How do you find a trustworthy IFA?

boomboomboom

TLDR; I am in the top 1% of earners but am late to the game when it comes to pensions, so I need to invest in a good pension for my family and I. I have an inherent distrust of IFAs but am also nervous of losing my money if I go it alone and invest in a SIPP. What did you do in the same situation?

The longer version...

• WHICH IFA? I am finding it hard to get help from an IFA that isn't always after making me spend big to help manage my 'wealth'. I realise unbiased and other IFA search services exist, but I just can't seem to find an IFA that is straight forward and honest.
• DIY I have ended up starting to "go it alone", looking for a SIPP for my wife, JISAs and Junior SIPPs to get my kids set up to avoid the situation I am in.
• RISK!! Everything I read pension-related talks about the fact that we could lose our investment - I get this, it's a disclaimer. But does it literally mean I could lose the lot? I realise the answer to that is probably yes, but how do you reconcile that worry of having zero at the end of 20 years of saving?
• MY PENSION I have a work-based pension and selected that I was caustious when I set it up. It's doing pretty well. Is that workplace pension any more/less risky than a SIPP?
• SIPP PROVIDERS: I've been looking at Wealthify, Fidelity, Legal & General and HSBC (via Fidelity again) for SIPPs. But it seems an incredibly small marketplace, and everything seems automated - I just have to select my risk level and boom. Will these companies go bust? I have read plenty of the special protection SIPPs/pensions get, but nothing can protect against a bad trade from what I have read.

I'd like to think I am not stupid, but I am finding it a total nightmare (literally I am dreaming about this stuff!) - it's hard enough to figure out what type of pension and risk is right, let along finding an IFA that isn't going to c^ck things up for me or worst still c^ck things up AND make me pay for the privilege!

The net result of all of this is that I end up doing nothing! I am prepared to pay for an IFA of course, but is it just me that believes they are inherently dishonest? Perhaps I have hangups from growing up in the 80s!

Thank you for any pointers, no matter how small. Have you been in the same situation as me, what did you do? And if anyone has the time to recommend an IFA with some personal experience I'd love to hear from you (assuming that is allowed?).

QrizB

Welcome to the forum.

One thing (OK, one of many things) you haven't said - how old are you and how long until you plan to retire? Suggestions for a 25-year-old are different to a 55-year-old.

lisyloo

I’m happy with my IFA. The deal I have is I pay 0.5% but I get advice whenever I want it.

there are good and bad in every profession so I’d say they are no better or worse than most other professions you care to name.

there is sometimes a difference in expectations.
they aren’t magicians, that can’t make risk dissapear, but they can help
navigate you through the decisions.

how to choose one - recommendation ideally.
diy- personally I think it’s a highly skilled job so to me it’s like going diy on root canal surgery. There’s a risk you could get it wrong by not knowing something. My ifa is unlikely to get it wrong as his advice is checked by a compliance team (that’s not the same as saying I’ll never lose anything).

risk - if your diversified you won’t lose the lot. A good ifa will make sure your investments match your risk profile.

A pension is just a wrapper. Workplace pensions often have benefits e.g. lower costs than personal ones. The risk is determined by the investments you choose so neither are more/less risky.

your investments will be protected from A provider going bust (they are only offering broker services). The risk is in the investment choice and YES you absolutely could get this wrong if you go a DIY route if you don’t understand what your doing, just like trying to fly a plane without any lessons.

I am not interested in DIY and I’m perfectly happy to pay my IFA as I think they will invest better than me. Also they would stop me making a mistake and also advise on tax avoidance, estate planning etc. I.e their advice is “holistic”

the trick is finding a good one and I’d say go for recommendation.

zagfles

One quick check you can do is search for the IFA here to see if any FO judgements against them (apparently most have none) https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions

Or if you're not going to use an IFA you can check here: http://www.comparefundplatforms.com

Or google "snowmans's spreadsheet" for a spreadsheet that compares platforms.

Re investments, if you invest in something mainstream and diverse eg Vanguard LifeStrategy/Target Retirement or other similar investments, the chances of "losing the lot" are virtually zero and if you did the whole world economy would likely be screwed! OTOH if you invest in one of the many dodgy schemes people get cold called about usually things like Cape Verde property, eco forestry, student accomodation or car park spaces etc then yes you could lose the lot.

boomboomboom

Thank you Lisyloo, that is really helpful to hear a firsthand experience.

So is 0.5% a percentage of your invested amount?

One of the IFAs I spoke to suggested a flat fee, but it was several thousand (under £10k) and was very non-specific. I am a facts and figures type of person, I know investing is not guarenteed, but I at least wanted some level of success criteria or measures or expectation. Without those I found it impossible to know what that fee was for or if it was worth it.

When I told friends about the offer and their proposal the immediate reaction was I was being scammed I have friends far more wealthy than me with 'estate' worthy of management and they have quite basic investments - which isn't to say they are right of course.

If my assumptions are correct, me investing in a medium risk SIPP would have the same effect as your IFA spreading investments across high and low risk 'things'.

For example my workplace pension is invested by a well known company and I have no idea what they do with the money. So what is the difference between them and Wealthify, albeit from what I can tell Wealthify is more of an automated 'platform' (more lingo I've picked up along the way).

Literally I just don't know where to turn. Like I said, to the point of apathy!

Do you mind if I ask how you found your IFA, was it recommendation or through searches? And did you speak to more than one? And finally ... sorry ... what did you base your decision on.

I'm a nightmare aren't I lol I just feel so frustrated.

lisyloo said:

I’m happy with my IFA. The deal I have is I pay 0.5% but I get advice whenever I want it.

boomboomboom

Amazing thank you Zagfles, I will have a look at those thank you.

zagfles said:

One quick check you can do is search for the IFA here to see if any FO judgements against them (apparently most have none) 

Albermarle

boomboomboom said:

TLDR; I am in the top 1% of earners but am late to the game when it comes to pensions, so I need to invest in a good pension for my family and I. I have an inherent distrust of IFAs but am also nervous of losing my money if I go it alone and invest in a SIPP. What did you do in the same situation?

The longer version...

• WHICH IFA? I am finding it hard to get help from an IFA that isn't always after making me spend big to help manage my 'wealth'. I realise unbiased and other IFA search services exist, but I just can't seem to find an IFA that is straight forward and honest. An IFA is running a business that charges for professional services , so they are not going to work for nothing . Nor sure how you managed to test the honesty of the IFA's you contacted ? A lie detector test ?
• DIY I have ended up starting to "go it alone", looking for a SIPP for my wife, JISAs and Junior SIPPs to get my kids set up to avoid the situation I am in.
• RISK!! Everything I read pension-related talks about the fact that we could lose our investment - I get this, it's a disclaimer. But does it literally mean I could lose the lot? I realise the answer to that is probably yes, but how do you reconcile that worry of having zero at the end of 20 years of saving? If you  invest in mainstream funds the chances of losing everything is approx zero . Historically the chance of losing any money over a ten year period is about 5% . So the chance of gaining is 95% , although you might be unlucky and the next ten years maybe one of the less good ones 
• MY PENSION I have a work-based pension and selected that I was caustious when I set it up. It's doing pretty well. Is that workplace pension any more/less risky than a SIPP? It is the investments you have in the workplace pension or SIPP that matter . They provider the risk/growth . If you selected cautious some years ago you will have lost out on a LOT of growth.
• SIPP PROVIDERS: I've been looking at Wealthify, Fidelity, Legal & General and HSBC (via Fidelity again) for SIPPs. But it seems an incredibly small marketplace, and everything seems automated - I just have to select my risk level and boom. Will these companies go bust? I have read plenty of the special protection SIPPs/pensions get, but nothing can protect against a bad trade from what I have read.
• If Fidelity , Legal & General or HSBC go bust it probably means a financial armageddon has happened, the likes of which we have never seen before . Fidelity manage around five Trillion Dollars of assets for example.

I'd like to think I am not stupid, but I am finding it a total nightmare (literally I am dreaming about this stuff!) - it's hard enough to figure out what type of pension and risk is right, let along finding an IFA that isn't going to c^ck things up for me or worst still c^ck things up AND make me pay for the privilege!

The net result of all of this is that I end up doing nothing! I am prepared to pay for an IFA of course, but is it just me that believes they are inherently dishonest? Perhaps I have hangups from growing up in the 80s!

Thank you for any pointers, no matter how small. Have you been in the same situation as me, what did you do? And if anyone has the time to recommend an IFA with some personal experience I'd love to hear from you (assuming that is allowed?).

See some comments in bold above .
On this forum there are different opinions on IFA's ( and that's putting it diplomatically ) but I have to say your view is at the more extreme negative end, along with one or two others.  . Normally the main argument is about whether they offer value for money , or not 

Most regular posters on this forum  DIY, including me , but then it is a pensions forum so attracts a certain type of person.

Anyway you have basic choices
1) Take a more positive view on IFA's and employ one . Be prepared to take some investment risk .
2) Spend some time learning more about DIY investments . Be prepared to take some investment risk .
3) Go in another direction and maybe become a BTL landlord or fund a start up company . Be prepared to take some investment risk .
4) Stick it all in safe savings accounts and watch it get eaten by inflation.

Albermarle

So is 0.5% a percentage of your invested amount?One of the IFAs I spoke to suggested a flat fee, but it was several thousand (under £10k) and was very non-specific. I am a facts and figures type of person, I know investing is not guarenteed, but I at least wanted some level of success criteria or measures or expectation. Without those I found it impossible to know what that fee was for or if it was worth it.

Normally there is an initial fee ( that can be a few grand ) and then an ongoing fee such as 0.5% of your total investments . The ongoing fee is not necessary but most people seem happier with this option. 

In all the discussions on this forum about the value of using an IFA , there is always the issue of the difficulty in measuring the value, as it is pretty much impossible due to all the variables involved and the very long time scale for looking at investments .

boomboomboom

Thank you Albermarle, the two/three comments below are extremely helpful.

You are right, it's not honestly, but trust and value I am failing to have/see. It was wrong of me to to use the word "honesty".

Those last four points and to hear about the amount Fidelity manage puts it into perspective.

Funnily, from just those insights I actually feel more comfortable going with a SIPP with Fidelity and selecting medium risk.

But more sobering than that, is if with just a few words you can help, it does make me wonder if I found an IFA then my eyes would be opened still further.

I just find the basis on which to select an IFA totally arbitrary, it's quite frustrating.

I am very grateful for your reply thank you.

Albermarle said:

• Nor sure how you managed to test the honesty of the IFA's you contacted ? A lie detector test ?
• Normally the main argument is about whether they offer value for money , or not 
  

Albermarle said:

Most regular posters on this forum  DIY, including me , but then it is a pensions forum so attracts a certain type of person.

Anyway you have basic choices
1) Take a more positive view on IFA's and employ one . Be prepared to take some investment risk .
2) Spend some time learning more about DIY investments . Be prepared to take some investment risk .
3) Go in another direction and maybe become a BTL landlord or fund a start up company . Be prepared to take some investment risk .
4) Stick it all in safe savings accounts and watch it get eaten by inflation.

boomboomboom

Yes, this pretty much mirrors my frustration - it's like going on a holiday in 25 years time, you don't know where it is or what the weather will be like but you must pay now and have hope, a bit of luck and pray the sun doesn't fal out of the sky at the same time

Albermarle said:

In all the discussions on this forum about the value of using an IFA , there is always the issue of the difficulty in measuring the value, as it is pretty much impossible due to all the variables involved and the very long time scale for looking at investments .

lisyloo

boomboomboom said:

Thank you Lisyloo, that is really helpful to hear a firsthand experience.

So is 0.5% a percentage of your invested amount?

One of the IFAs I spoke to suggested a flat fee, but it was several thousand (under £10k) and was very non-specific. I am a facts and figures type of person, I know investing is not guarenteed, but I at least wanted some level of success criteria or measures or expectation. Without those I found it impossible to know what that fee was for or if it was worth it.

When I told friends about the offer and their proposal the immediate reaction was I was being scammed I have friends far more wealthy than me with 'estate' worthy of management and they have quite basic investments - which isn't to say they are right of course.

If my assumptions are correct, me investing in a medium risk SIPP would have the same effect as your IFA spreading investments across high and low risk 'things'.

For example my workplace pension is invested by a well known company and I have no idea what they do with the money. So what is the difference between them and Wealthify, albeit from what I can tell Wealthify is more of an automated 'platform' (more lingo I've picked up along the way).

Literally I just don't know where to turn. Like I said, to the point of apathy!

Do you mind if I ask how you found your IFA, was it recommendation or through searches? And did you speak to more than one? And finally ... sorry ... what did you base your decision on.

I'm a nightmare aren't I lol I just feel so frustrated.

lisyloo said:

I’m happy with my IFA. The deal I have is I pay 0.5% but I get advice whenever I want it.

Yes 0.5% is on the whole investment so if you had £100k that would be £5k per year, but don’t forget the IFA might do 1% or 2% better than me as well as helping me plan to avoid income tax, inheritance tax, LTA etc. 

the people saying they are crooks don’t really understand the service the Ifa is offering.

no you putting yours in a medium risk account is not the same as my diversified portfolio. 

Have you considered currencies, geographies or asset classes. 

I have some In america for example. That means when the £ is doing badly against the dollar I get more £s for my investments denominated in $s.
mine is probably less volatile than yours which means it goes down less.

that is just one example of an aspect that someone doing diy might overlook.

I also get “institutional rates” on the funds which basically means my IfA gets a bulk discount. 

I’ve generally gotten my IFAs from work schemes and stick with them if they are any good.
its not a guarantee but if your employer is using them then that’s another level of due diligence.