Questions re IFAs

DoublePolaroid

I realise OP that my comment is not what you've asked for, however I will relate my experience as somebody who has only recently clued themselves up on this subject. I am by no means as knowledgeable as most on this board; I also have nothing against IFA's and will probably have the need to pick the brains of one in future re: a DB pension and tax planning. That being said, I have gone from next to no knowledge to being comfortable investing my assets and those of my wife over a period of a few months, despite a job and young kids, by doing a little bit of reading every night and/or watching some Youtube vids. This site and forum are of course excellent resources as is the Monevator blog and there's some decent articles/blogs on the Vanguard website. Pensioncraft and James Shack are good YT channels (the latter especially for beginners, the former also has very good vids but many cater to more experienced investors and his back catalogue goes back a way so the relevant videos require a bit of curating).

Once clued up, even though you may still instruct an IFA, it'll make the conversations less like a chat with somebody speaking Swahili.

Linton

Rollinghome said:

Linton said:

In the old days you as a customer did not suffer financially from the IFA taking a commision.  If you went to the fund provider directly they kept the commision for themselves.

I'm afraid the situation was quite the reverse. 

Investment management ongoing charges were around double what they are today, in order to include the cost of paying  trail commission to intermediaries.  The initial charge of around 5% to pay initial commission has now all but disappeared completely.  Investors were  paying those extra costs which went to advisors without getting the "independent advice" they thought they were getting. 

As you say, Investors were often still charged the full fees by the fund managers even if the investor bought directly and didn't get the  "free advice" because they didn't dare undercut the intermediaries they depended on for business.

The whole system stank, which is why it was rightly banned by the regulators, the FSA. The funds we buy today without the inclusion of commission are appropriately called "clean funds" by the industry.

With the banning of commission has come a complete change in the way advice is given and I notice even your outright opposition to low cost index funds is less vehement now that IFAs are more likely to recommend them. That's good to see.

Yes I agree with you.  My point which was not clearly put was that you did not save anything by not using an intermediary.  

I have no outright opposition to simple global low cost index funds or multi-asset funds based on index trackers as the most suitable option for people in the accumulation phase with an ongoing income who make ongoing pension contributions  and have no wish or need to get involved in the details of investing.   This must surely be the majority of all investors. The simplicity and inherent avoidance of major investment errors outweighs other considerations.

My argument is with those people who claim that they are the optimal answer to all investment problems.

ozzy_man

Thanks all for the very comprehensive and helpful comments so far. Good to understand the background to any negativity towards IFAs, duly noted re potential extra fees and will definitely get a couple of other quotes. And @DoublePolaroid thanks for the tips, if I get some time I will try to clue myself up a bit more!

The amount is just north of £55k so the up front fee is £1600. Not pocket change but I guess the point is over time their expertise could be worth it.

Thrugelmir

ozzy_man said:

The amount is just north of £55k so the up front fee is £1600. Not pocket change but I guess the point is over time their expertise could be worth it.

Not being facetious but that's a relatively small sum to warrant advice at this stage. By overpaying your mortgage, upping your pension contributions and contributing a monthly amount to broad diversified investment within an ISA wrapper you could cover all your major bases. 

Long term gross market returns have been estimated to return around 4% to 5% on average. Once fund fees, your advisor fees (0.75%) and other deductions have been made. The net return could be relative low over any given period of time.

Albermarle

The amount is just north of £55k so the up front fee is £1600. Not pocket change but I guess the point is over time their expertise could be worth it.

Just FYI, this sum is at the lower end of what some IFA's will deal with , especially in the richer parts of the country .

Rollinghome

DoublePolaroid said:

I have gone from next to no knowledge to being comfortable investing my assets and those of my wife over a period of a few months, despite a job and young kids, by doing a little bit of reading every night and/or watching some Youtube vids. This site and forum are of course excellent resources as is the Monevator blog and there's some decent articles/blogs on the Vanguard website. Pensioncraft and James Shack are good YT channels (the latter especially for beginners, the former also has very good vids but many cater to more experienced investors and his back catalogue goes back a way so the relevant videos require a bit of curating).

Once clued up, even though you may still instruct an IFA, it'll make the conversations less like a chat with somebody speaking Swahili.

That's great to read. Not the choice for everyone of course, but when the saving made is calculated, compounded over the years, the difference it can make is astonishing. And you'll have that knowledge for life.

To quote Lao Tzu, the founder of Taoism (sort of appropriate, so why not ) :“Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime”.

Thrugelmir

Rollinghome said:

DoublePolaroid said:

I have gone from next to no knowledge to being comfortable investing my assets and those of my wife over a period of a few months, despite a job and young kids, by doing a little bit of reading every night and/or watching some Youtube vids. This site and forum are of course excellent resources as is the Monevator blog and there's some decent articles/blogs on the Vanguard website. Pensioncraft and James Shack are good YT channels (the latter especially for beginners, the former also has very good vids but many cater to more experienced investors and his back catalogue goes back a way so the relevant videos require a bit of curating).

Once clued up, even though you may still instruct an IFA, it'll make the conversations less like a chat with somebody speaking Swahili.

That's great to read. Not the choice for everyone of course, but when the saving made is calculated, compounded over the years, the difference it can make is astonishing. And you'll have that knowledge for life.

To quote Lao Tzu, the founder of Taoism (sort of appropriate, so why not ) :“Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime”.

Alternatively an old Chinese proverb.

It's better to be without a book than to believe a book entirely

Rollinghome

Thrugelmir said:

Alternatively an old Chinese proverb.

It's better to be without a book than to believe a book entirely

Very Chinese. I'll have to find a tattooist.

eskbanker

Rollinghome said:

Thrugelmir said:

Alternatively an old Chinese proverb.

It's better to be without a book than to believe a book entirely

Very Chinese. I'll have to find a tattooist.

....or two Taoists?   For a deep and meaningful philosophical debate....

Rollinghome

Linton said:

I have no outright opposition to simple global low cost index funds or multi-asset funds based on index trackers as the most suitable option for people in the accumulation phase with an ongoing income who make ongoing pension contributions  and have no wish or need to get involved in the details of investing.   This must surely be the majority of all investors. The simplicity and inherent avoidance of major investment errors outweighs other considerations.

I'm sure you aren't suggesting that index trackers such as ETFs are just for beginners when they are favoured by many professional investors including pension fund managers. Anyone without at least one in their pf is probably missing something.

I invest in individual stocks, ITs, managed funds, and trackers, both as funds and ETFs.  Each tool has a place, and it would be a mistake to dismiss any one of them.