IFA ongoing fee..Why pay?

NeilCr

bostonerimus wrote: »

I think this is the best argument for an IFA. The actual mechanics of personal financial management can be done inexpensively by anyone with some basic common sense. However, the psychological side of things can be difficult. I can see how an IFA could be a good "hand holder" and offer reassurance.

Not, necessarily, the best but, certainly, a pretty good one!. I remember her recommending a switch of funds - it took a hit early on and I was slightly wobbly, to say the least. She explained the strategy to me and I hung on in there. It's now growing steadily (nothing spectacular but it's part of a mixed portfolio).

From the outside looking in I'd agree that the mechanics could well be straightforward. I had a friend who loved running his investments and was good at it. We talked about it on and off but, in all honesty, I have no real inclination or interest to do it myself. I enjoy the overview and discussion when I meet with her - that's about it. I tend to inertia, also, so might be inclined just to let things run while she is proactive - especially, in keeping up to speed with my attitude to risk. She is encouraging me to spend money now, too!

I do find this forum interesting. But I am perfectly happy how having an IFA works for me - and can fully understand why others would feel the same

Albermarle

Many people self-identify as "unlucky" and would take £9 for £10 rather than choose heads or tails.

It's a good example but not sure 'unlucky' is quite the right word . The issue as far as I understand it, is that the large majority of people have trouble rationally calculating risk and probability, and this then makes them take what seem like irrational decisions.
Apparently it is something that comes from when we were primitive man being stalked by dangerous animals. A kind of safety first survival instinct.

bostonerimus

LHW99 wrote: »

I think also many of us may reach a stage in life some time after retirement, when even if we had been very happy to DIY / self-manage when younger, feel that it would be preferable to allow a qualified professional to take on the task. At that point we may well be happy to pay the fees, rather than risking making a significant error due to some "senior moment"

Dementia is a reason to get help with finances. That could involve a professional and/or a family member. It's important to plan for these circumstances while you have you can so that any transition is orderly.

bostonerimus

NeilCr wrote: »

I tend to inertia, also, so might be inclined just to let things run while she is proactive - especially, in keeping up to speed with my attitude to risk. She is encouraging me to spend money now, too!

Spending money can be difficult when you have taken so long to save it, so it definitely needs a good plan.

I like inertia and worry about being too financially "proactive". I believe that its best to be proactive strategically and that tactically it's best avoided. So maybe the best IFA is the one that you pay to do not much at all.......this is why I think an annual percentage fee is a bit ridiculous.

Jaynishriya

fred246 wrote: »

If you found a rat in the kitchen eating your food would you make an agreement that it could only eat a quarter of your food or would you get rid of it?

You can have a cat/dog to avoid the rat eating your food. So, the ‘agreement’ is with your pet, akin to having an IFA manager, to protect your asset. The difference, of course, is that you can build a personal bond of trust with your pet but, with an IFA/FA, any trust is in-built into an arm’s length transaction, which may not materialise.

Jaynishriya

fred246 wrote: »

My gut instinct tells me that new cars are serviced particularly badly at main dealers. Part of it is common sense. If a car is a year old with 5000 miles on the clock they don't bother taking the wheels off to check the brakes. You get charged for it though...

It’s a common scenario where there is information asymmetry between car owners and the service providers, so many car owners place their trust on the main dealers to perform their services according to industry standards. Unfortunately, you won’t know whether they actually do what they say they do, unless you ask. But the fact is you have become a captive customer, once you bought the car and entered into such agreement, which leaves you exposed to their way of selling additional services, and you may oblige for safety reasons. I guess the car services industry is not heavily regulated as the financial services industry is, because there are many independent mechanics in the market that car owners can turn to if they are not satisfied.

NeilCr

bostonerimus wrote: »

Spending money can be difficult when you have taken so long to save it, so it definitely needs a good plan.

I like inertia and worry about being too financially "proactive". I believe that its best to be proactive strategically and that tactically it's best avoided. So maybe the best IFA is the one that you pay to do not much at all.......

While I agree with you, in general, there are times when spending is the best way forward. I am comfortably off, in my mid to late 60s, with no family/spouse to leave money to. So spending is, likely, the right way forward - much that I resist.:D:D

The best IFA is the one who tailors their advice to your particular situation.

Jaynishriya

bowlhead99 wrote: »

So in other words, there is a market for advisory services because investors would prefer to trust someone else to figure out what to do and arrange for them to do it, than research and implement a solution themselves...

Fees will always need to be higher than the cost base or there would be no point...

Unfortunately, the financial services industry does not work in the same way as the car or other industries do. Not only is it riddled with serious informational deficiency about not knowing what advisors actually do (from what they say they do), once you have entered into an arm’s length transaction with predetermined fees/rates, investors become captive customers, their costs are sunk, and this leaves them exposed to advisers charging hefty fees for routine management tasks.

Even with regulatory constraints, investors do remain exposed to services that may pander on investors beliefs and managers’ sweet talk. My point here is that fees do not necessary fall to costs when trust is (eventually) undermined, as the recent debacle with Woodford/HL has shown.

I would like to see an incentive or pricing structure more simplified and aligned with economies of scale, but that does not seem to happen with financial advisory services even when they have the advanced technology to do so.

NeilCr

Jaynishriya wrote: »

You can have a cat/dog to avoid the rat eating your food. So, the ‘agreement’ is with your pet, akin to having an IFA manager, to protect your asset. The difference, of course, is that you can build a personal bond of trust with your pet but, with an IFA/FA, any trust is in-built into an arm’s length transaction, which may not materialise.

So much long word bollox in your posts

Of course you can build a bond of trust with your IFA. To an extent you need to. They are advising you on investing your money with a long term view so you have to take that leap. If you can't trust your IFA why are you employing them?

This thread has become interesting. Seems now to involve self investors defending their position - which is fine (all power to your elbows) but please do respect that some of us take a differing view

[Deleted User]

coyrls wrote: »

Crikey and this is your pension?

Yes. When I wrested my pension, I put the cash sum into six stocks.
The only thing I have done since is put 1/2 yr div inc into a share tip.
Very happy.
Do you want figures?