Starting out in Investments. Paying an Independent Financial Advisor?

OldMusicGuy

Albermarle said:

Not everybody is after 'better returns' whether they use an IFA or not .

For example someone who is retired , is often looking for stability and some protection against market drops, rather than big growth .

That's me, I have invested for stability and low volatility rather than growth. I just need to stay ahead of inflation after costs as I have sufficient in my DC pot. Another reason why for me paying excessive fees to an IFA is a bad move. 

The important thing to remember is that IFAs are NOT experts in investing. They are not investment managers, they have no more insight into what is happening in the global economy than you or I. Paying their fees will not automatically get you a "better" return. Nor are they going to avoid any market downturns for you. They are very knowledgable about many different types of investments that are out there and can choose a set of funds/investments that match your attitude to risk and your long term goals. That's what you are paying that money for.  You can do that yourself - I did. But it does take an investment of time and effort and if you don't want to do that, that is where you should use an IFA. 

JohnWinder

OldMusicGuy said:

Albermarle said:

Not everybody is after 'better returns' whether they use an IFA or not .

For example someone who is retired , is often looking for stability and some protection against market drops, rather than big growth .

That's me, I have invested for stability and low volatility rather than growth. I just need to stay ahead of inflation after costs ...

Are we at risk of misrepresenting the originally stated position, which was ' ..I had thought that paying the costs/fees of all the relevant parties, including the IFA, would get you better returns?' Which I think means 'better returns than not paying and IFA et al'. That morphed into 'big growth'.

And, if one needs to stay ahead of inflation, then one needs to invest for growth, not 'rather than growth', and it needs to be real growth as well, nominal growth just won't cut it, and it needs to be 'real growth plus costs' growth.

We're all looking for our preferred level of stability and protection against market drops, and within those constraints we're all looking for 'better returns' rather than 'worse returns' surely.

On the matter of fees, the more you pay the less nett return you're likely to get, after fees. It's contrary to our common experience, the more you pay the better the product, but there it is.  To quote: '

• Overall, there does not appear to be a clear linear relationship between fund charges and the gross performance generated by the fund manager.'  source: Asset Management Market Study  Final Report: Annex 4 – Assessing the relationship between the price and performance of retail equity funds in the UK  June 2017

jbuchanangb

I have made use of IFAs 3 times over the years, and each time has worked out well. Having no knowledge of the investment business, it was definitely helpful to have the IFA to help sort out a portfolio.

On each occasion the deal was a one-off lump sum payment to the IFA for the benefit of the advice, and no follow-on fees for so-called annual reviews. I took the view, which is often stated, that investments should be long term, minimum 5 years, preferably at least 10 years, and therefore there should not be any need for chopping and changing.

At one stage I interviewed 3 different financial advisors, two were IFAs other one was tied to a bank, and compared their proposed fees, and attitudes, before apoointing one.

I found the IFAs did a thorough job, taking into account things like attitude to risk, desire for ethical investments, whether investing for income or growth etc. etc., which I wouldn't have had a clue about.

bostonerimus

Albermarle said:

 I had thought that paying the costs/fees of all the relevant parties, including the IFA, would get you better returns?

Not everybody is after 'better returns' whether they use an IFA or not .

For example someone who is retired , is often looking for stability and some protection against market drops, rather than big growth .

Very good observation. Growth is not the sole criterion that should be applied to a portfolio. Others are risk, volatility, tax efficiency, access to the money...