Views on advisors

enthusiasticsaver

Audaxer said:

enthusiasticsaver said:

BananaRepublic said:

barnstar2077 said:

enthusiasticsaver said:

ChilliBob said:

enthusiasticsaver said:

ChilliBob said:

Hey guys, 
I'm keen to get people's views on financial advisors when it comes to creating a portfolio.. 
1. Did you bother when starting out, or just learnt as you went, carefully
2. Do you continue to use one? If so in what capacity?
3. Assuming you *dont* use someone to do it for you (since they take a % cut) presumably you just pay for advise adhock, much like you might for legal advice?

On the face of it I'm thinking it's unnecessary with enough research and care, but unsure if that's a reasonable view, or very naive. 

Thoughts most welcome, cheers guys. 

 Initially I learnt as I went as I was starting out with a relatively small portfolio and I wanted to learn about investing.  After about 5 years as the portfolio was much larger and my husband had also started to invest we moved to an IFA and have been with him about a year.  He was the second one we had a free meeting with as we were not impressed with the first one. 

As  I understand it IFAs don't do ad hoc advice, at least ours doesn't.  They do a free initial meeting and if you decide to go further they do a recommendation (which you can pay for and not do the ongoing service so that might count as ad hoc). We opted for the ongoing service. 

I don't think it is naive to DIY if you do your research.  We could have carried on doing that but I was starting to get nervous about managing that amount of money (well over £200k) although he did say that I had managed it well over the 5 years I was looking after it.  He actually moved it from medium to cautious though as my husband was less inclined to  take risks.  I have more peace of mind and don't keep checking the value of the portfolio as I did when I was managing it. 

A few things I would say.  If you are going to DIY then you have to do your research and be aware of what your risk appetite is.  If you panic if the markets move downwards by more than a certain percentage and you  are tempted to sell out then you are invested in the wrong thing. Quite a few on here do DIY and some really do not like IFAs.  I just think that you have to remember you get an expert to service and repair your car and do work on your house so why not pay someone to manage your investments?  Yes of course there is a cost but the service we get from ours is not just managing the investments but advising on the best way of  financing  our lifestyle.  For us we get peace of mind but equally if I wasn't happy with him then we would terminate and manage it ourselves again. 

Thanks, this is really interesting to read. I think the charging model is a big part of it for me. For example a friend in a similar situation a few years ago has just whacked most of what he got on a few global index trackers, he seems happy with it and said it costs him about 100 quid a year, but due to sums involved would be about 10k via an ifa if they were to 'manage it'.

Yes, initially I balked at paying someone but I looked at the overall picture when we had our annual review and compared the value of the portfolio then after the charges to what it would have done had we left it in Vanguard LS60 which was where I had it invested prior to using the IFA.  Even after paying charges it had done better with the IFA and the funds he and the committee he uses had chosen.  They review the funds regularly and obviously have more  experience and knowledge than me and we get an overall financial picture each year re investments/liquidity and tax position so  more than just investing. Obviously each IFA works differently though so it could just as easily have gone down. 

I myself use a VLS fund and have considered using an IFA.  The reason I decided to continue to DIY was because I couldn't see how my return could be improved significantly without increasing risk, which I can do myself.  For example, if you use a 60 40 tracker, then other 60 40 trackers would perform similarly (Assuming they are globally and sector diverse). Obviously there would be some that could be eliminated immediately, but it wouldn't take much effort to identify three or four that would get the job done.  There are three or four that are often discussed on these forums.  So to increase growth wouldn't you have to switch to managed funds?  Which even if they share the 60 40 split, invest globally and cover different sectors are still open to the kind of human error that a simple tracker is not?

Personally I have nothing against IFAs, anymore than I do against plumbers or dentists.  I would definitely use any them if the need arose.  I would never take what they say blindly though.  My dentist likes to tell me that I might consider making an appointment with the hygienist to have my teeth cleaned.  The hygienist uses a room at the dentists, and I don't think my teeth need extra cleaning.  Am I being too cynical, I do not know. 

With the US market you are better off with a tracker.  There are some markets where active funds are a better choice. And there are markets and sectors where trackers do not exist. So if you want exposure to those areas, a tracker is not an option. 

You could argue that a selection of trackers, including a world index, maybe with a US index tracker thrown in for more US exposure, is the best option. To be honest I have not done the research, so I am guessing. I have almost always gone for actively managed funds, apart from my US pot, and I think their risk is exaggerated. Some might be closet trackers, but so long as there is no matching tracker fund, I’m okay with that. The likes of Woodford don’t exactly sell actively managed funds. 

You see I would not know where to start with actually choosing funds whether active or index trackers but one of our US actively managed funds performed at 102% over the last year compared to 14.5% on the S and P 500 index.  The other one is only at around 8% though.  

Yes, Baillie Gifford American fund has had an exceptional performance this year, presumably because it has good allocations in the big tech companies that have done very well this year. I assume the fund with the 8% growth has a much lower amount of tech, but it could still be a good fund to hold.

Indeed.  On checking the stats on my portfolio this morning the Ninety One American Franchise, the other US fund we hold is a large cap blended equity and has performed at over 18% over the last year.  I think the 8% is because we have not held it for a full year so it is just 8% up from book cost. I am still perusing to find out exactly what it is invested in.