Do I really need a Financial Advisor on an ongoing basis?

JohnWinder

I know, you're UK based, and I'm going to bring something USA based for your consideration. Fire at will.

Here's a paper which Vanguard uses to help advisors quantify the benefits of their work.

A commentator writes: 'I would summarize the entire article as follows:

It contains most of the best points in the Bogleheads' Wiki and addresses many of the Frequently Asked Questions on the forum with answers totally consistent with Bogleheads' Philosophy. In some sense, the article could be re-titled "How to Be Your Own Best Advisor" or perhaps "The Bogleheads' Manifesto" (with apologies to Wm. Bernstein). It covers briefly the main topics covered in longer books by Bernstein, Ferri, and Swedroe, so I would recommend that all investors read this article INCLUDING the Appendix.

For investors that have an advisor or are considering using an advisor, the paper clearly outlines what a great advisor should be doing for the client. For investors who are doing-it-themselves, the paper clearly outlines what a great DIY investor should be doing for themselves.' https://www.bogleheads.org/forum/viewtopic.php?t=157683

You can find it by searching for 'Vanguard research 2019. Putting a value on your work: Quantifying Vanguard advisor's alpha.'

braci

Through personal experience of having worked within an IFA, once you've had your first set of meetings, set up your plans/moved them into holding with the company a lot of your plans kind of manage themselves, and unless there are any changes within your own circumstances (you wish to take tax-free cash/move over plans/change risk profile) seeing an advisor isn't a necessity. 

On the flip side, it's always nice to get correspondence through to see how your plans are performing alongside the peace of mind knowing that they are being managed by pros. You may want to ask if your advisor offers Ad/Hoc charges rather than ongoing maintenance, if you do manage to implement this you would only have to pay charges on a basis of having meetings or work needing to be done.

[Deleted User]

In this day and age when information is readily available to everyone, nobody needs a financial advisor for routine investments  on an ongoing basis.  Funds do the job of selecting investments and the information on their strategies is public and consistent on sites like Morningstar.  Having yet another layer is completely unnecessary. 

 This equation may change if we are talking about someone with 50M. At that point people can get some very specialized services to align with special needs.  They would also get highly qualified experts paying a lot of attention. 

More generally, major changes in circumstances coinciding with consideration of certain products  may warrant a one off advice from a specialist. 

Ibrahim5

In this day and age when information is freely available to everyone you realise that in previous times when information wasn't freely available and you just had to trust your adviser that IFAs didn't have a clue what they were doing in terms of investing.

DT2001

Ibrahim5 said:

In this day and age when information is freely available to everyone you realise that in previous times when information wasn't freely available and you just had to trust your adviser that IFAs didn't have a clue what they were doing in terms of investing.

IMO IFA’s are there for strategy and they buy in choosing investments to meet your aims.

There are good and bad IFA’s as there good and bad people in all walks of life.

[Deleted User]

DT2001 said:

Ibrahim5 said:

In this day and age when information is freely available to everyone you realise that in previous times when information wasn't freely available and you just had to trust your adviser that IFAs didn't have a clue what they were doing in terms of investing.

IMO IFA’s are there for strategy and they buy in choosing investments to meet your aims.

There are good and bad IFA’s as there good and bad people in all walks of life.

If IFAs are for strategy then surely nobody needs ongoing advice.  Unless one is supposed to keep changing strategy on an ongoing basis. Which would be bad investment advice.

cfw1994

Deleted_User said:

DT2001 said:

Ibrahim5 said:

In this day and age when information is freely available to everyone you realise that in previous times when information wasn't freely available and you just had to trust your adviser that IFAs didn't have a clue what they were doing in terms of investing.

IMO IFA’s are there for strategy and they buy in choosing investments to meet your aims.

There are good and bad IFA’s as there good and bad people in all walks of life.

If IFAs are for strategy then surely nobody needs ongoing advice.  Unless one is supposed to keep changing strategy on an ongoing basis. Which would be bad investment advice.

I tend to agree….
...but I guess the counter to that is that many people are, broadly speaking, rubbish with money and planning.  Perhaps the vast majority 😳

As a nation, we do a terrible job at educating people into managing money.

School age kids, quite naturally, have little comprehension or indeed interest in the power of compounding. 

We are also pretty terrible about talking about money: offspring often have zero idea how much their parents earn, or any real understanding of bills.  

Events can knock people back as well: as Tyson once put it, “Everybody has a plan until they get punched in the mouth”.

People are fearful of planning, and often need some guidance….& historically, the financial advice industry has me one well from helping those people, whilst obviously parting them with a chunk of their money.

This forum tends to be (again, broadly speaking!) filled with people who are the exception to that.  The many contributors here can help offer guidance.  Of course one needs to balance that with the fact this is just a bunch of strangers….but the guidance will often be wiser than a mate down the pub!

One good pal of mine keeps paying his IFA, despite him not needing it, specifically because he doesn’t think his wife would manage if he pops his clogs first 🤪

Certainly there is way more information available now than ever before to help people with a genuine interest to manage their money.  

The need for ongoing charges really should be lower now than ever before….but again, many want a holding hand to guide them through life without “taking responsibility themselves”.  

Linton

Yet again the same people are making the same mistake in seeing the IFA's primary role as managing the nuts and bolts of investing.  To my mind paying an annual management charge is almost nothing to do with making changes to the portfolio which as said should not normally be necessary except for some infrequent minor rebalancing.  The important part is keeping the contact,  For example....

Say you dispense with your IFA and a couple of years later the newspapers are headlining major volatility on the stock market.  Which investments do you sell?

One of your children needs help buying a house. Can you afford to cash in part of your pension?

Your investments are performing rather better than you expected.  Do you book a world cruise?

You are finding your drawdown is not covering your desired expenditure - do you increase it?

You get a £100K legacy but have no immediate need for the cash.  What do you do?

You talk to a mate in the pub who tells you of the small fortune he has made on Bitcoin.  How much of your savings do you invest?



Someone with a moderate knowledge of investing and appropriate arithmetical and spreadsheet skills should be able to come up with a sensible answer to these questions.  If you are confident in your abilities then paying an IFA an ongoing charge may well not be worthwhile.  However if you feel you would need help with this level of questions and have not retained an IFA I suspect you would find it difficult to get a one-off consultation.  For a start the IFA would presumably have to redo all the fact-finding and produce appopriate documentation. Would they want to take on such a small job for a charge that you would consider reasonable? 

I share cfw1994's view that many people do not have the basic skills. 

DT2001

Deleted_User said:

DT2001 said:

Ibrahim5 said:

In this day and age when information is freely available to everyone you realise that in previous times when information wasn't freely available and you just had to trust your adviser that IFAs didn't have a clue what they were doing in terms of investing.

IMO IFA’s are there for strategy and they buy in choosing investments to meet your aims.

There are good and bad IFA’s as there good and bad people in all walks of life.

If IFAs are for strategy then surely nobody needs ongoing advice.  Unless one is supposed to keep changing strategy on an ongoing basis. Which would be bad investment advice.

IFA’s can have access to expensive research tools to ensure your mix of investments has the best chance of meeting your strategy (risk/reward balance). The cost of that research  would be lower than I could get it for. My time is better spent working (being self employed and lucky enough to be able to dictate, at the moment, how much work I do).

JohnWinder

Someone with a moderate knowledge of investing and appropriate arithmetical and spreadsheet skills should be able to come up with a sensible answer to these questions.

Even a smart person with those skills can make ratty emotion-driven decisions when markets flame out; that's where a trusted advisor with steady hands can earn their keep.

IFA’s can have access to expensive research tools to ensure your mix of investments has the best chance of meeting your strategy (risk/reward balance).

I don't know if that's right, some evidence would be interesting. But without it, I'd say you're joining up some pretty distant dots to get that picture. (And I think I know what 'meeting your strategy' means.)