IFA Fees

smartpicture

Cus said:

How often does the IFA change the fund choices?
How often does the IFA tune the amounts in the funds, and what types of funds have they selected?

I think it's only reviewed once a year. When we have our annual meeting I usually have to sign something to agree to move things around & re-balance to meet my risk profile, I don't believe the investments change in-between meetings. Funds are things like Fidelity Index World Fund, Dimensional Emerging Markets Core Equity, and Dimensional Global Short Dated Bond, there's 8 different ones.   

dunstonh

SIPP 950kish with AJ Bell:
AJ Bell Custody Charge 0.17% = £1598 last year
IFA Fee 0.75% = £7030
Investment Funds Annual Management Charge 0.35% = £3857 (not clear who gets this money??)
ISA/GIA 420k ish with AJ Bell:
AJ Bell Custody Charge 0.17% = £697 last year
IFA Fee 0.75% = £3031
Investment Funds Annual Management Charge 0.35% = £1664 (not clear who gets this money??)

Platform charge is fine.  it's in the ballpark
Investment funds charge is fine.  The fund house gets the charge.    (note to others. IFAs have to disclose fund charges including TC & IC.  Not just OCF).
Adviser charge is above what you would expect for the fund value.  0.50% would be more typical.

cfw1994

smartpicture said:

Cus said:

How often does the IFA change the fund choices?
How often does the IFA tune the amounts in the funds, and what types of funds have they selected?

I think it's only reviewed once a year. When we have our annual meeting I usually have to sign something to agree to move things around & re-balance to meet my risk profile, I don't believe the investments change in-between meetings. Funds are things like Fidelity Index World Fund, Dimensional Emerging Markets Core Equity, and Dimensional Global Short Dated Bond, there's 8 different ones.   

It's not bad money for that level of work, eh!  Only takes a dozen clients (& I bet many IFAs have 20-50) to round up a pretty decent income  
Do they *explain* the funds you are in to any detail, or does it feel like they earn about £3,500 her hour for the effort put in?
Those three don't look particularly "special" to me, & that is just an amateur look at the performance of them....
You clearly want to use them, which is fine - but the rate sounds steep to me.    In my view, you should ask them to halve their fee, or you will look around, it sounds like they only really do fairly rudimentary admin on your pots....again, just my opinion, worth everything you paid me for it!

dunstonh

Do they *explain* the funds you are in to any detail, or does it feel like they earn about £3,500 her hour for the effort put in?

"They" do if you ask.

 it sounds like they only really do fairly rudimentary admin on your pots....again, just my opinion, worth everything you paid me for it!

How on earth have you managed to build that assumption based on virtually no information provided?

cfw1994

dunstonh said:

Do they *explain* the funds you are in to any detail, or does it feel like they earn about £3,500 her hour for the effort put in?

"They" do if you ask.

 it sounds like they only really do fairly rudimentary admin on your pots....again, just my opinion, worth everything you paid me for it!

How on earth have you managed to build that assumption based on virtually no information provided?

well....from the OP:

I think it's only reviewed once a year.   When we have our annual meeting I usually have to sign something to agree to move things around & re-balance to meet my risk profile, I don't believe the investments change in-between meetings.

Maybe the OP doesn't realise they pay that £7k even if their funds drop for the year.
Maybe they do, and that is absolutely fine......but it reads like no investment changes are done, perhaps a rebalancing (& the jury is out on how effective that is, right?!).   

Do you think that information suggests many hours of work & sounds justifiable?   

We had our EV serviced earlier today....almost £200 for essentially a sat-nav upgrade & a bit of "checking".   Around £100 per hour.  
Does the IFA do 70 hours of work there?    
Or maybe their work justifies 2k-5k per hour (depending on how long you think the meeting and rebalancing takes!)?

Apologies: I'm in danger of sounding like Fred now!   
I'm all for people who lead busy lives and/or earn well paying generously for services they value, but it galls me a little when it feels like even they might be being taken for a ride 

dunstonh

Do you think that information suggests many hours of work & sounds justifiable?   

It doesn't suggest whether it is or isn't.   For example, can the op answer how frequently the funds are assessed under their governance?   (monthly is typical).   The OP may have a meeting once a year but it doesn't mean nothing happens in between.

Whilst the IFA may not carry out the work personally, they will buy that information in.  It costs money.   The car mechanic can work on multiple cars in a day. An IFA can do one person, maybe two at a push.   And often take multiple days on a single person.

We had our EV serviced earlier today....almost £200 for essentially a sat-nav upgrade & a bit of "checking".   Around £100 per hour.  
Does the IFA do 70 hours of work there?    

Does your car mechanic give you investment advice?

Your car mechanic doesn't have a lifetime of liability on the advice given or the regulatory and compliance requirements and mechanics are main garages lack skills that a proper mechanic would have.  

Or maybe their work justifies 2k-5k per hour (depending on how long you think the meeting and rebalancing takes!)?

Financial advice is expensive but you can blame the regulatory environment and EU directives for that.

Albermarle

smartpicture said:

Thank you, you're all helping to clarify things. I've been doing some investigations and here is some more detail on the charges, hopefully you can tell me if these are reasonable. To be clear, I'm happy to pay an IFA, I don't want to manage any of this myself (because I wouldn't), I'm assuming he will get me the best return (or better than I would get myself), I just want to make sure the charges are reasonable or whether I should look at other IFAs and/or discuss further with him.

SIPP 950kish with AJ Bell:
AJ Bell Custody Charge 0.17% = £1598 last year
IFA Fee 0.75% = £7030
Investment Funds Annual Management Charge 0.35% = £3857 (not clear who gets this money??)
ISA/GIA 420k ish with AJ Bell:
AJ Bell Custody Charge 0.17% = £697 last year
IFA Fee 0.75% = £3031
Investment Funds Annual Management Charge 0.35% = £1664 (not clear who gets this money??)

So about £18,000 annual fees. Additional small dealing charges notified once a year when fund is rebalanced.
IFA Fees were 1% until 3yrs ago when various investments were amalgamated onto one platform, now 0.75%.
Does this all look ok? Thank you.

As you want to stay with having a financial advisor , then as someone with a large pot , I would concentrate on getting the advisor fees down by putting some pressure on them .
For example you could say that you had been in contact with other potential advisors that were offering more competitive rates and more regular reviews etc . It is the same in all business , bringing in a competitive situation tends to drive down prices .

Cus

smartpicture said:

Cus said:

How often does the IFA change the fund choices?
How often does the IFA tune the amounts in the funds, and what types of funds have they selected?

I think it's only reviewed once a year. When we have our annual meeting I usually have to sign something to agree to move things around & re-balance to meet my risk profile, I don't believe the investments change in-between meetings. Funds are things like Fidelity Index World Fund, Dimensional Emerging Markets Core Equity, and Dimensional Global Short Dated Bond, there's 8 different ones.   

I use a wealth management firm and pay 0.85%. Our portfolio numbers are similar.
They invest in 20 or so niche funds on average, 25 or so multi country individual equity shares roughly, I speak to them regularly to ask about their investment strategy. They buy and sell funds regularly through the year, and adjust the amounts in them often.  They move in and out of shares many times a year also. They sometime dive in on an unusual index for a few months to try to boost profit. They follow my risk profile. And I get an IFA at no additional cost for any non investment queries.
I have a few benchmarks I judge them on, (not their benchmarks) and on occasion I quiz them a lot on performance, but so far (4 years), they are beating my benchmarks (after fees) by a level I am satisfied with.

For the kind of fees I am paying (like you), I need to be demanding, they need to be under pressure to perform, I expect a level of service. If they just invested in the funds you have, with a once a year rebalance I would likely just go DIY personally.

[Deleted User]

smartpicture, please tell us you’re not paying £200 per week ongoing to someone who reviews your investments one day a year.

cfw1994

Cus said:

smartpicture said:

Cus said:

How often does the IFA change the fund choices?
How often does the IFA tune the amounts in the funds, and what types of funds have they selected?

I think it's only reviewed once a year. When we have our annual meeting I usually have to sign something to agree to move things around & re-balance to meet my risk profile, I don't believe the investments change in-between meetings. Funds are things like Fidelity Index World Fund, Dimensional Emerging Markets Core Equity, and Dimensional Global Short Dated Bond, there's 8 different ones.   

I use a wealth management firm and pay 0.85%. Our portfolio numbers are similar.
They invest in 20 or so niche funds on average, 25 or so multi country individual equity shares roughly, I speak to them regularly to ask about their investment strategy. They buy and sell funds regularly through the year, and adjust the amounts in them often.  They move in and out of shares many times a year also. They sometime dive in on an unusual index for a few months to try to boost profit. They follow my risk profile. And I get an IFA at no additional cost for any non investment queries.
I have a few benchmarks I judge them on, (not their benchmarks) and on occasion I quiz them a lot on performance, but so far (4 years), they are beating my benchmarks (after fees) by a level I am satisfied with.

For the kind of fees I am paying (like you), I need to be demanding, they need to be under pressure to perform, I expect a level of service. If they just invested in the funds you have, with a once a year rebalance I would likely just go DIY personally.

That sounds like a very active management of funds that they are doing.  It is sometimes said that active fund managers may have a few good years, but rarely beat the market consistently for *many* years.
When you say you have a few benchmarks to judge them on.....what do you mean?
I know some here find it a feature of “wealth management” companies to use many funds as you mention.  My main pot is a similar number, & currently is in 4 funds (has been up to 6 in the past).  I know there is an comforting element of “eggs and baskets” to using different funds, but even in my 2 “adventurous” funds there is already some overlap!
The reason I ask is that the main benchmark I can think of would be performance, pure & simple: my funds were X at Day 1, and Y one year later.  I personally track my funds quarterly, but overall it is annual growth of the “pot” that is of interest.  What sort of numbers (% annual growth after fees) are they producing?  If you prefer not to respond, that is of course fine!