AJBell fund advice

[Deleted User]

BritishInvestor said:

Deleted_User said:

DT2001 said:

Also, % is charged annually on the original value again and again and again. So the original Xk after a couple of decades will have lots of bites taken out of it.  And any growth is charged too with the total charges typically escalating well ahead of inflation.  While a property set up portfolio needs very little work, the adviser gets paid while he sleeps. Quoting % rather than GBP makes sense. For the adviser.

Earlier in the thread you put the point very well that meeting your own goals rather than the potential to be a billionaire was the key. This point is often overlooked so if even after paying an IFA you can achieve your goals why not? As long as you know enough to ask the right questions. 

I think that committing to paying thousands of pounds annually for something that is unnecessary is the exact opposite of helping one to achieve financial goals. 

Keep in mind that an IFA won’t be interested if its a young investor with a beginner portfolio.  And if its someone who already has a bit of experience under his belt and succeeded in building a bit of a nest then I struggle to understand why he would need to pay for expensive hand holding. A one off advice to set things up after a change might be warranted but the set up could and should be simple enough to self manage.
Given high asset prices and low expected returns, a 1% annual cost could wipe out most of your returns in real terms. 

And even if you experience losses under his management,IFA would still charge you thousands for the pleasure. How is that fair? In his early years Buffett only charged his clients a fee on a portion of return above treasury bond rate (around 5% at the time).  That makes more sense to me.  Why should anything at all be paid if you manage to return less than I can get by putting money into a zero risk asset?  

"Keep in mind that an IFA won’t be interested if its a young investor with a beginner portfolio."
I think that's understandable, what value can they genuinely add to cover their costs? 
"And if its someone who already has a bit of experience under his belt and succeeded in building a bit of a nest then I struggle to understand why he would need to pay for expensive hand holding."
A lack of confidence, knowledge, time or general lack of interest. For someone with a high paying job with long hours they might choose to outsource this part of their life given what they consider the hourly value of their time.
"That makes more sense to me."
I'm really not sure how, and it goes back to the point around investment management being commoditised, surely you don't want to hire someone that promises you great returns?
1. The chances of finding someone with an edge in the retail space is pretty low
2. The chances of you finding someone that tells you they have an edge is pretty high.
If I spoke to a product flogger and they showed me some great historical returns, that would be a big warning flag. I've seen some stinkers.

There is nothing wrong with outsourcing investment management. Thats what fund managers do. They have years of education, powerful tools and billions in assets supporting them. IFAs “managing” clients’ investments often are undereducated salespeople acting as an intermediary.  It does not save time because under all circumstances one should invest in educating himself enough to understand what an IFA is doing with your money. 

The rest of your post makes points about salesmen making false promises. Not sure if it was meant as a response to something I said but I doubt it. 

BritishInvestor

Deleted_User said:

BritishInvestor said:

Deleted_User said:

DT2001 said:

Also, % is charged annually on the original value again and again and again. So the original Xk after a couple of decades will have lots of bites taken out of it.  And any growth is charged too with the total charges typically escalating well ahead of inflation.  While a property set up portfolio needs very little work, the adviser gets paid while he sleeps. Quoting % rather than GBP makes sense. For the adviser.

Earlier in the thread you put the point very well that meeting your own goals rather than the potential to be a billionaire was the key. This point is often overlooked so if even after paying an IFA you can achieve your goals why not? As long as you know enough to ask the right questions. 

I think that committing to paying thousands of pounds annually for something that is unnecessary is the exact opposite of helping one to achieve financial goals. 

Keep in mind that an IFA won’t be interested if its a young investor with a beginner portfolio.  And if its someone who already has a bit of experience under his belt and succeeded in building a bit of a nest then I struggle to understand why he would need to pay for expensive hand holding. A one off advice to set things up after a change might be warranted but the set up could and should be simple enough to self manage.
Given high asset prices and low expected returns, a 1% annual cost could wipe out most of your returns in real terms. 

And even if you experience losses under his management,IFA would still charge you thousands for the pleasure. How is that fair? In his early years Buffett only charged his clients a fee on a portion of return above treasury bond rate (around 5% at the time).  That makes more sense to me.  Why should anything at all be paid if you manage to return less than I can get by putting money into a zero risk asset?  

"Keep in mind that an IFA won’t be interested if its a young investor with a beginner portfolio."
I think that's understandable, what value can they genuinely add to cover their costs? 
"And if its someone who already has a bit of experience under his belt and succeeded in building a bit of a nest then I struggle to understand why he would need to pay for expensive hand holding."
A lack of confidence, knowledge, time or general lack of interest. For someone with a high paying job with long hours they might choose to outsource this part of their life given what they consider the hourly value of their time.
"That makes more sense to me."
I'm really not sure how, and it goes back to the point around investment management being commoditised, surely you don't want to hire someone that promises you great returns?
1. The chances of finding someone with an edge in the retail space is pretty low
2. The chances of you finding someone that tells you they have an edge is pretty high.
If I spoke to a product flogger and they showed me some great historical returns, that would be a big warning flag. I've seen some stinkers.

There is nothing wrong with outsourcing investment management. Thats what fund managers do. They have years of education, powerful tools and billions in assets supporting them. IFAs “managing” clients’ investments often are undereducated salespeople acting as an intermediary.  It does not save time because under all circumstances one should invest in educating himself enough to understand what an IFA is doing with your money. 

The rest of your post makes points about salesmen making false promises. Not sure if it was meant as a response to something I said but I doubt it. 

"It does not save time because under all circumstances one should invest in educating himself enough to understand what an IFA is doing with your money. "
Yes, I agree. 

I just don't see how that form of incentive (Buffett) can possibly deliver outcomes that are aligned with the client's real objectives. So for example if someone was rewarded only when they beat treasury bonds, why not?
1). Sell out of the money put options like Victor Niederhoffer and hope the market doesn't blow up (which it did in his case. Twice).
2. Sell the client some structured notes that have a good chance of paying out unless the market has a real shocker and/or the counterparty defaults. 
Neither of which are probably going to be the best solution for the client, longer term.

Secret2ndAccount

BritishInvestor said:

I just don't see how that form of incentive (Buffett) can possibly deliver outcomes that are aligned with the client's real objectives. So for example if someone was rewarded only when they beat treasury bonds, why not?

1). Sell out of the money put options like Victor Niederhoffer and hope the market doesn't blow up (which it did in his case. Twice).
2. Sell the client some structured notes that have a good chance of paying out unless the market has a real shocker and/or the counterparty defaults. 
Neither of which are probably going to be the best solution for the client, longer term.

Of course those two options would also be open to an FA who was charging a percentage. Only difference is he would still get his pound of flesh in the year when the plan went pear-shaped. The guy charging for performance would be more likely to go out of business, and not be around to keep performing badly in the future.

How do you suggest we pick an IFA if we can't get a personal recommendation? What prevents an IFA from constantly undeperforming against his neighbour or (insert any benchmark or metric here), yet taking 0.5% year after year? I posit that anyone with sufficient knowledge to tell if their IFA is any good doesn't need an IFA.

Anecdotally, one of my fund managers charges for performance. I have been happy with their performance for 16 years straight. Also, he invests the majority of his fortune in his own funds. Put those two features together (risking own money, and not charging when they underperform), and, in my opinion, you have an investment worth looking at.

BritishInvestor

Secret2ndAccount said:

BritishInvestor said:

I just don't see how that form of incentive (Buffett) can possibly deliver outcomes that are aligned with the client's real objectives. So for example if someone was rewarded only when they beat treasury bonds, why not?

1). Sell out of the money put options like Victor Niederhoffer and hope the market doesn't blow up (which it did in his case. Twice).
2. Sell the client some structured notes that have a good chance of paying out unless the market has a real shocker and/or the counterparty defaults. 
Neither of which are probably going to be the best solution for the client, longer term.

Of course those two options would also be open to an FA who was charging a percentage. Only difference is he would still get his pound of flesh in the year when the plan went pear-shaped. The guy charging for performance would be more likely to go out of business, and not be around to keep performing badly in the future.

How do you suggest we pick an IFA if we can't get a personal recommendation? What prevents an IFA from constantly undeperforming against his neighbour or (insert any benchmark or metric here), yet taking 0.5% year after year? I posit that anyone with sufficient knowledge to tell if their IFA is any good doesn't need an IFA.

Anecdotally, one of my fund managers charges for performance. I have been happy with their performance for 16 years straight. Also, he invests the majority of his fortune in his own funds. Put those two features together (risking own money, and not charging when they underperform), and, in my opinion, you have an investment worth looking at.

"How do you suggest we pick an IFA if we can't get a personal recommendation? "
I can give you plenty of things to watch out for. 

 What prevents an IFA from constantly undeperforming against his neighbour or (insert any benchmark or metric here), yet taking 0.5% year after year? I posit that anyone with sufficient knowledge to tell if their IFA is any good doesn't need an IFA."
I'm not sure what the fixation is with IFAs and performance - it's a 90s mindset IMO

"Anecdotally, one of my fund managers charges for performance. I have been happy with their performance for 16 years straight. Also, he invests the majority of his fortune in his own funds. Put those two features together (risking own money, and not charging when they underperform), and, in my opinion, you have an investment worth looking at."
Yes I agree, I would definitely look at it, primarily to understand what benchmark he is using
In all reality, your fund manager, along with all other fund managers, is outgunned in modern markets.

[Deleted User]

BritishInvestor said:

Secret2ndAccount said:

BritishInvestor said:

I just don't see how that form of incentive (Buffett) can possibly deliver outcomes that are aligned with the client's real objectives. So for example if someone was rewarded only when they beat treasury bonds, why not?

1). Sell out of the money put options like Victor Niederhoffer and hope the market doesn't blow up (which it did in his case. Twice).
2. Sell the client some structured notes that have a good chance of paying out unless the market has a real shocker and/or the counterparty defaults. 
Neither of which are probably going to be the best solution for the client, longer term.

Of course those two options would also be open to an FA who was charging a percentage. Only difference is he would still get his pound of flesh in the year when the plan went pear-shaped. The guy charging for performance would be more likely to go out of business, and not be around to keep performing badly in the future.

How do you suggest we pick an IFA if we can't get a personal recommendation? What prevents an IFA from constantly undeperforming against his neighbour or (insert any benchmark or metric here), yet taking 0.5% year after year? I posit that anyone with sufficient knowledge to tell if their IFA is any good doesn't need an IFA.

Anecdotally, one of my fund managers charges for performance. I have been happy with their performance for 16 years straight. Also, he invests the majority of his fortune in his own funds. Put those two features together (risking own money, and not charging when they underperform), and, in my opinion, you have an investment worth looking at.

I'm not sure what the fixation is with IFAs and performance - it's a 90s mindset IMO

When reaching for the ineffable, I think people tend still to look for a priest rather than an IFA. Call me old fashioned

NottinghamKnight

BritishInvestor said:

Secret2ndAccount said:

BritishInvestor said:

I just don't see how that form of incentive (Buffett) can possibly deliver outcomes that are aligned with the client's real objectives. So for example if someone was rewarded only when they beat treasury bonds, why not?

1). Sell out of the money put options like Victor Niederhoffer and hope the market doesn't blow up (which it did in his case. Twice).
2. Sell the client some structured notes that have a good chance of paying out unless the market has a real shocker and/or the counterparty defaults. 
Neither of which are probably going to be the best solution for the client, longer term.

Of course those two options would also be open to an FA who was charging a percentage. Only difference is he would still get his pound of flesh in the year when the plan went pear-shaped. The guy charging for performance would be more likely to go out of business, and not be around to keep performing badly in the future.

How do you suggest we pick an IFA if we can't get a personal recommendation? What prevents an IFA from constantly undeperforming against his neighbour or (insert any benchmark or metric here), yet taking 0.5% year after year? I posit that anyone with sufficient knowledge to tell if their IFA is any good doesn't need an IFA.

Anecdotally, one of my fund managers charges for performance. I have been happy with their performance for 16 years straight. Also, he invests the majority of his fortune in his own funds. Put those two features together (risking own money, and not charging when they underperform), and, in my opinion, you have an investment worth looking at.

"How do you suggest we pick an IFA if we can't get a personal recommendation? "
I can give you plenty of things to watch out for. 

Well we are all ears....

BritishInvestor

NottinghamKnight said:

BritishInvestor said:

Secret2ndAccount said:

BritishInvestor said:

I just don't see how that form of incentive (Buffett) can possibly deliver outcomes that are aligned with the client's real objectives. So for example if someone was rewarded only when they beat treasury bonds, why not?

1). Sell out of the money put options like Victor Niederhoffer and hope the market doesn't blow up (which it did in his case. Twice).
2. Sell the client some structured notes that have a good chance of paying out unless the market has a real shocker and/or the counterparty defaults. 
Neither of which are probably going to be the best solution for the client, longer term.

Of course those two options would also be open to an FA who was charging a percentage. Only difference is he would still get his pound of flesh in the year when the plan went pear-shaped. The guy charging for performance would be more likely to go out of business, and not be around to keep performing badly in the future.

How do you suggest we pick an IFA if we can't get a personal recommendation? What prevents an IFA from constantly undeperforming against his neighbour or (insert any benchmark or metric here), yet taking 0.5% year after year? I posit that anyone with sufficient knowledge to tell if their IFA is any good doesn't need an IFA.

Anecdotally, one of my fund managers charges for performance. I have been happy with their performance for 16 years straight. Also, he invests the majority of his fortune in his own funds. Put those two features together (risking own money, and not charging when they underperform), and, in my opinion, you have an investment worth looking at.

"How do you suggest we pick an IFA if we can't get a personal recommendation? "
I can give you plenty of things to watch out for. 

Well we are all ears....

In the context of taking retirement advice, in no particular order.

1. Retirement planning specialist or generalist: Their website should give some idea of who they work best with
2. Independent vs restricted vs vertically integrated: Always worth understanding who you are working with
3. The adviser focuses too much on investments: (when it's a very small part of the retirement planning journey).
4. The financial planning exercise is not thorough: Beware of "free" financial planning or financial planning undertaken using in house tools (such as Excel). 
5. The adviser has too many clients: Retirement planning is a time-intensive process.
6. The way the adviser charges (a big topic ), which includes contingent charging, cross subsidization, fees being too high, charges for regular contributions, no upfront costs but high ongoing costs, exit charges, offers of a discount to win your business and whether they offer genuine value for money

You could write a chapter of a book on this

NottinghamKnight

BritishInvestor said:

NottinghamKnight said:

BritishInvestor said:

Secret2ndAccount said:

BritishInvestor said:

I just don't see how that form of incentive (Buffett) can possibly deliver outcomes that are aligned with the client's real objectives. So for example if someone was rewarded only when they beat treasury bonds, why not?

1). Sell out of the money put options like Victor Niederhoffer and hope the market doesn't blow up (which it did in his case. Twice).
2. Sell the client some structured notes that have a good chance of paying out unless the market has a real shocker and/or the counterparty defaults. 
Neither of which are probably going to be the best solution for the client, longer term.

Of course those two options would also be open to an FA who was charging a percentage. Only difference is he would still get his pound of flesh in the year when the plan went pear-shaped. The guy charging for performance would be more likely to go out of business, and not be around to keep performing badly in the future.

How do you suggest we pick an IFA if we can't get a personal recommendation? What prevents an IFA from constantly undeperforming against his neighbour or (insert any benchmark or metric here), yet taking 0.5% year after year? I posit that anyone with sufficient knowledge to tell if their IFA is any good doesn't need an IFA.

Anecdotally, one of my fund managers charges for performance. I have been happy with their performance for 16 years straight. Also, he invests the majority of his fortune in his own funds. Put those two features together (risking own money, and not charging when they underperform), and, in my opinion, you have an investment worth looking at.

"How do you suggest we pick an IFA if we can't get a personal recommendation? "
I can give you plenty of things to watch out for. 

Well we are all ears....

In the context of taking retirement advice, in no particular order.

1. Retirement planning specialist or generalist: Their website should give some idea of who they work best with
2. Independent vs restricted vs vertically integrated: Always worth understanding who you are working with
3. The adviser focuses too much on investments: (when it's a very small part of the retirement planning journey).
4. The financial planning exercise is not thorough: Beware of "free" financial planning or financial planning undertaken using in house tools (such as Excel). 
5. The adviser has too many clients: Retirement planning is a time-intensive process.
6. The way the adviser charges (a big topic ), which includes contingent charging, cross subsidization, fees being too high, charges for regular contributions, no upfront costs but high ongoing costs, exit charges, offers of a discount to win your business and whether they offer genuine value for money

You could write a chapter of a book on this

Fair enough thanks for the reply.
The difficulty with all of the above is that whilst it appears obvious to many on these boards it won;t be to those investing with low knowledge. Many will follow a reassuringly expensive view which is maybe why SJP are still popular, but it really doesn't give any idea of competence or abiilty. 
Interestingly as you seem to be an advisor, though haven't explicitly stated this from my recollection, what value do you think you bring to your clients. You have commented about how investment management isn't a high priority which would indicate that you outsource this, do you follow a dfm type model?
I have made tongue in cheek comments about life coaching but I'm interested to hear what you believe it is you do for your clients. Risk is a huge topic that is not well explained or understood by the vast majority of the population, so do you manage to explain that. Also you appear to have a pessimistic view of potential reasonable worst case scenarios so presumably advise clients to maintain very large pots for such events?

zagfles

BritishInvestor said:

NottinghamKnight said:

BritishInvestor said:

Secret2ndAccount said:

BritishInvestor said:

I just don't see how that form of incentive (Buffett) can possibly deliver outcomes that are aligned with the client's real objectives. So for example if someone was rewarded only when they beat treasury bonds, why not?

1). Sell out of the money put options like Victor Niederhoffer and hope the market doesn't blow up (which it did in his case. Twice).
2. Sell the client some structured notes that have a good chance of paying out unless the market has a real shocker and/or the counterparty defaults. 
Neither of which are probably going to be the best solution for the client, longer term.

Of course those two options would also be open to an FA who was charging a percentage. Only difference is he would still get his pound of flesh in the year when the plan went pear-shaped. The guy charging for performance would be more likely to go out of business, and not be around to keep performing badly in the future.

How do you suggest we pick an IFA if we can't get a personal recommendation? What prevents an IFA from constantly undeperforming against his neighbour or (insert any benchmark or metric here), yet taking 0.5% year after year? I posit that anyone with sufficient knowledge to tell if their IFA is any good doesn't need an IFA.

Anecdotally, one of my fund managers charges for performance. I have been happy with their performance for 16 years straight. Also, he invests the majority of his fortune in his own funds. Put those two features together (risking own money, and not charging when they underperform), and, in my opinion, you have an investment worth looking at.

"How do you suggest we pick an IFA if we can't get a personal recommendation? "
I can give you plenty of things to watch out for. 

Well we are all ears....

In the context of taking retirement advice, in no particular order.

1. Retirement planning specialist or generalist: Their website should give some idea of who they work best with
2. Independent vs restricted vs vertically integrated: Always worth understanding who you are working with
3. The adviser focuses too much on investments: (when it's a very small part of the retirement planning journey).
4. The financial planning exercise is not thorough: Beware of "free" financial planning or financial planning undertaken using in house tools (such as Excel). 
5. The adviser has too many clients: Retirement planning is a time-intensive process.
6. The way the adviser charges (a big topic ), which includes contingent charging, cross subsidization, fees being too high, charges for regular contributions, no upfront costs but high ongoing costs, exit charges, offers of a discount to win your business and whether they offer genuine value for money

You could write a chapter of a book on this

Also, as I keep mentioning here, check the financial ombudsman site to see if they have judgements against them

https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions