Do you have to have an IFA?

bostonerimus

SonOf wrote: »

My colleague had a client who had been reading online (could be here for all I know) and he said he wanted to end ongoing servicing to reduce his charges and invest in VLS60 which was better for him and lower cost than what we had done.

The returns on his portfolio arranged by us had outperformed VLS60 consistently after charges. He was surprised at this because he had been told online that it was better to not use an IFA.

Then he mentioned that he was going to transfer two other pensions into this new direct pension. We had previously told him not to transfer but he forgot that. One of the pensions had a something like a 60% protected tax free cash entitlement that would be lost on transfer. The other one was a lump sum retirement benefit scheme that has 100% tax free cash available but lost on transfer plus it had £1800 transfer penalty. He hadn't spotted either of those. So, again, had he not had the adviser, he would have made two costly mistakes as well as having the misconception that VLS and DIY is the answer to everything.

This is why, time and again, the DIY vs IFA debate needs context. If you know what you are doing, then you can save money if you DIY. If you do not know what you are doing, it could lead to costly errors.

I won't argue with any of that.

There are obviously many portfolios that will outperform VLS60, my contention is that VLS60 is a good solution for very many people, it won't be the best, but it won't be the worse either. The strategy that worked for me was to be thrifty, keep costs down and shoot for broad market investment returns form a simple 60/40 portfolio. Over the past 10 years I'm averaging 10% annual return which is more than enough to fund my goals so that's success for me. I'm sure the client you mention has also been successful.

lisyloo

ZingPowZing wrote: »

Root canal work in the interest of the patient is good; root canal work in the interest of the dentist? Not so much.

But - as you say - each to their own.

I agree it’s a downside to buying ANY service.
If you go to a car dealer they won’t recommend a bicycle as a form of transport as they will be looking to their interest.

But If one can’t avoid a basic rip-off then Can one be savvy enough to manage an investment portfolio?

There are pros and cons.

I don’t think the fact that an IfA is getting paid should be an overriding factor (e.g. more important than whether you have the ability).
Some business people are interested in doing good business and making long term relationships.

But yes I agree it’s a downside and there are downsides.

bostonerimus

waveydavey48 wrote: »

That resonates with me and, I imagine, lots of people. Would you mind elaborating on what the "few simple rules" are please. This is a genuine question as I would prefer to DIY. My own situation is that we can live happily on secure income but also have a DC pot of about £165k. My thoughts at present are that I will probably put that in the Vanguard SIPP when it starts using LS60/40 and forget about it.

I would then have diversity, automatic adjustment and low costs. What could an IFA add to that, apart from charges?

OK here is a link to those rules and a little radio piece on them. It's American so there's a little translation to do. For 401k read workplace pension and for ROTH, SEP, and 529 read ISA and SIPP. Your plan pretty much aligns with the rules on the index card.

https://www.npr.org/sections/alltechconsidered/2016/01/08/462250239/when-an-index-card-of-financial-tips-isnt-enough-this-book-is-therehttps://www.npr.org/sections/alltechconsidered/2016/01/08/462250239/when-an-index-card-of-financial-tips-isnt-enough-this-book-is-there

I would also add that one of the first steps is to do a budget so you can see where you can save money. Thrift is usually ignored and it's actually vital as it can greatly increase the amount of you can save and invest.

zagfles

SonOf said:

My colleague had a client who had been reading online (could be here for all I know) and he said he wanted to end ongoing servicing to reduce his charges and invest in VLS60 which was better for him and lower cost than what we had done.

The returns on his portfolio arranged by us had outperformed VLS60 consistently after charges. He was surprised at this because he had been told online that it was better to not use an IFA.

Woodford consistently outperformed the market, until a few years ago. As they say, past performance is not a guide to future returns.
First post on new forum! Will it work???

cfw1994

SonOf said:

My colleague had a client who had been reading online (could be here for all I know) and he said he wanted to end ongoing servicing to reduce his charges and invest in VLS60 which was better for him and lower cost than what we had done.

The returns on his portfolio arranged by us had outperformed VLS60 consistently after charges. He was surprised at this because he had been told online that it was better to not use an IFA.

Then he mentioned that he was going to transfer two other pensions into this new direct pension. We had previously told him not to transfer but he forgot that. One of the pensions had a something like a 60% protected tax free cash entitlement that would be lost on transfer. The other one was a lump sum retirement benefit scheme that has 100% tax free cash available but lost on transfer plus it had £1800 transfer penalty. He hadn't spotted either of those. So, again, had he not had the adviser, he would have made two costly mistakes as well as having the misconception that VLS and DIY is the answer to everything.

This is why, time and again, the DIY vs IFA debate needs context. If you know what you are doing, then you can save money if you DIY. If you do not know what you are doing, it could lead to costly errors.

Time to test the new forum....not liking how spaced out everything looks, not sure if there is a button to compress things?

So VLS60 looks like about 8% pa for past 5 years.....VLS100 look just over 11%.
My (clearly high-appetite-for-risk!) view for long term investments in this space would be VLS100.   

What sort of annualised number would the funds/package you had chosen for him give?
The things he hadn’t spotted suggests to me he is not someone with an eye for detail, and I am sure benefits greatly from having an IFA.  Perhaps like most people.

SonOf

cfw1994 said:

SonOf said:

My colleague had a client who had been reading online (could be here for all I know) and he said he wanted to end ongoing servicing to reduce his charges and invest in VLS60 which was better for him and lower cost than what we had done.

The returns on his portfolio arranged by us had outperformed VLS60 consistently after charges. He was surprised at this because he had been told online that it was better to not use an IFA.

Then he mentioned that he was going to transfer two other pensions into this new direct pension. We had previously told him not to transfer but he forgot that. One of the pensions had a something like a 60% protected tax free cash entitlement that would be lost on transfer. The other one was a lump sum retirement benefit scheme that has 100% tax free cash available but lost on transfer plus it had £1800 transfer penalty. He hadn't spotted either of those. So, again, had he not had the adviser, he would have made two costly mistakes as well as having the misconception that VLS and DIY is the answer to everything.

This is why, time and again, the DIY vs IFA debate needs context. If you know what you are doing, then you can save money if you DIY. If you do not know what you are doing, it could lead to costly errors.

Time to test the new forum....not liking how spaced out everything looks, not sure if there is a button to compress things?

So VLS60 looks like about 8% pa for past 5 years.....VLS100 look just over 11%.
My (clearly high-appetite-for-risk!) view for long term investments in this space would be VLS100.   

What sort of annualised number would the funds/package you had chosen for him give?
The things he hadn’t spotted suggests to me he is not someone with an eye for detail, and I am sure benefits greatly from having an IFA.  Perhaps like most people.

It was in the same risk profile.  So, not influenced by equity content.   Whenever comparisons are made, they should always be on a like for like risk profile basis. Otherwise comparisons are pointless (for reference it was 61% equity on the portfolio and he was looking at VLS60.  Both coming out at virtually identical for risk.Although ours had 70% trackers, 30% managed).
And yes, the new forum needs a bit of work.  No proper & easy quote function.  Spacing is too great and its not visually easy to see which threads are new or had new posts since last visit (yes a "new" icon appears but the thread title being bold rather than normal text was much better.  Or put the "new" icon in front of the thread title, not at the end.