Should I engage a Financial Advisor?

Redlander

I am a complete novice at investing. In 2019 I received a legacy of about £400,000 which I invested on advice from my own bank, Santander. Since the start of this year the value of my investments has been dropping and is now less than I put in. I accept that this is probably happening to most people, but I do wonder whether I might do better with different investments. As I have no idea how to choose investments, I am wondering whether to engage a financial advisor to manage them for me.

I have spoken with an advisor who is a member of my church, whose integrity I trust. He says that my Santander funds are performing worse than average and if he were managing my investments he would charge 0.5% of the value annually and an initial fee of which he says "Our Client Agreement states an initial charge of up to 3% of the portfolio up to a value of £250,000, with a reducing percentage on higher values but this is a maximum figure and we would generally expect to charge less than this and, unless there was a very substantial amount of work involved, I would hope to be able to offer you a further discount."

So what I want to know is whether I would be better off letting an advisor manage my investments, even though he is taking a substantial fee.

Brie

I always wonder about letting a friend or acquaintance get involved in one's personal finance.  It can lead to animosity if things don't do well.  Kinda like the idea of never selling a car to a friend - everything that goes wrong with it will be your fault.  

with £400k I think advice of some sort is essential - especially as you admit you haven't a clue.  I'd be ringing up a local IFA firm and ask for an initial session - these are normally free so you can get to know what's available and what the individual is like.  That at least will give you something to compare your church member with and help you make a more informed decision.

Noneforit999

With that amount of money, I would find a financial advisor. 

You need someone who is going to invest the money in a diverse portfolio to spread the risk.

You have a decent amount of money so you should be able to find someone willing to help.

Albermarle

So what I want to know is whether I would be better off letting an advisor manage my investments, even though he is taking a substantial fee.

You basically have three choices.
1) Do some reading and research to learn the basics of investing ( reading this forum can be useful) and DIY for free #
This is what most of the regular posters on here do. 
2) Leave it as it is
3) Engage an Independent Financial Advisor, not one linked to a bank for example and pay an extra fee.

# In all cases of course there will be fees for the investments themselves

As we can not see into the future, nobody can say what will give the best outcome. It is worth noting that an advisor is not some kind of investment guru, who can 'beat the markets' but they can at least find investments suitable for you and in the most tax efficient way for your circumstances.
0.5% ongoing fee is normal for a fund your size. 3% initial fee is on the high side.

jimjames

Which funds are you invested in at the moment? Did you pay a fee to get them setup? If so then you'll effectively be paying twice if you move them again.

Your friend might have integrity that you trust but even trustworthy advisers can work for companies that charge excessive fees and aren't Independent.

Beddie

Redlander said:

I have spoken with an advisor who is a member of my church, whose integrity I trust. He says that my Santander funds are performing worse than average and if he were managing my investments he would charge 0.5% of the value annually and an initial fee of which he says "Our Client Agreement states an initial charge of up to 3% of the portfolio up to a value of £250,000, with a reducing percentage on higher values but this is a maximum figure and we would generally expect to charge less than this and, unless there was a very substantial amount of work involved, I would hope to be able to offer you a further discount."

So what I want to know is whether I would be better off letting an advisor manage my investments, even though he is taking a substantial fee.

Just so you know, IFAs can set up your investments with the initial charge and you do not have to pay the ongoing 0.5%. You can simply opt out, then ask for a review every few years and pay as needed. But if you want it reviewed annually you will have to pay. I certainly wouldn't pay it, because what's the point of it if your circumstances haven't changed?

dunstonh

Just so you know, IFAs can set up your investments with the initial charge and you do not have to pay the ongoing 0.5%. You can simply opt out, then ask for a review every few years and pay as needed.

That would likely cost more and lead to tax difficulties.

But if you want it reviewed annually you will have to pay. I certainly wouldn't pay it, because what's the point of it if your circumstances haven't changed?

What about the annual allowances?  (CGT use, pension allowance and ISA allowance)

piesagittariusstick

This is a very interesting subject since it's something any of us might walk into thinking is a sure-shot way. Consulting with your bank was good thinking IMO, but I hope you did more thorough back-ground check-ups as well. Luckily, you stayed on top of things in the following months, meaning you probably have the space to weigh in your next move.

In your position, I'd schedule a one-time consultation with an independent team of advisors and look for as many option as they can come up with. Perhaps there's a way to re-invest the funds and secure at least a steady ROI that will even out the costs after a few months?

Albermarle

In your position, I'd schedule a one-time consultation with an independent team of advisors and look for as many option as they can come up with
Often IFA's work in small groups but normally you would only deal with one of them, although you might have contact with other people in the office.
Normally you can have a free one hour meeting to discuss your general financial and personal situation, objectives etc.
No specific personal advice will be given, but you should get some idea of what to expect and how much it will cost if you go ahead.

Perhaps there's a way to re-invest the funds and secure at least a steady ROI that will even out the costs after a few months?
There is no Holy Grail I am afraid either with an advisor, or without one.  You either take a risk to get a decent income/beat inflation in the long run, or you play safe with cash savings and a lower return.

dunstonh

Consulting with your bank was good thinking IMO, but I hope you did more thorough back-ground check-ups as well.

Historically, banks have been amongst the worst place to invest.   Expensive and low quality on their own brand stuff.  If the robo-service was used then the lack of annual allowance use may be an issue and its not advice but self directed.

pecunianonolet

Would try to find at least 2 independent advisers, better 3, and try to get at least an initial for free session to get to know that side of business, fee structure and the approach of those advisors, what sort of questions they ask, are they open, do they take time to explain you products, etc. Even if you have to pay a small initial consultation fee, this could work very well in your favour. Check reviews of those advisors. Always remember, nothing is for free and whoever is managing your pot wants to make money of you, it's their job. 

Ask yourself a couple of questions before (we don't know your age and current circumstances and what you are invested in at the moment so some of the below most likely isn't relevant):

- How risk averse are you?
- What are you trying to achieve short, mid and long term with the funds? E.g. priority on pension and to retire early, property, what proportion could you lock away for longer, do you need an emergency fund accessible daily, family, education cost for children?, inheritance optimisation?, etc.
- Planning to perhaps retire abroad? (Could mean tax implications or optimisations)
- Can you max out on allowances (tax optimisation)
- Do you want to increase the pot or do you want to maintain and use gains for daily living? 
- Are you willing to learn, invest time and want to be managing more yourself or do you prefer to pay happily a fee and let others manage it?
- You mentioned the church, is ethical banking a thing for you or are you happy to potentially use "any" product available on the market as long as the gains are good?

--> You started in 2019 so only 3 years since you started, which is not a long period as some investments only really work with a 10+ year horizon. 

--> Whatever you do, never put all eggs in one basket. Diversify your risk, one product might fail, another might go through the roof and in the end you have hedged yourself with this.