IFA Charge

[Deleted User]

tacpot12 said:

Deleted_User said:

A one-off review might be worth it, particularly if you know nothing and the adviser is good. Neither is a given.  You should still learn enough so you understand the advice and can make an informed decision.  The outcome should be a solid investment policy statement that you can stick to and a simple cost efficient diversified portfolio meeting your IPS.

Ongoing fees are only ever worth it if you have very special circumstances.  Its not just the fees. Its the loss of returns and compounding on the fees had they been invested by you. Once you decided on the appropriate asset allocation and a suitable investment vehicle, modern portfolios are so simple to run that another “management” layer is completely redundant. 

While I tend to agree with Mordko (most people's situations don't change often enough warrant an annual review), someone needs to keep an eye on the specific investments in your portfolio in case any of them changes so that they become less suitable over time. (Checking the investments are still suitable might be something that is done in a regular every four or five years, or when your investment needs change e.g. with the onset of ill health).

There is a question as to who will take prompt action if one of the investments runs into problems? I don't know if IFAs ever work on a retainer basis where you pay a small fee per year for the right to be able to pick up the phone and ask for some prompt advice at a set rate per hour, but this sort of arrangement might suit someone who was managing their portfolio themselves. I'm not sure if the fees for annual reviews would cover this, or whether this is part of the Discretionary Wealth Management function that dunstonh has mentioned in other posts. 

If your circumstances change then you would not need a financial adviser to tell give you the news. A simple well selected portfolio should not be “running into problems”.  In most cases it could be a single multi-asset fund, And the provider should be someone who is far less likely to run into problems than an IFA.  

cfw1994

jimi_man said:

ZingPowZing said:

redmalc said:

I have just been to see a new IFA and i felt relaxed by his comments and in total we are transferring 550k into his management in a Pension and an isa.
I have been quoted a fee of 0,5% for him to fully manage the portfolio on my behalf which I think is competitive, any comments on his fee 
Would be helpful

Don't become too relaxed, redmalc, the ups and downs are still yours to bear alone.
Rather than look at the fee in isolation, calculate what it might cost you blessed with a long life.
#boiling frog 

To the OP, I think you need to look at it differently.

On the basis that you can't/don't want to do the work yourself, what would happen if you did nothing at all? And how much better off would you be by employing the services of the IFA - i.e. what benefit do they bring? And that's not necessarily all financial. 
It's like anything else in life - car servicing and repairs or plumbing for example. Not too difficult to do yourself but if you don't have the time, inclination or the know-how then you can pay someone else to do it. Sure, over a long period of time the costs will add up but that's the same with anything. 
Obviously you could buy a book and learn how to do it yourself - again the same applies to car repairs, plumbing, etc etc. You might be successful or you might make a mess of it, so you need to do a cost/benefit analysis to calculate value and see if (to you) it represents good value.

This is slightly the problem though, really.  It really isn't like car servicing and repairs or plumbing, is it. 
My plumber came out 2 weeks ago to install a new tap for me, & will be back to service the boiler in a while....but I don't pay him a retainer to do so, & if he moves/retires, I will find a new plumber.
I got my car serviced last August (despite the minuscule miles put on!)....cost about £200.    I don't pay the garage 0.5% of the value of my car to keep them standing by either.
In a similar vein, when we last moved house, I paid a solicitor to deal with the paperwork.  Wills too.   All one-off Professional fees, appropriate to the job at hand.   No retainer.   Maybe some here have a "family solicitor" - not uncommon....but that person typically doesn't demand an annual chunk of said persons wealth to be available.
If only there were financial advisors who could help do that.  Build a business in that manner.    I doubt that would happen - always easier to take a % chunk - it's a great annuity for them - like so much of the world - look around you: phone contracts, O365, Netflix/Prime/etc, PCPs - easy business to take a regular chunk, & I understand that.

& this, to me, is the crux of it.   

Annual fees - & yes, I agree with dunstonh, 0.5% is likely in the right ball-park of expectations, are taken, even when & if "the pot" reduces in value.   
Over long investment periods, these can dramatically influence - reduce - the overall value of "the pot".
That, coupled with the fact that this is, after all, moneysavingexpert, is perhaps why many here suggest DIY as a better path.   By "better", of course we mean "more cost effective" - ie, could make you more money, let you retire earlier, etc.

Of course the counter to this, as IFAs will readily report, is that DIY badly and you could be worse off.   Even open to scams & risk.   & that is also true.   Half the problem is that we only have the benefit of 20:20 hindsight - it is quite easy to be scared about your "pot" disappearing dramatically if you make a mistake.  Nowadays, there are broad funds that will be unlikely to do that (passive index trackers, etc).
MANY people are scared about money - I recall it was the biggest worry to people in a survey - examples here and here to confirm that.   A confident smiling FA/IFA can give you the belief that they know things you don't, and can look after you.   Maybe they can & will.   But at a cost.   Go in with open eyes!

I like the http://kroijer.com approach - I think a LOT of people would find the first video could open their eyes up to possibilities!!

[Deleted User]

Agreed. 
Also, a plumber will improve your situation and guarantee his work. 
Clearly, a lot of people are looking for that sort of financial safety but a financial adviser - however affable - offers no such protection. 
Also, the cumulative fees may be less damaging to his client's wealth than the steps the financial adviser takes to smooth the path of the financial journey. In some respects, a risk profile is more beneficial to the financial services industry than the individual who undertakes it. (I found the process haphazard at best)

Prism

Deleted_User said:

tacpot12 said:

Deleted_User said:

A one-off review might be worth it, particularly if you know nothing and the adviser is good. Neither is a given.  You should still learn enough so you understand the advice and can make an informed decision.  The outcome should be a solid investment policy statement that you can stick to and a simple cost efficient diversified portfolio meeting your IPS.

Ongoing fees are only ever worth it if you have very special circumstances.  Its not just the fees. Its the loss of returns and compounding on the fees had they been invested by you. Once you decided on the appropriate asset allocation and a suitable investment vehicle, modern portfolios are so simple to run that another “management” layer is completely redundant. 

While I tend to agree with Mordko (most people's situations don't change often enough warrant an annual review), someone needs to keep an eye on the specific investments in your portfolio in case any of them changes so that they become less suitable over time. (Checking the investments are still suitable might be something that is done in a regular every four or five years, or when your investment needs change e.g. with the onset of ill health).

There is a question as to who will take prompt action if one of the investments runs into problems? I don't know if IFAs ever work on a retainer basis where you pay a small fee per year for the right to be able to pick up the phone and ask for some prompt advice at a set rate per hour, but this sort of arrangement might suit someone who was managing their portfolio themselves. I'm not sure if the fees for annual reviews would cover this, or whether this is part of the Discretionary Wealth Management function that dunstonh has mentioned in other posts. 

If your circumstances change then you would not need a financial adviser to tell give you the news. A simple well selected portfolio should not be “running into problems”.  In most cases it could be a single multi-asset fund, And the provider should be someone who is far less likely to run into problems than an IFA.  

And yet, given how simple it can be, an awful lot of people completely screw it up - chasing returns, selling on the hint of a downturn, buying at the top or being too scared to buy at all. Many people can't or won't do even the basic maths to work out how investing actually works and therefore either charge in way over their risk level or completely avoid it an just use savings accounts. Most people do not have or want the fundamental knowledge required to do this well. Most people don't even realise that they are investing through their pension and are quite happy to leave it in underperforming funds for years.

[Deleted User]

Prism said:

Deleted_User said:

tacpot12 said:

Deleted_User said:

A one-off review might be worth it, particularly if you know nothing and the adviser is good. Neither is a given.  You should still learn enough so you understand the advice and can make an informed decision.  The outcome should be a solid investment policy statement that you can stick to and a simple cost efficient diversified portfolio meeting your IPS.

Ongoing fees are only ever worth it if you have very special circumstances.  Its not just the fees. Its the loss of returns and compounding on the fees had they been invested by you. Once you decided on the appropriate asset allocation and a suitable investment vehicle, modern portfolios are so simple to run that another “management” layer is completely redundant. 

While I tend to agree with Mordko (most people's situations don't change often enough warrant an annual review), someone needs to keep an eye on the specific investments in your portfolio in case any of them changes so that they become less suitable over time. (Checking the investments are still suitable might be something that is done in a regular every four or five years, or when your investment needs change e.g. with the onset of ill health).

There is a question as to who will take prompt action if one of the investments runs into problems? I don't know if IFAs ever work on a retainer basis where you pay a small fee per year for the right to be able to pick up the phone and ask for some prompt advice at a set rate per hour, but this sort of arrangement might suit someone who was managing their portfolio themselves. I'm not sure if the fees for annual reviews would cover this, or whether this is part of the Discretionary Wealth Management function that dunstonh has mentioned in other posts. 

If your circumstances change then you would not need a financial adviser to tell give you the news. A simple well selected portfolio should not be “running into problems”.  In most cases it could be a single multi-asset fund, And the provider should be someone who is far less likely to run into problems than an IFA.  

And yet, given how simple it can be, an awful lot of people completely screw it up - chasing returns, selling on the hint of a downturn, buying at the top or being too scared to buy at all. Many people can't or won't do even the basic maths to work out how investing actually works and therefore either charge in way over their risk level or completely avoid it an just use savings accounts. Most people do not have or want the fundamental knowledge required to do this well. Most people don't even realise that they are investing through their pension and are quite happy to leave it in underperforming funds for years.

Two different things, aren't they Prism?
I'm not convinced a substantial percentage of investors panicked in Feb but, if they did, the longer term damage reverted to sitting out the market by April. 
The second cohort is surely much bigger and the uninterested "stickers", unfortunately, get the bad end of the stick from the financial services industry, as they do elsewhere. 

Prism

ZingPowZing said:

Prism said:

Deleted_User said:

tacpot12 said:

Deleted_User said:

A one-off review might be worth it, particularly if you know nothing and the adviser is good. Neither is a given.  You should still learn enough so you understand the advice and can make an informed decision.  The outcome should be a solid investment policy statement that you can stick to and a simple cost efficient diversified portfolio meeting your IPS.

Ongoing fees are only ever worth it if you have very special circumstances.  Its not just the fees. Its the loss of returns and compounding on the fees had they been invested by you. Once you decided on the appropriate asset allocation and a suitable investment vehicle, modern portfolios are so simple to run that another “management” layer is completely redundant. 

While I tend to agree with Mordko (most people's situations don't change often enough warrant an annual review), someone needs to keep an eye on the specific investments in your portfolio in case any of them changes so that they become less suitable over time. (Checking the investments are still suitable might be something that is done in a regular every four or five years, or when your investment needs change e.g. with the onset of ill health).

There is a question as to who will take prompt action if one of the investments runs into problems? I don't know if IFAs ever work on a retainer basis where you pay a small fee per year for the right to be able to pick up the phone and ask for some prompt advice at a set rate per hour, but this sort of arrangement might suit someone who was managing their portfolio themselves. I'm not sure if the fees for annual reviews would cover this, or whether this is part of the Discretionary Wealth Management function that dunstonh has mentioned in other posts. 

If your circumstances change then you would not need a financial adviser to tell give you the news. A simple well selected portfolio should not be “running into problems”.  In most cases it could be a single multi-asset fund, And the provider should be someone who is far less likely to run into problems than an IFA.  

And yet, given how simple it can be, an awful lot of people completely screw it up - chasing returns, selling on the hint of a downturn, buying at the top or being too scared to buy at all. Many people can't or won't do even the basic maths to work out how investing actually works and therefore either charge in way over their risk level or completely avoid it an just use savings accounts. Most people do not have or want the fundamental knowledge required to do this well. Most people don't even realise that they are investing through their pension and are quite happy to leave it in underperforming funds for years.

Two different things, aren't they Prism?
I'm not convinced a substantial percentage of investors panicked in Feb but, if they did, the longer term damage reverted to sitting out the market by April. 
The second cohort is surely much bigger and the uninterested "stickers", unfortunately, get the bad end of the stick from the financial services industry, as they do elsewhere. 

I have no particular opinion on the actual charge that advisors charge. Maybe it is too high, maybe not. I can only assume that like most business there is enough competition to ensure the fees are reasonable. However it is important that this service exists as without it an awful lot of people will be inadequately prepared for their retirement. I am sure many of us have started small and learnt along the way making mistakes as we go. Then there are those that 20 years on still haven't leaned a thing about it. That also doesn't help those who have just received a lump sum from a DB pension or an inheritance.

cfw1994

Prism said:

ZingPowZing said:

Prism said:

Deleted_User said:

tacpot12 said:

Deleted_User said:

A one-off review might be worth it, particularly if you know nothing and the adviser is good. Neither is a given.  You should still learn enough so you understand the advice and can make an informed decision.  The outcome should be a solid investment policy statement that you can stick to and a simple cost efficient diversified portfolio meeting your IPS.

Ongoing fees are only ever worth it if you have very special circumstances.  Its not just the fees. Its the loss of returns and compounding on the fees had they been invested by you. Once you decided on the appropriate asset allocation and a suitable investment vehicle, modern portfolios are so simple to run that another “management” layer is completely redundant. 

While I tend to agree with Mordko (most people's situations don't change often enough warrant an annual review), someone needs to keep an eye on the specific investments in your portfolio in case any of them changes so that they become less suitable over time. (Checking the investments are still suitable might be something that is done in a regular every four or five years, or when your investment needs change e.g. with the onset of ill health).

There is a question as to who will take prompt action if one of the investments runs into problems? I don't know if IFAs ever work on a retainer basis where you pay a small fee per year for the right to be able to pick up the phone and ask for some prompt advice at a set rate per hour, but this sort of arrangement might suit someone who was managing their portfolio themselves. I'm not sure if the fees for annual reviews would cover this, or whether this is part of the Discretionary Wealth Management function that dunstonh has mentioned in other posts. 

If your circumstances change then you would not need a financial adviser to tell give you the news. A simple well selected portfolio should not be “running into problems”.  In most cases it could be a single multi-asset fund, And the provider should be someone who is far less likely to run into problems than an IFA.  

And yet, given how simple it can be, an awful lot of people completely screw it up - chasing returns, selling on the hint of a downturn, buying at the top or being too scared to buy at all. Many people can't or won't do even the basic maths to work out how investing actually works and therefore either charge in way over their risk level or completely avoid it an just use savings accounts. Most people do not have or want the fundamental knowledge required to do this well. Most people don't even realise that they are investing through their pension and are quite happy to leave it in underperforming funds for years.

Two different things, aren't they Prism?
I'm not convinced a substantial percentage of investors panicked in Feb but, if they did, the longer term damage reverted to sitting out the market by April. 
The second cohort is surely much bigger and the uninterested "stickers", unfortunately, get the bad end of the stick from the financial services industry, as they do elsewhere. 

I have no particular opinion on the actual charge that advisors charge. Maybe it is too high, maybe not. I can only assume that like most business there is enough competition to ensure the fees are reasonable. However it is important that this service exists as without it an awful lot of people will be inadequately prepared for their retirement. I am sure many of us have started small and learnt along the way making mistakes as we go. Then there are those that 20 years on still haven't leaned a thing about it. That also doesn't help those who have just received a lump sum from a DB pension or an inheritance.

Prism said:

ZingPowZing said:

Prism said:

Deleted_User said:

tacpot12 said:

Deleted_User said:

A one-off review might be worth it, particularly if you know nothing and the adviser is good. Neither is a given.  You should still learn enough so you understand the advice and can make an informed decision.  The outcome should be a solid investment policy statement that you can stick to and a simple cost efficient diversified portfolio meeting your IPS.

Ongoing fees are only ever worth it if you have very special circumstances.  Its not just the fees. Its the loss of returns and compounding on the fees had they been invested by you. Once you decided on the appropriate asset allocation and a suitable investment vehicle, modern portfolios are so simple to run that another “management” layer is completely redundant. 

While I tend to agree with Mordko (most people's situations don't change often enough warrant an annual review), someone needs to keep an eye on the specific investments in your portfolio in case any of them changes so that they become less suitable over time. (Checking the investments are still suitable might be something that is done in a regular every four or five years, or when your investment needs change e.g. with the onset of ill health).

There is a question as to who will take prompt action if one of the investments runs into problems? I don't know if IFAs ever work on a retainer basis where you pay a small fee per year for the right to be able to pick up the phone and ask for some prompt advice at a set rate per hour, but this sort of arrangement might suit someone who was managing their portfolio themselves. I'm not sure if the fees for annual reviews would cover this, or whether this is part of the Discretionary Wealth Management function that dunstonh has mentioned in other posts. 

If your circumstances change then you would not need a financial adviser to tell give you the news. A simple well selected portfolio should not be “running into problems”.  In most cases it could be a single multi-asset fund, And the provider should be someone who is far less likely to run into problems than an IFA.  

And yet, given how simple it can be, an awful lot of people completely screw it up - chasing returns, selling on the hint of a downturn, buying at the top or being too scared to buy at all. Many people can't or won't do even the basic maths to work out how investing actually works and therefore either charge in way over their risk level or completely avoid it an just use savings accounts. Most people do not have or want the fundamental knowledge required to do this well. Most people don't even realise that they are investing through their pension and are quite happy to leave it in underperforming funds for years.

Two different things, aren't they Prism?
I'm not convinced a substantial percentage of investors panicked in Feb but, if they did, the longer term damage reverted to sitting out the market by April. 
The second cohort is surely much bigger and the uninterested "stickers", unfortunately, get the bad end of the stick from the financial services industry, as they do elsewhere. 

I have no particular opinion on the actual charge that advisors charge. Maybe it is too high, maybe not. I can only assume that like most business there is enough competition to ensure the fees are reasonable. However it is important that this service exists as without it an awful lot of people will be inadequately prepared for their retirement. I am sure many of us have started small and learnt along the way making mistakes as we go. Then there are those that 20 years on still haven't leaned a thing about it. That also doesn't help those who have just received a lump sum from a DB pension or an inheritance.

Actually, part of the problem is that there is NOT enough competition.   The number of financial advisors has, I recall reading here, dramatically dropped in the past 5-10 years.   The ones left can mop up and fill their boots!
Okay, perhaps a rash and derogatory way to put things......but I would guess there are very few IFAs who offer to give advice for a fee: far easier to take a % every year from 200-300 clients.
There is a positive dearth of help to lower earners in particular.  Not sure there is any easy answer, unfortunately.    Education is probably it, but I doubt kids at school are that interested (on the whole) in this kind of conversation.  Only might be fruitful when they start work.....

fred246

I am not sure they compete at all. I have read that they steadfastly refuse to publish their fees. If you find an IFAs website you won't find their fees. IFAs aren't going to reduce their fees. Customers are the only people that can do that. People need to say. I will pay 0.25%. That is more than enough.

[Deleted User]

Agreed fred, but many of the lazy assumptions and fees are a legacy from the days when those pensions had no higher expectations than an annual statement figure, six months in arrears. 

No wonder the financial services industry hankers after and wishes to cling to the remnants of that model, which may go some way to justify the patronising response commonly offered first posters on this board.

[Deleted User]

There is competition and more is coming.  Roboadvisors will grow presence over time.  Major non-independent advisers will be moving into the market sector.  As long as they represent a large and low cost company offering a comprehensive set of products, people will be able to get the hand holding they strive for at much lower cost. 

There are things IFAs can usefully do but not the service called “I will keep an eye on your pension money for you, the money  which someone else is managing” .