Relationship With Your IFA

cfw1994

“How the markets are day to day” is not how one ought to invest, I would suggest 🤪

Certainly spreading the eggs about is wise, which is why funds exist - spread the risk.

For those who believe in deep knowledge of markets by their FA/IFA, I’d strongly suggest you take about 35 minutes to watch a short series of videos by Lars Kroijer here.

When someone invests in a Vanguard LS80 (other similar ‘multi-asset’ funds exist, some mentioned in here, for example)  it is spread across a wide chunk of the worlds markets.  You can see here how it uses other index funds, each in turn which will contain stock in many companies.  There are plenty of baskets for the eggs there! 


If you do chose to use an IFA, & it will make sense for some, it ought to be about much broader financial/lifestyle guidance, & (IMHO) absolutely not about their investing skills 😉

Ibrahim5

dunstonh is always saying that you should always use an IFA not an FA. Someone was saying that his IFA was retiring and they were being transferred to an FA. Dunstonh says oh yes no problem with that. An IFA can sell their business to anyone. So the IFA dumps all his customers in the poo to benefit himself. IFAs always put their needs first. You can get single funds containing hundreds of baskets. It's certainly easy to create a portfolio with less than 4 funds. I have read IFAs discussing it. And then one says "what about our businesses?" So they make them with 10 to 20 funds to make them look too complex to DIY.

Audaxer

GSP said:

Ibrahim5 said:

IFAs have no practical skills. If you are able to read and write you can teach yourself. There are so many resources available now. As with many things in life self confidence seems to be the most important factor. You have to remember that IFAs purposefully make complex investment portfolios to make you think that you couldn't do it yourself. I do all the practical stuff too. No reason why you can't do both.

Not sure if I agree Ibrahim5 and not sure if it’s about confidence etc. It’s about leaving matters to a specialist who has to look at just about everything daily for his job, I for one just wouldn’t have the time. With a number of clients under their belts, I am sure they often make similar decisions on fund recommendations from time to time. In truth just being aware how the overall markets are day to day is enough for me and how this may affect my fund.
Do they really make complex investment portfolio’s to make you think you can’t do it yourself? I thought the key was diversity and not putting all your eggs in one basket?

I think IFAs are useful if you have complex financial affairs, but if it is a relatively small amount you are investing, one of the low cost multi asset funds at your preferred risk level would give you a globally diversified portfolio.

GSP

Audaxer said:

GSP said:

Ibrahim5 said:

IFAs have no practical skills. If you are able to read and write you can teach yourself. There are so many resources available now. As with many things in life self confidence seems to be the most important factor. You have to remember that IFAs purposefully make complex investment portfolios to make you think that you couldn't do it yourself. I do all the practical stuff too. No reason why you can't do both.

Not sure if I agree Ibrahim5 and not sure if it’s about confidence etc. It’s about leaving matters to a specialist who has to look at just about everything daily for his job, I for one just wouldn’t have the time. With a number of clients under their belts, I am sure they often make similar decisions on fund recommendations from time to time. In truth just being aware how the overall markets are day to day is enough for me and how this may affect my fund.
Do they really make complex investment portfolio’s to make you think you can’t do it yourself? I thought the key was diversity and not putting all your eggs in one basket?

I think IFAs are useful if you have complex financial affairs, but if it is a relatively small amount you are investing, one of the low cost multi asset funds at your preferred risk level would give you a globally diversified portfolio.

But what ‘I would hope’ that the specialist is better informed than me and able to make a better choice on the whole wealth of funds out there. Not doing it for a living, without any knowledge, expertise feeling like I am going in blind would leave me sleepless nights for years. I just feel comfortable them doing this work for me, and someone who would/should have a much better handle on this type of business than I ever would.
To me it’s like trying to do an electrician’s job without hardly any training. I could only see burns.

cfw1994

GSP said:

Audaxer said:

GSP said:

Ibrahim5 said:

IFAs have no practical skills. If you are able to read and write you can teach yourself. There are so many resources available now. As with many things in life self confidence seems to be the most important factor. You have to remember that IFAs purposefully make complex investment portfolios to make you think that you couldn't do it yourself. I do all the practical stuff too. No reason why you can't do both.

Not sure if I agree Ibrahim5 and not sure if it’s about confidence etc. It’s about leaving matters to a specialist who has to look at just about everything daily for his job, I for one just wouldn’t have the time. With a number of clients under their belts, I am sure they often make similar decisions on fund recommendations from time to time. In truth just being aware how the overall markets are day to day is enough for me and how this may affect my fund.
Do they really make complex investment portfolio’s to make you think you can’t do it yourself? I thought the key was diversity and not putting all your eggs in one basket?

I think IFAs are useful if you have complex financial affairs, but if it is a relatively small amount you are investing, one of the low cost multi asset funds at your preferred risk level would give you a globally diversified portfolio.

But what ‘I would hope’ that the specialist is better informed than me and able to make a better choice on the whole wealth of funds out there. Not doing it for a living, without any knowledge, expertise feeling like I am going in blind would leave me sleepless nights for years. I just feel comfortable them doing this work for me, and someone who would/should have a much better handle on this type of business than I ever would.
To me it’s like trying to do an electrician’s job without hardly any training. I could only see burns.

May I suggest you have another read of my post above?
Listen to those videos.  Please feel give feedback here after you have listened!

Then realise the IFAs expertise, & I am pretty certain our esteemed resident IFA has said as much in posts, is NOT about fund-picking....but a broader lifestyle thing, matching your long-term hopes & expectations with your 'risk level'.


Also note that "risk level" could perhaps better be named "volatility acceptance" - calling it your risk tolerance is rather disingenuous, and almost guides people to worrying about losing their entire life savings (pensions). 
If one is not accessing one's funds for a decade or more, then I personally believe one's level of tolerance should be high: those 'higher risk' funds tend to be the ones which go up more over time.   

Clearly your concern over eggs & baskets is real, & sensible - I don't mean lob your pension into one crypto basket - that would be madness - but do put it into a big basket of multi-asset funds.   
Our twenties offspring have some funds in LS100 (perhaps a bit UK-centric, but this is long term stuff).  Started that in Apr2018, & I can see their rate of return is standing over +50% right now.  Will things drop in the next few month/years?  Of course there will be dips - but since they pop money in monthly, they will buy more on the low dips, and over the decades ahead, I believe they will be okay 👍

dunstonh

If you do chose to use an IFA, & it will make sense for some, it ought to be about much broader financial/lifestyle guidance, & (IMHO) absolutely not about their investing skills 😉

The IFA is not the investment manager.  But they will buy in the data, research, analysis and due diligence and consolidate all that into their selection.   So, the IFA is more of a facilitator.   It provides a structure and process and, if done correctly, can avoid issues like Woodford and Arch Cru (both of which were more popular with DIY investors).

And it comes back down to the ability of the individual.  The UK's largest DIY platform frequently has its own brand expensive  MM funds in its top selling funds list.    So, the DIY investor picking those is paying nearly twice the platform cost that an IFA would have access to and two, three or even four or more times the cost of fund charges.   So, paying more than using an adviser.    For most, the point of going DIY is to save money. Not pay more.  Yet plenty do.

Ibrahim5

Investing for yourself is different to investing for someone else. The IFAs say they rarely invest in 100% equities because the customer can't handle the volatility. I would say they don't because it's too risky for the IFA. If you refuse to learn about investing and give the IFA a lump sum to look after and find it has dropped 50% you are likely to dump the IFA.

Ibrahim5

IFAs invest more cautiously for a smoother ride. A smoother ride gives greater potential for a long term relationship and lots of ongoing fees.

DT2001

Ibrahim5 said:

IFAs invest more cautiously for a smoother ride. A smoother ride gives greater potential for a long term relationship and lots of ongoing fees.

Dunstonh says IFA is not the investment manager.

Have you had dealings with an IFA recently and completed the risk/volatility analysis.
That guides the mix of funds used not the personal take of the IFA.

Is your aim to maximise return or achieve a specific goal?

cfw1994

dunstonh said:

If you do chose to use an IFA, & it will make sense for some, it ought to be about much broader financial/lifestyle guidance, & (IMHO) absolutely not about their investing skills 😉

The IFA is not the investment manager.  But they will buy in the data, research, analysis and due diligence and consolidate all that into their selection.   So, the IFA is more of a facilitator.   It provides a structure and process and, if done correctly, can avoid issues like Woodford and Arch Cru (both of which were more popular with DIY investors).

And it comes back down to the ability of the individual.  The UK's largest DIY platform frequently has its own brand expensive  MM funds in its top selling funds list.    So, the DIY investor picking those is paying nearly twice the platform cost that an IFA would have access to and two, three or even four or more times the cost of fund charges.   So, paying more than using an adviser.    For most, the point of going DIY is to save money. Not pay more.  Yet plenty do.

I think the the bit in bold need digesting.  
There is a slightly dangerous assumption that all IFAs are perfect machines who perform the same 👀
Clearly that is not true...is there an IFA league table to find how to recognise a good one from a less capable one?  🥸🤷🏼‍♂️
https://www.ftadviser.com/investments/2020/04/23/how-advisers-responded-to-the-woodford-saga starts with

The majority of financial advisers did not alter their investment strategy or due diligence protocol in the aftermath of the Neil Woodford debacle, despite the former star manager’s fall from grace dominating headlines throughout 2019.
Research from FE Fundinfo, published this week (April 20), showed 55 per cent of advisers “made no changes” in response to Mr Woodford’s fund and firm closure. 

The implication that an IFA will naturally and perfectly insulate the client from fiscal pain like Woodford is not necessarily accurate 🧐
How do you avoid one that leads to this?

Some IFAs might indeed use a DFM for smarter investment management decisions - for which there will be further fees.  Fees can be a big drag on fund performance.   That much remains a fact.

I believe that there are many who will benefit from an IFA....but they need to be getting more than some investment advice from them for the value to be real.