IFA Charges

choi

Thanks Dunstonh

Much appreciated

I have told all of them my main concern is to protect my savings from inflation

I am happy to top up my pension income from savings and see my savings diminish over time

My main concern is to keep us as much of my savings intact as I can to handover to my wife and children

redmalc

i have 750K in pensions and Isa,s and my IFA looks after it for me and his charges are 0,25% plus the old Mutual platform charges

JohnWinder

choi said:

I have told all of them my main concern is to protect my savings from inflation

I am happy to top up my pension income from savings and see my savings diminish over time

If I understand that correctly, a big IF, I’d say you’ve set a modest investment goal (match inflation over an unspecified period) for a professional to try to satisfy; it’s not like you’re giving them much of a challenge. And actually, they don’t even need to meet your investment objective, they just need to make a reasonable attempt. Which is a round-about way of saying a lot of people would feel they could have a shot at that in diy mode.
Hard to know if it’s worth the effort for you, but for starters, keeping your asset value up with inflation might need a 3 or 4%/year return. You’re anticipating spending about 1%/year on fees you might be rid of in diy mode. That makes it even easier to meet your objective.
A lot of investors are trying to squeeze every last penny out of their investments without burning themselves with risk. I no idea how risk wary you are, but it seems you might meet your objective in a canter with little risk.
Consider for a moment a fund of 30% equities and 70% ‘safe as a bank’ government bonds running with little attention for the last 35 years. It would have tripled in value (inflation adjusted); you only need yours to keep its value. It would never have dropped more than 14% in value during financial crises. Even a 20/80 portfolio would have doubled your money, and never fallen more than 8%, its worst year returning minus 3%.

Or you could have chosen a 10/90 portfolio and still doubled your money with even less risk.

But none of that considers your expressed need to 'to top up my pension income from savings and see my savings diminish over time'.  So I put a 1%/year withdrawal into the 10/90 portfolio, and it still finished up worth 50% more than it started (inflation adjusted).

The future won’t be like the past, and professional help might take the heat off you but it probably won’t make the future any more certain; but those fees will be taking about a third of the returns you need to match inflation which has averaged about 3%/year for 30 years.

Albermarle

 I no idea how risk wary you are,

From past threads the poster is very risk averse, although after various comments/replies he seems to be opening up to the fact that being too risk averse is actually a risk in itself.

OP - It is good that you want to leave a substantial sum for your wife and children . However just remember that you and your wife will hopefully have a long and happy retirement/life, and that savings, pension etc are also for spending when you are alive.

Your children would presumably prefer to see you happy alive than they get a bigger inheritance.

Malthusian

choi said:

Do ethical Investments  generally produce lower returns

Sometimes they do and sometimes they don't. If you are investing in ethical funds to get higher returns then you are simply making a sector bet: "renewables and financials will do better than fossil fuels and tobacco" is no different from "miners will beat communications technology" or "defensive consumer goods will beat industrials" or for that matter "the Pacific will outperform the US". There is no evidence that anyone can consistently beat the market by predicting which sectors will do better than others. This still applies if one sector is more virtuous than another.

The point of investing ethically is so you can sleep at night knowing your money isn't funding something you object to. Anything else means you have fallen for marketing.

redmalc said:

i have 750K in pensions and Isa,s and my IFA looks after it for me and his charges are 0,25% plus the old Mutual platform charges

You have done very well to get 0.25%pa. It's almost certainly still profitable for both parties but someone starting from scratch would have to search long and hard to get the same deal, even with £750k under advice. (They would eventually get it but might have to discard some better options on the way, and then end up overpaying anyway because the lowest bidder wasn't much cop. 0.25% for advice you don't value is worse than 0.5% for advice you do.) Are you sure he's an IFA and not a Quilter tied adviser?

Aminatidi

I know it's very easy to say "have you considered doing it yourself" but if you have modest aims like beating inflation and you're looking at paying a couple of percent out on the lot you're already setting yourself an additional hurdle because of the fees.

There are so many low cost platforms and multi-asset funds out there that for a fairly simple approach maybe consider investing some of the money yourself and see how that goes?

My mum has a modest pot and very simple requirements (it would literally be in the bank otherwise) and had an IFA who she paid around 2% a year for a phone call or two and now she's managing her own investments through Vanguard.

Not suggesting that's the answer for everyone as there's also a price on peace of mind

Albermarle

You have done very well to get 0.25%pa. It's almost certainly still profitable for both parties but someone starting from scratch would have to search long and hard to get the same deal, even with £750k under advice. 

If the investment side is delegated to a DFM , then the IFA has less to do so maybe has reduced their fee.

In other threads it is often suggested that with a DFM , the IFA should reduce their fees but often they do not .Perhaps this one has . Just Speculating !

dunstonh

My mum has a modest pot and very simple requirements (it would literally be in the bank otherwise) and had an IFA who she paid around 2% a year for a phone call or two and now she's managing her own investments through Vanguard.

Nobody should be paying an IFA 2%.  The most common charge is 0.5%. Although there is typically movement towards 1.0% for smaller values.

JohnWinder

Or perhaps no IFA should be charging 2%, etc.....

Aminatidi

dunstonh said:

My mum has a modest pot and very simple requirements (it would literally be in the bank otherwise) and had an IFA who she paid around 2% a year for a phone call or two and now she's managing her own investments through Vanguard.

Nobody should be paying an IFA 2%.  The most common charge is 0.5%. Although there is typically movement towards 1.0% for smaller values.

Fair point and that was misleading wording on my part.

With IFA + platform + fund fees she was paying almost 2.2% overall.

The actual advisor fee was 1%.

Dump the whole lot in a low cost multi-asset on a fixed fee platform v needing to clear the IFA + platform + fund charges that you're paying forever too - that's quite a drag on performance that might already be modest if you're investing cautiously.

I get it that IFA's are absolutely the right and best option for some people though.