IFA Ad-hoc Consultations

SteveBLFC64

Hello,

I'd like to know from people's experiences re: IFA ad-hoc consultations, especially:-

a) How difficult is it to get one? I know the vast majority want to manage people's finances on an ongoing basis.
b) What fees approx do they charge? I know that could vary, dependent on what they're being asked, and how much work it would require on their behalf.
c) Has it been worthwhile?

Just a little background experience - I'm still a few years off retiring - I manage my SIPP (all previous pension plans consolidated into that), and still have a workplace pension that I'm paying into. I'm reasonably confident of my investment decisions and allocations - understand there are obviously risks, etc. I currently have all the SIPP investments in funds, and have a spread across most markets in what I'd term quite aggressive selections, the majority being in UK, European, NA, Global and Tech. I do have some in other markets, eg. India, China, Latin America and gold. To give you a flavour of their recent performance (fairly dire, given current world economic issues), since their height of 10th Dec, they've dropped approx. 13%. Given that some markets have dropped alot more than that, I'm not particularly concerned - I invest for the long-term, and don't usually sell when investments have made a loss, although did make the decision just recently on a couple - one China fund that had dropped just over 40% since June last year (I have another one I'm holding onto for the moment that has 'only' dropped 20% in the same period), and one European fund that dropped just over 30% (whereas others have only gone down 8%).

That's just to give a flavour of my investments - I compare it with the AFI indices that the Trustnet site shows, eg. against their Aggressive portfolio it has done better (well, perhaps not done as bad as, over the past few months), and actually hasn't actually performed any worse that their Cautious one. I currently don't have any cash/bonds-related investments, but, as I start to near retirement, will start to modify my portfolio to hold less 'risky' investments. Currently the least risky one is a fund in the GBP Allocation 60-80% Equity category (down 3% fron June last year).

The 'advice' I want from an IFA is just perhaps his view on my SIPP management, and warning signs they see, etc, and perhaps other advice on our current financial situation and goals. I guess looking for some assurance, although I'd still say that I'm confident on my approach. I wouldn't want to hand management of this over to one, as I really can't see how they'd do a better job, significant enough to warrant taking a % of the funds. I would like to know how many IFAs would actually be able to demonstrate from real pension funds they administer, how well they have performed or not.

I do unfortunately have a bad experience from contacting one recently - back in January I was recommened one by a friend - I spoke to them on the phone outlining what I wanted and my current situation, and then they agreed to anaylse my pension portfolio and other personal finance. I spent some time consolidating and sending all the information to them to then get no response, even after a couple of follow-up e-mails and a phone call left with their secretary. Very unprofessional, especially given the time I'd spent, and also that the information I provided was very confidential re: my financial cirumstances.

Also, if anyone has any comments on the above - re: IFA consultations, or even views on my investment strategy, they're all welcome.

Kind regards,

Steve

BritishInvestor

SteveBLFC64 said:

Hello,

I'd like to know from people's experiences re: IFA ad-hoc consultations, especially:-

a) How difficult is it to get one? I know the vast majority want to manage people's finances on an ongoing basis.
b) What fees approx do they charge? I know that could vary, dependent on what they're being asked, and how much work it would require on their behalf.
c) Has it been worthwhile?

Just a little background experience - I'm still a few years off retiring - I manage my SIPP (all previous pension plans consolidated into that), and still have a workplace pension that I'm paying into. I'm reasonably confident of my investment decisions and allocations - understand there are obviously risks, etc. I currently have all the SIPP investments in funds, and have a spread across most markets in what I'd term quite aggressive selections, the majority being in UK, European, NA, Global and Tech. I do have some in other markets, eg. India, China, Latin America and gold. To give you a flavour of their recent performance (fairly dire, given current world economic issues), since their height of 10th Dec, they've dropped approx. 13%. Given that some markets have dropped alot more than that, I'm not particularly concerned - I invest for the long-term, and don't usually sell when investments have made a loss, although did make the decision just recently on a couple - one China fund that had dropped just over 40% since June last year (I have another one I'm holding onto for the moment that has 'only' dropped 20% in the same period), and one European fund that dropped just over 30% (whereas others have only gone down 8%).

That's just to give a flavour of my investments - I compare it with the AFI indices that the Trustnet site shows, eg. against their Aggressive portfolio it has done better (well, perhaps not done as bad as, over the past few months), and actually hasn't actually performed any worse that their Cautious one. I currently don't have any cash/bonds-related investments, but, as I start to near retirement, will start to modify my portfolio to hold less 'risky' investments. Currently the least risky one is a fund in the GBP Allocation 60-80% Equity category (down 3% fron June last year).

The 'advice' I want from an IFA is just perhaps his view on my SIPP management, and warning signs they see, etc, and perhaps other advice on our current financial situation and goals. I guess looking for some assurance, although I'd still say that I'm confident on my approach. I wouldn't want to hand management of this over to one, as I really can't see how they'd do a better job, significant enough to warrant taking a % of the funds. I would like to know how many IFAs would actually be able to demonstrate from real pension funds they administer, how well they have performed or not.

I do unfortunately have a bad experience from contacting one recently - back in January I was recommened one by a friend - I spoke to them on the phone outlining what I wanted and my current situation, and then they agreed to anaylse my pension portfolio and other personal finance. I spent some time consolidating and sending all the information to them to then get no response, even after a couple of follow-up e-mails and a phone call left with their secretary. Very unprofessional, especially given the time I'd spent, and also that the information I provided was very confidential re: my financial cirumstances.

Also, if anyone has any comments on the above - re: IFA consultations, or even views on my investment strategy, they're all welcome.

Kind regards,

Steve

The investment portfolio is the final, and least important part of the financial planning process. It's commoditised, and you can read a book that tells you all you need to know - I don't see the value in paying an IFA to "analyse your pension portfolio". I also don't see the value in one-off consultations (unless it's a genuine transactional piece of work - for example, to buy an annuity).


"but, as I start to near retirement, will start to modify my portfolio to hold less 'risky' investments."

I'm not clear on this part.

Malthusian

a) How difficult is it to get one? I know the vast majority want to manage people's finances on an ongoing basis.

That is because the vast majority of clients want ongoing advice. All financial plans need reviewing on a regular basis, and only a small minority of people are confident they can DIY that job from 2023 onwards but are not confident they can DIY it in 2022.

The 'advice' I want from an IFA is just perhaps his view on my SIPP management, and warning signs they see, etc, and perhaps other advice on our current financial situation and goals. I guess looking for some assurance, although I'd still say that I'm confident on my approach.

This may not be a textbook answer but I would not actually expect to pay anything for that. Because the "IFA's views on your SIPP management" are not advice. That is where the IFA "sells themselves" by identifying areas in which they can add value to you and persuading you that they can. You will then be either assured that you would benefit from paying for advice or assured that everything is fine and it would be a waste of money.

An IFA can identify "warning signs", point out tax allowances that you aren't currently using, etc, without crossing the line into a specific recommendation.

It's difficult to see a need for one-off transactional advice in your post. An IFA is unlikely to endorse your current portfolio by formally saying "it all looks good and you should keep it as it is", even for a few hundred quid, as they would then become liable for it. Equally they would not take money off you to say "you should switch to X Y and Z" because you aren't interested in paying for that.

I would like to know how many IFAs would actually be able to demonstrate from real pension funds they administer, how well they have performed or not.

No reputable IFA sells themself based on how well their recommended portfolios have done. There is no evidence that any IFA can consistently beat the market.

The point of paying an IFA is to receive independent financial advice, not to make free money by outperforming the market by more than their fee.

Are you confident that you have enough in the pension fund (after adding the next few years' worth) to meet your needs and goals? Do you have a withdrawal strategy in mind? You say you are a few years off retiring - is that money driven, because you want to work that long, or because your age will be divisible by 5? These are the kinds of things people generally want to talk to an IFA about.

Albermarle

To add to the above, normally an IFA would not just look at your finances in isolation. They would take into account your spouse's situation ( if you have one ) and your plans for inheritance, when you get much older etc. Plus of course making everything as tax efficient as possible.

Another point is what would you do if they said they thought your strategy was no good, and recommended something totally different ? I am guessing you might just ignore them and carry on the same.

Regarding your retirement strategy you say you hold no cash. Does this mean no cash in your pension ( not really an issue whilst you are still accumulating ) or no cash savings at all ? During drawdown it is normally seen as useful to have a decent amount of cash sitting around, either inside or outside the pension, or both . 

coyrls

Malthusian said:

This may not be a textbook answer but I would not actually expect to pay anything for that. Because the "IFA's views on your SIPP management" are not advice. That is where the IFA "sells themselves" by identifying areas in which they can add value to you and persuading you that they can. You will then be either assured that you would benefit from paying for advice or assured that everything is fine and it would be a waste of money.

An IFA can identify "warning signs", point out tax allowances that you aren't currently using, etc, without crossing the line into a specific recommendation.

It’s interesting that you say that, as it matches my experience.  Seven years ago, I had to decide whether to take voluntary redundancy and retire.  As part of that process, I arranged an initial free discussion with an IFA.  I went through my current pension investments and the redundancy payment and my expected outgoings.  I didn’t receive any advice but our discussion increased my confidence that I could afford to take VR and retire and that I was on top of my investments and my future options.  The IFA went through the services he could offer but there were no high-pressure sales techniques.  He subsequently provided me with a proposal that I didn’t take up because I didn’t feel that I needed his services but the discussion we had certainly helped my confidence.

gm0

There isn't a short cut to happiness.  You either iterate on drawdown methods, portfolio and your drawdown plan until you are confident it is a) good enough to be "suitable" in terms of key decisions / risk / life goals / IHT / SORR etc. which is similar to the actual bar of what you are paying for with IFA who doesn't have any skin in the game on portfolio returns b) as good as you will feel later that you reasonably could have made it if conditions do make things difficult later - avoiding your own and spouse regrets.  That's a psychological bar that's about you and less about your plan once you have covered the basics around drawdown, LTA and tax which you can readily do here and a few books and blogs but it's a non trivial amount of effort to do so. 

More if your threshold for b) is higher.  As an engineer my psychology made it take longer to accept that - there is no single optimal or best or perfect solution or portfolio. Demonstrably better ante for all conditions absent hindsight.  Sure with hindsight I can set SORR buffers to exactly the lowest (right) value needed to maximise investments and adjust portfolio back in time to the "perfect picks at the perfect times.  But that's unrealistic for an actual forward looking 40 year plan.  Back in the real world, there are a range of good enough drawdown management options in the literature and retail portfolios which meet the bar for "suitable" and diversified at sensible costs.  Once comfortable that you are on the map of reasonable choices then satisfying point b) becomes iteratively easier.

Whether that DIY outcome is better or worse than the similar risk level cookie cutter portfolio you would have been placed on with the IFA only time and luck will tell.  And whether the IFA one can beat the retail one by 0.5% pa every year cumulatively forever is a higher bar again.  (Assumption mainstream portfolios of similar risk level and drag).  Any wealth manager or FA will of course tell you that this question is settled in their favour.  SPIVA reports and passive enthusiast folk wisdom will tell you the exact opposite.  As will Bogleheads generally.   Our resident forum IFA makes a more nuanced point about "bad DIY" and "competent DIY" vs advised which is a much more defensible position on the matter given what he sells for a living.

Your key lifeplanning decisions about access will look wise and prescient or utterly rubbish based on serious illness, death date, regulatory risk - future changes to the taxation of pensions, ISAs, IHT, Income, Dividends etc. etc.  Neither you nor the IFA can know the form they will take.  Both of you could choose to partially hedge this risk by earlier distribution of assets around family to reduce per person attack surface for the chancellor (via PET) or could decide to optimise around current rules such as IHT protection inside the wrapper because that's all there is.  My experience of IFA advice is that it generally tends towards the 2nd approach at least as a default i.e. an emphasis on current rules optimisation.

BritishInvestor

gm0 said:

There isn't a short cut to happiness.  You either iterate on drawdown methods, portfolio and your drawdown plan until you are confident it is a) good enough to be "suitable" in terms of key decisions / risk / life goals / IHT / SORR etc. which is similar to the actual bar of what you are paying for with IFA who doesn't have any skin in the game on portfolio returns b) as good as you will feel later that you reasonably could have made it if conditions do make things difficult later - avoiding your own and spouse regrets.  That's a psychological bar that's about you and less about your plan once you have covered the basics around drawdown, LTA and tax which you can readily do here and a few books and blogs but it's a non trivial amount of effort to do so. 

More if your threshold for b) is higher.  As an engineer my psychology made it take longer to accept that - there is no single optimal or best or perfect solution or portfolio. Demonstrably better ante for all conditions absent hindsight.  Sure with hindsight I can set SORR buffers to exactly the lowest (right) value needed to maximise investments and adjust portfolio back in time to the "perfect picks at the perfect times.  But that's unrealistic for an actual forward looking 40 year plan.  Back in the real world, there are a range of good enough drawdown management options in the literature and retail portfolios which meet the bar for "suitable" and diversified at sensible costs.  Once comfortable that you are on the map of reasonable choices then satisfying point b) becomes iteratively easier.

Whether that DIY outcome is better or worse than the similar risk level cookie cutter portfolio you would have been placed on with the IFA only time and luck will tell.  And whether the IFA one can beat the retail one by 0.5% pa every year cumulatively forever is a higher bar again.  (Assumption mainstream portfolios of similar risk level and drag).  Any wealth manager or FA will of course tell you that this question is settled in their favour.  SPIVA reports and passive enthusiast folk wisdom will tell you the exact opposite.  As will Bogleheads generally.   Our resident forum IFA makes a more nuanced point about "bad DIY" and "competent DIY" vs advised which is a much more defensible position on the matter given what he sells for a living.

Your key lifeplanning decisions about access will look wise and prescient or utterly rubbish based on serious illness, death date, regulatory risk - future changes to the taxation of pensions, ISAs, IHT, Income, Dividends etc. etc.  Neither you nor the IFA can know the form they will take.  Both of you could choose to partially hedge this risk by earlier distribution of assets around family to reduce per person attack surface for the chancellor (via PET) or could decide to optimise around current rules such as IHT protection inside the wrapper because that's all there is.  My experience of IFA advice is that it generally tends towards the 2nd approach at least as a default i.e. an emphasis on current rules optimisation.

 
~"Any wealth manager or FA will of course tell you that this question is settled in their favour."

Not sure where you got that info from. Someone claiming to beat the market is a big warning flag, IMO.

SPIVA reports and passive enthusiast folk wisdom will tell you the exact opposite."

As will an adviser that uses passive investments (I'd hope)

"Our resident forum IFA makes a more nuanced point about "bad DIY" and "competent DIY" vs advised which is a much more defensible position"

Agreed, you only have to look at the bestselling funds in 2021 to realise this.

SteveBLFC64

BritishInvestor said:

Removed my original e-mail to 'save space'

The investment portfolio is the final, and least important part of the financial planning process. It's commoditised, and you can read a book that tells you all you need to know - I don't see the value in paying an IFA to "analyse your pension portfolio". I also don't see the value in one-off consultations (unless it's a genuine transactional piece of work - for example, to buy an annuity).


"but, as I start to near retirement, will start to modify my portfolio to hold less 'risky' investments."

I'm not clear on this part.

Yes, perhaps I shouldn't have gone into so much depth on my portfolio, and not make that the focus of any IFA consultation, should we opt to take one.

re: investment 'risk', really just referring to relative investment volatility - I usually look at the FE fundinfo Risk Score found on Trustnet, eg. my gold fund is just over 200 (although has the 'best' return since June last year at all of 4.5%!), whereas the lowest I hold is the one I referred to initially, the GBP Allocation 60-80% Equity fund (down 3% fron June last year) whose risk score is 67 - so, as I move towards retirement, I'd start to hold a greater proportion that have a lower risk score.

SteveBLFC64

Malthusian said:

a) How difficult is it to get one? I know the vast majority want to manage people's finances on an ongoing basis.

That is because the vast majority of clients want ongoing advice. All financial plans need reviewing on a regular basis, and only a small minority of people are confident they can DIY that job from 2023 onwards but are not confident they can DIY it in 2022.

The 'advice' I want from an IFA is just perhaps his view on my SIPP management, and warning signs they see, etc, and perhaps other advice on our current financial situation and goals. I guess looking for some assurance, although I'd still say that I'm confident on my approach.

This may not be a textbook answer but I would not actually expect to pay anything for that. Because the "IFA's views on your SIPP management" are not advice. That is where the IFA "sells themselves" by identifying areas in which they can add value to you and persuading you that they can. You will then be either assured that you would benefit from paying for advice or assured that everything is fine and it would be a waste of money.

An IFA can identify "warning signs", point out tax allowances that you aren't currently using, etc, without crossing the line into a specific recommendation.

It's difficult to see a need for one-off transactional advice in your post. An IFA is unlikely to endorse your current portfolio by formally saying "it all looks good and you should keep it as it is", even for a few hundred quid, as they would then become liable for it. Equally they would not take money off you to say "you should switch to X Y and Z" because you aren't interested in paying for that.

I would like to know how many IFAs would actually be able to demonstrate from real pension funds they administer, how well they have performed or not.

No reputable IFA sells themself based on how well their recommended portfolios have done. There is no evidence that any IFA can consistently beat the market.

The point of paying an IFA is to receive independent financial advice, not to make free money by outperforming the market by more than their fee.

Are you confident that you have enough in the pension fund (after adding the next few years' worth) to meet your needs and goals? Do you have a withdrawal strategy in mind? You say you are a few years off retiring - is that money driven, because you want to work that long, or because your age will be divisible by 5? These are the kinds of things people generally want to talk to an IFA about.

Thanks for the feedback! Can anyone be confident of having enough in their pension fund in the current market conditions? I did have a relatively simplistic model just on the expectation that my portfolio would increase by a minimum of 5%/year, however, may need to review that (downwards most probably...) over time. As ever, past performace of investments is no guarantee of the future, and unfortunately no-one has a crystal ball to understand how the current financial market conditions will pan out over the next few years. Currently approx. 7yrs off official retirment age, and haven't yet thought of withdrawal strategy, to be honest. Didn't start saving into my pension properly until later, so can't see myself having accumulated sufficient to allow myself to retire any earlier. Yes, all good questions for an IFA.

dunstonh

That's just to give a flavour of my investments - I compare it with the AFI indices that the Trustnet site shows, eg. against their Aggressive portfolio it has done better (well, perhaps not done as bad as, over the past few months), and actually hasn't actually performed any worse that their Cautious one

The AFI indices are pointless.   I wouldn't use them for benchmarking.

re: investment 'risk', really just referring to relative investment volatility - I usually look at the FE fundinfo Risk Score found on Trustnet, eg. my gold fund is just over 200 (although has the 'best' return since June last year at all of 4.5%!), whereas the lowest I hold is the one I referred to initially, the GBP Allocation 60-80% Equity fund (down 3% fron June last year) whose risk score is 67 - so, as I move towards retirement, I'd start to hold a greater proportion that have a lower risk score.

FE risk score is not a good idea to use unless you have context.  It moves around a lot. FE themselves update how the scores fit into risk scales every quarter.   Without knowing the context of the scale (i.e. where does 67 fit this month relative to say 6 months ago) you can be prone to mistakes.    For example, HSBC GS Balanced had an FE risk score that made it appear cautious for a period towards the end of last year.

Can anyone be confident of having enough in their pension fund in the current market conditions? 

yes they can.  What is special about current market conditions?    what is going on at the moment is normal for investing.  

I did have a relatively simplistic model just on the expectation that my portfolio would increase by a minimum of 5%/year, 

That sort of modelling is decades out of date.   At the end of the day, you don't know what you are going to get in returns.  However, if you use statistical models based on 20th century returns or a monte carlo simulation and look at worse case scenarios or perhaps a pessimistic scenario in the bottom 30%, if you can achieve you goal with those, then you are pretty much covering the majority of periods.