Understanding Investment Fees

Alexland

longman27 said:

Thanks Alexland you are correct its 1.86%

I wasn't expecting it to be a crude 50/50 allocation so created a quick excel spreadsheet to calculate the ratio for you. There's obviously some sophisticated portfolio construction going on with your advisor...

bostonerimus

longman27 said:

So here is a breakdown of fees quoted-

Initial charge 2.17%

On going charges-

Advisor Planning advice charge 0.75%

Standard Life WRAP 0.29%

SEI Growth Sterling Wealth Acc 1.38%

Vanguard Life Strategy 80% Equity A 0.26%

My CSE grade 1 Maths tells me that that is more than 1.86%. I'll check that with the advisor.

The term "money for old rope" comes to mind here.
IFA's have a place to give advice and deal with complicated situations, but I just don't see any value they are providing here. The ongoing charges will be a serious drag on you portfolio...well if you can call 2 funds a portfolio...Seriously look into DIY. Pay off debt, put some in a saving account an then use the rest to fund ISAs and maybe up your workplace pension contributions.

cloud_dog

bostonerimus said:

The term "money for old rope" comes to mind here.
IFA's have a place to give advice and deal with complicated situations, but I just don't see any value they are providing here. The ongoing charges will be a serious drag on you portfolio...well if you can call 2 funds a portfolio...Seriously look into DIY. Pay off debt, put some in a saving account an then use the rest to fund ISAs and maybe up your workplace pension contributions.

Yes, but importantly we are not talking about you, but trying to view it from the OP's perspective.  DIYers are likely be more than comfortable in this situation (you for example).

The key question is why did they approach a IFA, and are those considerations still valid? 

longman27

The IFA had always worked for my late mother in law and we have seen that her investments always seemed to be well looked after with regular communication and updates. My original question was as to whether the fees seemed excessive and that it looked like the fund would have to make a lot to cover them adding into the mix inflation.

Thanks for all your feedback.

JohnWinder

longman27 said:

From the figures quoted here we could save £5000 a year in fees but would have to take responsibility for watching the investment. .. if we take our eye off the ball we could lose more ...

Something to think about.

Here's one thing to think: choosing something sensible like VLSxy gets you some funds which closely track several different securities' markets globally (read: well diversified, thus offering some safety against a narrower choice going bad on you). Whether you are 'watching the investments' or not, global markets will gyrate around completely out of your control, so it's a waste of time watching them unless one thinks you can anticipate a movement and adjust your investments accordingly. Plenty of research indicates this is extremely difficult for even the experts to do, and they charge high fees, often, to not do it.

If you choose some sensible investments for your circumstances, you don't have to watch them, in fact it's probably better for most people not to as it increases the chance of messing up a good plan. Investing is simple, it just isn't easy, someone said; or maybe 'easy, but not simple'. Whatever.