asset classes) perhaps earning performance fees alongside fixed management fees (subject to hurdle rates and high watermarks etc) is fine. They would earn more money if they do relatively better.

Whereas if I was using an independent advisor to help me allocate my portfolio I would not want the advisor to be compensated on a percentage of returns. As a practical point, as the independent advisor can't control whether the returns are positive or negative (which depends on the markets) it would be difficult for them to plan their business to be around for me in the future if they are able to get negative revenues and the negative years come first.   As higher returns are likely to come from higher risk, that would potentially bias the portfolio towards a riskier one that would make them more money in the good times (to be able to build up a buffer for the bad times, but also to buy themselves fast cars and yachts) rather than being an independently-considered allocation suitable for my needs and risk tolerance / risk capacity.  

fred246

Please explain how it is dishonest?    I am open minded to be corrected but I visited a website that gave the levels for various medical roles and they gave 4-7 as the range required.  If you have more accurate information then please give it.  Maybe you should clarify the role as there is a large range and the requirements at the upper end of the medical professions are significantly higher than at the lower end.

According to Wikipedia a medical degree is a Level 7 qualification.
https://en.wikipedia.org/wiki/Bachelor_of_Medicine,_Bachelor_of_Surgery#United_Kingdom
According to this website
https://www.healthcareers.nhs.uk/explore-roles/doctors/training-doctor
The medical degree would represent about halfway through the training to be a GP
4-7 is complete codswallop.

Malthusian

Mickey666 said:

Perhaps another reason is that finance professionals get paid their fees regardless of how good their advice turns out to be.  They don't seem to have their own skin in the game.  Being paid a percentage of the gains they might make for you is one thing but how about they also bear a percentage of any losses as well?

That is what ad valorem (percentage-based) charging achieved and is used by the vast majority of advisers (as well as fund managers, most platforms and even the regulator).

If your investments lose money it does not mean that the advice was bad. If you don't understand why, you should stick with FSCS-protected bank accounts, as otherwise you are highly likely to lose money when the markets go down and you sell them in a panic.

For most people it means the advice was good. If you consulted an adviser then chances are you have money that needs to be invested for the long term (wouldn't be much point otherwise). If the markets are going down but your investment is going up then there are three possible explanations, in increasing order of unlikeliness: 1) you are in cash 2) you are in a Ponzi scheme 3) your investments are managed by a genius, like Neil Woodford. Neither suggests brilliant advice.

fred246

I remember about 20 years ago an IFA giving a talk. They said commission had finished and so they were charging per hour. Hourly rate of £250 per hour. I have never seen so many incredulous glances go around a room. It was just unbelievable. So I can see why they charge a percentage like estate agents. They will charge 0.5% but never say how long their 'review' takes. So a portfolio of £500K costs £2.5K to 'review' it. Does it take 10 hours to read the list of investments? 0.5% is totally ridiculous but people keep paying it. Some even pay more. Customers should take the initiative and get it knocked down. IFAs won't reduce it to a reasonable level on their own initiative.