Relationship With Your IFA

Ibrahim5

IFAs have to have more complicated portfolios to make it look as though you couldn't do it yourself.

MX5huggy

Is it ever acceptable for client to have a relationship with an IFA?
I understand IFA’s have to act in your best interest so maybe if the IFA had a higher net worth than you then a relationship could be justified but the other way round I could see issues. 

Bianchiintenso

Forgive my ignorance, but are there any instances where an IFA/FA would use an off the shelf solutions for a client from a mainstream platform such as a VLS or HSBC Global fund from AJBell? 

GSP

dunstonh said:

I have 13 investments, basically 70% equities, 30% bonds & gilts. With Lars video, do you believe my fund could consist of just two investments, one 70% world equity index tracker for equities, the other 30% for bonds?

If you were based in the US, you would be daft to have anything other than passive and a split between equities and bond and a single US bond tracker would be fine.    In the UK, with currency fluctuations and a more global outlook and a market where managed funds exist that do offer value for increased potential returns in a number of areas, mean you should not rely on US data.

How many investments do people have? Are they following the Lars ideology? 

15 funds make up my portfolios. Although with risk levels and time weightings, only 10 are in use at any one time.  And no, I do not follow the ideology.      

Investing is about opinion and there are many different opinions.  Methodologies will vary and there is no one best methodology.  In some periods, a methodology may work better than another or worse in the next period.   In different countries, they may work differently because of internal taxation, market access and cost.  A lot of these methods are also variations of a theme and when you look at each, that can become quite clear.   Nobody knows what methodology is going to be best in any given period.    The key above all else is to have a structure and process that is viable.  Rather than random selections.    The actual methodology you choose to follow is less important. 

Thanks again dunstonh. Trying to learn differences between IFA’s, it’s good and comforting to hear that you appear to follow a similar number of investments as my IFA. God knows however how you choose tha figure from the wealth on offer.

cfw1994

GSP said:

cfw1994 said:

“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 😉

Thanks very much for this.

I have 13 investments, basically 70% equities, 30% bonds & gilts. With Lars video, do you believe my fund could consist of just two investments, one 70% world equity index tracker for equities, the other 30% for bonds?

Seems like a discussion for a new thread? 😃
How many investments do people have? Are they following the Lars ideology? 

In short: yes, you could.   To get to 70:30, you might need to go with half in LS60, & half in LS80.

It is often suggested that IFA/FAs will generally add a large number of funds, & dunstonh has essentially agreed with that.
It can almost certainly be argued they are spreading risk about (eggs & baskets).  They have detailed tools that regular humans don't.
It could (& has previously on these boards) also be argued that using multiple funds maintains a mystique about the Financial Advice space, and is done to justify the often high fees which result from using an IFA/FA. 
I suspect there is an element of truth to both those statements 😉

I don't slavishly follow Lars' advice, but I certainly do believe in the ethos of it.

My main pot is in just 4 funds - I have tweaked it a few times over the past 20 years, no more than 6 funds, usually 4 or sometimes 5.    I've helped kick-start our offspring off with Vanguard LS ISAs, and some small pension savings which are similar.    Could of course have picked a range of 10-15 investments....but why overcomplicate things?!

Given the Global Marketplace we can invest in and live in, I am clearly too stupid in failing to see why you must not follow similar investments to those based in the US.    Clearly currency fluctuations could make a difference, of course, but equally, they could help your pot grow more.  If we have a Venezuelan-style collapse of the £ against the $, well, I guess I'll be eating humble pie 🤪

dunstonh

Thanks again dunstonh. Trying to learn differences between IFA’s, it’s good and comforting to hear that you appear to follow a similar number of investments as my IFA. God knows however how you choose tha figure from the wealth on offer.

If you think about it for a second, it actually makes sense why you have that number.

UK Equity, US Equity, European Equity, Japan Equity and so on....  If you add up the major sectors and include bonds, gilts, index linked gilts, high yidle bonds, global bonds, property etc then you hit those numbers.   

No doubt you will get someone slagging off IFAs for doing that and tell you that you should use something like HSBC GS, or more likely VLS.  However, they seem to forget that these are fund of funds that also invest in a similar number of funds.  So, they preach that their beloved Vanguard is quite right doing it, whilst criticising IFAs for doing it.

cfw1994

dunstonh said:

Thanks again dunstonh. Trying to learn differences between IFA’s, it’s good and comforting to hear that you appear to follow a similar number of investments as my IFA. God knows however how you choose tha figure from the wealth on offer.

If you think about it for a second, it actually makes sense why you have that number.

UK Equity, US Equity, European Equity, Japan Equity and so on....  If you add up the major sectors and include bonds, gilts, index linked gilts, high yidle bonds, global bonds, property etc then you hit those numbers.   

No doubt you will get someone slagging off IFAs for doing that and tell you that you should use something like HSBC GS, or more likely VLS.  However, they seem to forget that these are fund of funds that also invest in a similar number of funds.  So, they preach that their beloved Vanguard is quite right doing it, whilst criticising IFAs for doing it.

Not sure if you are suggesting I was "slagging off IFAs" for this?  I try not to give that feeling.  Maybe I fail 😱

The Kroijer approach essentially says there is a cheaper & simpler way to achieve what the vast majority of money managers achieve, year after year...... you appear to be saying that those global fund-of funds might well be achieving the same thing 🧐

That suggests that, financially speaking, it might be achieved at a lower cost....& over several decades, those costs can make a difference, perhaps a BIG difference 👀

As I've often said here, the value an IFA can provide to a client ought to not be measured by the fund performance, although that is often the question raised here: I feel it ought to be in more help towards achieving life goals, or indeed financially helping those with complex arrangements. 
Each to their own, of course!  

dunstonh

Not sure if you are suggesting I was "slagging off IFAs" for this?  I try not to give that feeling.  Maybe I fail 😱

You hadn't actually posted when I made my comment.  In fact, now is the first time I have seen it.  

The Kroijer approach essentially says there is a cheaper & simpler way to achieve what the vast majority of money managers achieve, year after year...... you appear to be saying that those global fund-of funds might well be achieving the same thing 🧐

As I said earlier, variations of a theme.     Although I am not going to argue the point on active vs passive at this time as its been done to death.

As I've often said here, the value an IFA can provide to a client ought to not be measured by the fund performance, although that is often the question raised here: I feel it ought to be in more help towards achieving life goals, or indeed financially helping those with complex arrangements

I don't know if I said it on this thread or one of the others on the go, the majority of consumers are not looking for the IFA to be an investment manager with star returns.  They are looking at having someone do it for them knowing that it will be done correctly and suitably and have consumer protection if it isn't.   In the real world, the conversations about the actual investments have the least time spent on them.

GSP

dunstonh said:

Thanks again dunstonh. Trying to learn differences between IFA’s, it’s good and comforting to hear that you appear to follow a similar number of investments as my IFA. God knows however how you choose tha figure from the wealth on offer.

If you think about it for a second, it actually makes sense why you have that number.

UK Equity, US Equity, European Equity, Japan Equity and so on....  If you add up the major sectors and include bonds, gilts, index linked gilts, high yidle bonds, global bonds, property etc then you hit those numbers.   

No doubt you will get someone slagging off IFAs for doing that and tell you that you should use something like HSBC GS, or more likely VLS.  However, they seem to forget that these are fund of funds that also invest in a similar number of funds.  So, they preach that their beloved Vanguard is quite right doing it, whilst criticising IFAs for doing it.

  On the equities looks pretty much the same as I have from my IFA. Also, bonds, gilts and property. Are you my IFA? 😂

If the same investments are being used in various bundles, shouldn’t the overall returns, or losses be quite similar?

dunstonh

On the equities looks pretty much the same as I have from my IFA. Also, bonds, gilts and property. Are you my IFA? 😂

I use one of the larger (although not the largest) providers of data, research and analysis.   So, it would not be a surprise to see the weightings repeated.  Plus, sector allocation models are a popular way to invest.

If the same investments are being used in various bundles, shouldn’t the overall returns, or losses be quite similar?

If everybody used passive only and the only differences were small variations in the weightings, then the returns would be very similar.   However, the fund selections are usually where the differences are made.  For example, for US equity, I use a tracker for the core holding but a managed fund for the satellite (the sat could use a tracker if no viable managed fund existed).   The lowest risk profile has zero weighting to US satellite but increases as you move up the risk scale.