Should I change my IFA?

beemerk12s

I am not particularly money savvy and have never been able to get to grips with pensions, investments, etc. I have, therefore, used an IFA - a one-man band for the last 30+ years, although he has had little to do until recently, as I haven't really invested much over my working life (no lectures on how stupid I've been, please!).
After some years of not needing the IFA, he got in touch in March last year to offer a new management platform (Fidelity Funds Network).
He said there would be a one-off fee (worked out at 3%) and I wouldn't need to pay anything else in the future.
When I threw an extra £5k at it last year, I didn't pay him anything. There are, of course, fees from FFN, which I was unaware of at the time of opening the account
I now wish to top up the fund again.
He hasn't asked for any fee to do this, but has said that the current portfolio (achieving around 7% growth in last year) could do with a review. He says that this will take him 2-3 hours and I can throw a little money at him for this work if I like. He also did this when I made a separate investment.
I don't mind paying a reasonable fee for someone to manage my investments for me, but his approach seems less than professional and seems to rely on moral obligation or shaming me into paying him something, despite his promises that there would be no additional costs when he set up FFN for me.
Also, he seems less than proactive - I haven't had any sort of review since starting with FFN in March last year and any new investment has been through my own instigation. I also feel that he has missed some opportunity to maximise my potential investment in the pension funds in order to give them more time to grow.
Can someone advise whether the initial 3% fee sounds reasonable and what I might expect from a different IFA?
Also, what costs might be involved in this - I'm assuming that if I stay with FFN, these will be limited to any costs for advice from the new IFA.

Dox

Are you sure he is even FCA registered? This all sounds supremely amateurish on both sides.

Albermarle

There are, of course, fees from FFN, which I was unaware of at the time of opening the account

Regardless of whether you use an IFA or not , there will always be fees from the investment platform and for the actual funds you are invested in . Usually the IFA will use a platform that they are working with regularly and sometimes they can get a better deal than you , which partly offsets the IFA charges . Normally these are 0.5% to 1 % pa ( depending on fund size) and a set up fee .

Otherwise your current arrangements with the IFA seem rather 'ad hoc' to put it politely.

dunstonh

I don't mind paying a reasonable fee for someone to manage my investments for me, but his approach seems less than professional and seems to rely on moral obligation or shaming me into paying him something, despite his promises that there would be no additional costs when he set up FFN for me.

Advice is split between transactional and ongoing.

Ongoing advice is where you pay the adviser on an ongoing basis.  The adviser has to be proactive in their servicing.  This will include things like rebalancing, product adjustments etc.   Typically, when you have ongoing servicing, you do not pay any initial fees again.  So, moving from provider/platform A to B would not incur charges as its part of the ongoing service.

Transactional advice is not proactive and is reactive. i.e. mainly when you contact them.   You then pay for the work required on an ad-hoc basis.  So, the advice tends to be ad-hoc as that is how you are paying for it.

Also, he seems less than proactive - I haven't had any sort of review since starting with FFN in March last year and any new investment has been through my own instigation.

It sounds like your existing adviser has you on a transactional advice basis and not ongoing given the reactive basis and the fee being required with each work task.

Can someone advise whether the initial 3% fee sounds reasonable and what I might expect from a different IFA?

For transactional advice it is reasonable.  More than some, less than others but in the ballpark.

[Deleted User]

1. These days, a good simple investment does not need any reviews. Keep saving as much as you can and adding.  “Forgetting” about investments is often the best way of maximizing ones returns. Tinkering usually does more harm than good. 

2. Ok, every 10 years or so its worth looking at investment vehicles and checking there isn’t something that does the same thing but cheaper.
3. If he set up your platform and investments a year ago then there has to be a bloody good reason to look at it again. 

4. On-going % fees are a killer. They don’t sound like much but take a massive bite out of your portfolio, by taxing the principal investment and all returns over and over. The benefit is zero, see above. 

5. A transparent way of paying for advice is to agree an hourly rate and pay it when you actually need the advice. Normally its when there is a major change in your circumstances 

JoeCrystal

Deleted_User said:

5. A transparent way of paying for advice is to agree an hourly rate and pay it when you actually need the advice. Normally its when there is a major change in your circumstances 

It might be better to have an agreed fixed fee beforehand on a transactional basis rather than an open-ended amount since it may be higher than what you are expecting.

Just how large your pot is anyway? beemerk12s
3% of £10,000 is pretty good in comparison to  £100,000 for example.

[Deleted User]

JoeCrystal said:

Deleted_User said:

5. A transparent way of paying for advice is to agree an hourly rate and pay it when you actually need the advice. Normally its when there is a major change in your circumstances 

It might be better to have an agreed fixed fee beforehand on a transactional basis rather than an open-ended amount since it may be higher than what you are expecting.

Just how large your pot is anyway? beemerk12s
3% of £10,000 is pretty good in comparison to  £100,000 for example.

Agree a rate and a number of hours for a given scope.