IFA fund management costs

MarcoRolo

Have seen lots of discussion on here about IFA costs as a % of total portfolio value and what that % should be.  However, I was wondering whether there are any IFAs who operate on the basis of taking a % cut of the INCREASE in portfolio value rather than a % of the total value which means they don’t feel much of the pain of a reduction in value.  Has anyone come across this or can any IFAs comment?  Thanks

Albermarle

This has been mentioned before on other threads . It is misunderstanding the role of an IFA, which is to manage your finances in an optimal way through good and bad times + advise on other issues like tax, inheritance etc .
They are not fund managers, where a performance type bonus would be more normal. 

dunstonh

However, I was wondering whether there are any IFAs who operate on the basis of taking a % cut of the INCREASE in portfolio value rather than a % of the total value which means they don’t feel much of the pain of a reduction in value. 
1 - it would be a truly awful way for you to pay charges.  You would end up paying more over time (growth periods outnumber negative)
2 - It would create bias in recommendations (low risk = lower return)
3 - it remunerates the IFA for something that is not their primary role. (IFAs are not fund managers and they have no control over negative periods).
4 - it creates cashflow issues for the business which could bankrupt it.
5 - No mainstream platform/provider supports it (not sure any do).

MarcoRolo

Thanks for the comments and understand the points you both make.  It just feels like the IFAs role should be to make you better off, yet there is little/nothing that acts as a financial incentive for them to do so.  

Andrew31

MarcoRolo said:

Thanks for the comments and understand the points you both make.  It just feels like the IFAs role should be to make you better off, yet there is little/nothing that acts as a financial incentive for them to do so.  

Apart from the fact that if they dont do a good job you can stop using them, that is the financial incentive. 

Its like saying there is no incentive for Pizza hut to make good Pizzas!

This is the 3rd thread of yours about IFA charges, if you dont like them,  why dont you change advisers.

Or manage it yourself

MarcoRolo

Of course you’re right, but I would get a better pizza if I could pay what I thought it was worth after I’d eaten it.  

Andrew31

MarcoRolo said:

Of course you’re right, but I would get a better pizza if I could pay what I thought it was worth after I’d eaten it.  

Start making your own pizzas if you believe that.   

cfw1994

Andrew31 said:

MarcoRolo said:

Of course you’re right, but I would get a better pizza if I could pay what I thought it was worth after I’d eaten it.  

Start making your own pizzas if you believe that.   

Love making my own pizzas.....family love 'em too!

Aegis

MarcoRolo said:

Thanks for the comments and understand the points you both make.  It just feels like the IFAs role should be to make you better off, yet there is little/nothing that acts as a financial incentive for them to do so.  

Except that clients who aren't made better off will leave.  Otherwise I wholeheartedly agree with dunstonh as usual - it's not my job to try to generalt positive returns during falling markets, and it's certainly not fair of you to expect me to work for free for potentially years if we end up in a bear market.

Thrugelmir

MarcoRolo said:

Thanks for the comments and understand the points you both make.  It just feels like the IFAs role should be to make you better off, yet there is little/nothing that acts as a financial incentive for them to do so.  

How much time, effort and paid resource are you prepared into managing/selecting your own investments? 

fred246

I do my own investments so I don't waste any dough. My wife makes the pizza so I get the best pizzas for no effort and minimal dough. She makes lots of dough when she makes the pizzas but she says you have to. She reckons it costs peanuts to make the dough so it's a massive saving over buying ready made pizzas.