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

Ibrahim5

The business is only valuable because it's like a free cash machine. People paying thousands for very little effort. If people stopped paying for unnecessary annual reviews the adviser would actually have to do work to get new customers.

Ibrahim5

MisterT said:

Deleted_User said:

MisterT said:

Since I started this thread I've had occasion to ask my IFA some questions about the impact of my wife possibly having to take early retirement and how best we could manage the impact to our finances. Despite me having read up as much as I could he came up with some interesting options I hadn't considered, which of course is his job.

So perhaps for us that 0.35% a year isn't a bad thing at all. As a few have commented it's exactly this type of problem that really has nothing to do with managing the portfolio (which more or less manages itself) that we are really paying the ongoing charge for. We have help for financial issues on tap when we need it, within reason I suppose - I'm sure if I was getting in touch every week he might have something else to say about it.

This raises a few questions:

1. How often does your wife retire? 

2. Do you think the advisor would have rejected you had he not been paid an annual fee growing well above RPI?
3. 0.35% does not sound like a lot.  Yet its the same money getting taxed again and again and again for decades.  Do you know the cumulative compounded cost after lets say 20 years?
4. People buy houses way more often than they retire.  Do you have a real estate agent on a retainer? Do you pay him a proportion of your current house valuation? 

Due to unexpected circumstances she may have to retire early hence the need for advice from the IFA, If I had dispensed with his services I'd have had to go elsewhere and as I mentioned it turned out to be pretty useful.
We are both definitely retiring in a couple of years at which point I will be looking for more advice and he will be there to provide it, once we have our post retirement up and running I doubt I'll keep paying the 0.35% as hopefully my requirements will be much simpler and I can go it alone.
Afaik 0.35% is a pretty good rate for an ongoing charge, I got him down from 05% initially and as the plan was only set up in early 2020 we're not going to be paying it for that long, I started this thread as I had my doubts about even paying that once the plan was up and running.
Don't get me started on estate agents and how much they charge......

Estate agents and IFAs. The only people charging a small percentage of a large figure rather than charging for work actually done.

Ibrahim5

How long does an annual review costing £5k take? The IFAs won't answer the question. Is it 2 hours at £2.5k an hour or 100 hours at £50 an hour?

[Deleted User]

DT2001 said:

Deleted_User said:

MisterT said:

Since I started this thread I've had occasion to ask my IFA some questions about the impact of my wife possibly having to take early retirement and how best we could manage the impact to our finances. Despite me having read up as much as I could he came up with some interesting options I hadn't considered, which of course is his job.

So perhaps for us that 0.35% a year isn't a bad thing at all. As a few have commented it's exactly this type of problem that really has nothing to do with managing the portfolio (which more or less manages itself) that we are really paying the ongoing charge for. We have help for financial issues on tap when we need it, within reason I suppose - I'm sure if I was getting in touch every week he might have something else to say about it.

This raises a few questions:

1. How often does your wife retire? 

2. Do you think the advisor would have rejected you had he not been paid an annual fee growing well above RPI?
3. 0.35% does not sound like a lot.  Yet its the same money getting taxed again and again and again for decades.  Do you know the cumulative compounded cost after lets say 20 years?
4. People buy houses way more often than they retire.  Do you have a real estate agent on a retainer? Do you pay him a proportion of your current house valuation? 

Playing devils advocate
1. MisterT’s wife was only looking at an impact of possibly retiring
2. how does it grow above RPI or are you suggesting the portfolio is rising well!
3. If, and I know some will say a big if, the IFA made a good investment decision on day 1 the returns would compound over time
4. IFA’s might advise on retiring, investing, IHT, decumulation, your children’s investments, ISA’s etc so it is not a fair comparison. If you’ve sold a property in France and had to pay 6% to the immobilier plus TVA you might think 0.35% a bargain!

1.  I often look at a nice house and think about buying it.  Should I seek advice from a realtor every time?  Unless its serious, its waste of everyones time.
2. I am suggesting that it should have been growing well above RPI if the decision maker spent 10 seconds on putting it all in a world index. 

3. See item 2.
4. Realtor might advise on constantly changing planning permissions in the area. And on neighbours boundary issues. And on price forecasts.  And on adding value by refurbishing a kitchen or best colours for the bathroom.  

5. Where does 6% come from? In Canada transactional financial advice  costs 700 to 1500 GBP a pop. The cost of transactional advice is what we should be comparing against. 

Thrugelmir

MisterT said:

Deleted_User said:

MisterT said:

Since I started this thread I've had occasion to ask my IFA some questions about the impact of my wife possibly having to take early retirement and how best we could manage the impact to our finances. Despite me having read up as much as I could he came up with some interesting options I hadn't considered, which of course is his job.

So perhaps for us that 0.35% a year isn't a bad thing at all. As a few have commented it's exactly this type of problem that really has nothing to do with managing the portfolio (which more or less manages itself) that we are really paying the ongoing charge for. We have help for financial issues on tap when we need it, within reason I suppose - I'm sure if I was getting in touch every week he might have something else to say about it.

This raises a few questions:

1. How often does your wife retire? 

2. Do you think the advisor would have rejected you had he not been paid an annual fee growing well above RPI?
3. 0.35% does not sound like a lot.  Yet its the same money getting taxed again and again and again for decades.  Do you know the cumulative compounded cost after lets say 20 years?
4. People buy houses way more often than they retire.  Do you have a real estate agent on a retainer? Do you pay him a proportion of your current house valuation? 

Don't get me started on estate agents and how much they charge......

No one every complains about the price of a cup of tea or coffee in Starbucks or the margins that MacDonalds achieve on fast food. 

MisterT

No one every complains about the price of a cup of tea or coffee in Starbucks or the margins that MacDonalds achieve on fast food. 

Daughter - "Can we  go to Starbucks/MacDonalds?"

Dad - "There's food in the fridge and you can wait till you get home"

nuff said......

Seriously though it's the percentage thing that really gets me, is it really more work to do a 500k transfer (or house purchase) @ 5% compared to a 250k transfer @ 5%  Sure you can try and negotiate the price down but you're on the back foot straight away as they've set the expectation that's what's going to cost you.

Linton

MisterT said:

No one every complains about the price of a cup of tea or coffee in Starbucks or the margins that MacDonalds achieve on fast food. 

Daughter - "Can we  go to Starbucks/MacDonalds?"

Dad - "There's food in the fridge and you can wait till you get home"

nuff said......

Seriously though it's the percentage thing that really gets me, is it really more work to do a 500k transfer (or house purchase) @ 5% compared to a 250k transfer @ 5%  Sure you can try and negotiate the price down but you're on the back foot straight away as they've set the expectation that's what's going to cost you.

If nothing else the liability costs are proportional to the size of job.  AIUI some IFAs have a max and min charge which is arguably fairer.  But in the end it doesnt really matter - you have a quote for a service which you can accept, reject, or negotiate.  Being on the back foot is purely in your mind.

Diplodicus

Well you get those intangible benefits "hand holding," the "comfort call," "peace of mind," "sleep at night." You cannot measure that type of reassurance, it seems. And we shouldn't marry the benefit of financial advice (if any) to the size of the fee. A common mistake, apparently. 

On the other hand, the financial advice industry makes no mistake about what a client is worth to itself. Funny, that.

DT2001

Ibrahim5 said:

The business is only valuable because it's like a free cash machine. People paying thousands for very little effort. If people stopped paying for unnecessary annual reviews the adviser would actually have to do work to get new customers.

If it was that easy more people would be setting up as IFA’s?

How often do the FCA say a review is needed?

dunstonh

Seriously though it's the percentage thing that really gets me, is it really more work to do a 500k transfer (or house purchase) @ 5% compared to a 250k transfer @ 5%  Sure you can try and negotiate the price down but you're on the back foot straight away as they've set the expectation that's what's going to cost you. 

There is some validity in that.  We operate a cap and collar on the initial and taper the ongoing charge (the latter is a pain as no platforms allow that model and you have to manually adjust it. So, you allow a reasonable tolerance).

However, the issue can be with liability.   With any business, as the liability increases, the cost increases.

How often do the FCA say a review is needed?

Eu directive MiFIDII - "at least annually".