When to get an Independent Financial Advisor?

Scotbot

Linton said:

Scotbot said:

Am I correct that in the UK IFAs make their money by commission on the investments they sell and that you are therefore limited to the products work with?  

You are incorrect.  Since around 2013 commission for investment products has been banned.  IFAs charge directly for giving investment advice and for carrying out subsequent agreed work, if any.  They operate in the whole of the market.

Note that the "I" in IFAs is imporrtant.  IFA is a protected job title and implies that the person concerned is regulated by the FCA.  Other "advisors" are likely to be FAs who can be regarded as salespeople and will be restricted in the products thery can offer.

Thanks. I spoke to someone in 2018, he told me he did not charge a fee and earned his living from the products he sold. He was to email his recommendations but never did and I did not follow him up. Now I am considering talking to people again I will look more closely at their credentials.

DiggerUK

Why do you need an emergency fund? there aren't any plans to close the NHS and there is no greaseball Sir Philip Green in charge of your pension.
As things stand you are in secure jobs with the best pension scheme going and excellent pay. 

If you wasted all your income on the high life you would still have a house and income in retirement.

My bespoke and personalised plan for you is as follows. Clear the mortgage asap, if you have plans to upsize your accommodation then do it. At the moment I see you with £45,000 cash just wasting away, so put that towards the mortgage and start overpaying.

Oh yes, book a fancy holiday for about 2023..._

RosieAnn

@darkidoe
Hi darkidoe, thank you for your advise. I have never considered opening a SIPP and to be honest, was not really aware of the differences of LISA versus SIPP. Thank you for the link to the moevator article, very helpful.

It is quite difficult to forecast my long term future goals eg where I will be in 30 years time. I think for now I am going to keep investing in my S&S ISA for more medium- long term goals. With my current earning and likely next few years, I will not go over £20,000 tax allowance- so I will just try to max out this allowance with my S&S ISA and LISA. I saw the LISA as a potential early pension fund - as doubt I want to work till I am 68 [current age I can access my NHS pension]. I also am aware  if I open a SIPP - I may get into problems later on in my career when I am earning more and potentially exceeding my life time allowance. I was under the impression LISA is not included in your life time allowance? 

RosieAnn

Hi @DiggerUK
Thank you for your advise. I feel I do need an emergency fund for things like if boiler breaks down, I will likely need a new car in 1-2 years time. I agree that having so much sitting in cash is not going to gain any benefits.
In regards to your advise for overpayments of the mortgage, I have considered this. However, I felt that since the interest is quite low [2.5%] - I may get better returns investing the money into S&S. There are quite a few differing views on this forum about whether to overpay your mortgage or invest your money instead. So perhaps a mixture of the two is a good balance? 

Albermarle

I was under the impression LISA is not included in your life time allowance? 

Only pension funds are included in your LTA ( lifetime allowance ) calculation .

So LISA is an alternative way of saving for retirement, without adding to any potential LTA issues.

Of course the restriction of max £4K pa means it is not really suitable as the main retirement savings home , but good as an add on , as long as it is started before you are 40 .

One issue is that S&S LISA's are very thin on the ground , with only a small number of providers.

dunstonh

Am I correct that in the UK IFAs make their money by commission on the investments they sell and that you are therefore limited to the products work with?  

As mentioned, commission has not been an option since the end of 2012 on new investment/pension class business.

 I spoke to someone in 2018, he told me he did not charge a fee and earned his living from the products he sold. He was to email his recommendations but never did and I did not follow him up. Now I am considering talking to people again I will look more closely at their credentials.

Was that person an IFA or an FA?     There is an anomaly with FAs that retail own-brand investments that allow them to still show a bundled charge and they are paid out of those charges.   So, it may look like you are paying fund charges and not an adviser charge but in reality you are. It is just built into the fund charges.   
Unregulated sales people selling unregulated investments can earn a commission.   However, you shouldn't go near those.

csgohan4

I would recommend an IFA if not for your investments, but for the pension aspect. As the NHS pension is a Defined benefit scheme, you will find it difficult getting accurate up to date pension statements. They often lag behind 6-12months and during that time you may go over your annual allowance without realizing, if you are high earners for a long enough period. 

From the investment aspects, plenty of resources on here, Monevator to inform you of where to go with your investments

I use an ifa for pensions myself, quite useful to know when to opt out or in the pension from time to time as well as other things. They arrange my my re- mortgage as well for free.  

Alexland

Albermarle said:

So LISA is an alternative way of saving for retirement, without adding to any potential LTA issues.

Yup. The biggest problem we have found with making good use of both pension and LISA alowances is wondering what the hell we are going to do with that much money in old age.
A few years ago I was thinking some of the LISAs could be recycled into my younger wife's pension until she is 75 which might help with estate planning but she probably doesnt need it either as we have already achieved our pension target (with a 2% pa growth above inflation assumption) so any further contributions are just to reduce shortfall risk or pay for luxuries that we don't currently enjoy.
So the kids will probably get most of our LISA money as part of a matched savings scheme towards their house deposits.
Another option we are considering is changing our 20% LTV mortgage to interest only (to save more in S&S ISAs to retire earlier) then using some of the LISAs or pension TFLS in a few decades to repay the balance.

csgohan4

Alexland said:

Albermarle said:

So LISA is an alternative way of saving for retirement, without adding to any potential LTA issues.

Yup. The biggest problem we have found with making good use of both pension and LISA alowances is wondering what the hell we are going to do with that much money in old age.
A few years ago I was thinking some of the LISAs could be recycled into my younger wife's pension until she is 75 which might help with estate planning but she probably doesnt need it either as we have already achieved our pension target (with a 2% pa growth above inflation assumption) so any further contributions are just to reduce shortfall risk or pay for luxuries that we don't currently enjoy.
So the kids will probably get most of our LISA money as part of a matched savings scheme towards their house deposits.
Another option we are considering is changing our 20% LTV mortgage to interest only (to save more in S&S ISAs to retire earlier) then using some of the LISAs or pension TFLS in a few decades to repay the balance.

Exactly, I've stopped putting extra into my mortgage repayments after getting below 60% LTV, as the offers are similar and the best below 60% LTV. My money in ISA's are making more than the interest I am losing to the lender. 

Alexland

csgohan4 said:
Exactly, I've stopped putting extra into my mortgage repayments after getting below 60% LTV, as the offers are similar and the best below 60% LTV. My money in ISA's are making more than the interest I am losing to the lender. 

Yes I wish we had stopped overpaying earlier but we just kept going until it was down to 20%. In some tax years I even paid higher rate tax to overpay the mortgage which was really stupid. But then 60% of the value of our house would be a debt far more than I would be comfortable with so it's a balance.
Our S&S ISAs are now generating enough IT smoothed divis to cover the mortgage interest and some of the repayment so it feels less of a risk to be needlessly running a mortgage even at current market valuations.
Unfortunately I cannot change the mortgage deal to interest only for another 3 years without paying an ERC so some more of the balance will get repaid.