Should I leave IFA and where to go

Lookingforanswer

I dont know a great deal about investing. My money (mostly pension) has been invested for over five years with an IFA as medium risk in a balanced portfolio. I'm aware that this has been a difficult period for investments but my investments have overall decreased quite considerably and continue to do so.

I paid a percentage up front to invest with this IFA (who has about 25 years experience) as well as an ongoing fee. I retired thinking that I had enough savings but am now very worried about my financial situation. I don't know how to compare this performance to other IFAs over the period, or whether to leave. He is recommending I stick with the investments on the basis that they should pick up, but I've literally waited years for this to happen.

If I leave then I have no idea what better options to consider because all IFAs will charge more fees.

I would really appreciate any advice on how I can compare IFA performance, what the pros and cons are of leaving and what other options I could consider if I leave? Thank you.

Albermarle

You can not compare IFA performance directly. You can however compare investment performance.

Although markets have been a bit up and down, it seems unusual that a medium risk portfolio has gone down over the last 5 years. I would have expected some modest growth . Around 15 to 20% over the last 5 years.

Can you give more detail about what the investments are ? and exactly the time when they were first invested?
Also how much are you withdrawing each year ( as a % of the pot) ?

older_and_no_wiser

It would also be worth knowing what the IFA's ongoing fee is. This will be eating into any fund growth you are receiving. They will be charging a percentage of your total portfolio each year.

dunstonh

 I'm aware that this has been a difficult period for investments but my investments have overall decreased quite considerably and continue to do so.

The "continue to do so" bit is something we have seen a lot on this site recently and I have had several clients say the same.    However, when we look into that comment, it becomes clear that they are not continuing to do so.   

In the majority of cases, people hit their low point point in October 2022 and year to date figures are higher.   2023 has been a bit wavy line from month to month but the majority are up year to date.     So, when your say yours is still going down are you absolutely sure about that?

 I don't know how to compare this performance to other IFAs over the period, or whether to leave.

IFAs are not investment managers.    IFAs select the investments that they believe are suitable for your needs.  The markets and the fund house/fund manager are responsible for the returns.     The last 5 years have been some of the worst in the last 20 years.  For gilts - which is where most of the losses over 2022 are, they suffered their worst loss in over 100 years.    Your IFA is not responsible for the gains or the losses.   Events are.    2018 was a negative year.  2020 suffered the third biggest drop in the last 25 years due to coronavirus.    Tech stocks boomed in 2020 but unwound in 2021/22 by the amount they boomed and gilts suffered an unwinding of quantitate easing that was expected to take a decade or so but happened in 18 months.     

In this figure year period, you have had the UK leaving the EU, A global pandemic, a war in Europe, an energy crisis and significant inflation.     To get one of those in a cycle would be normal.  to get all of them in 5 years is highly unusual and that is the reason for the returns being poor.

He is recommending I stick with the investments on the basis that they should pick up, but I've literally waited years for this to happen.

No you haven't.   Nov 2021 was the peak. That was 19 months.   Consecutive negative years are not common.  They happen but 2023 is not currently on track to be negative.      The last time was 2000.2001 and 2002 which was three negative years in a row  (depending on your asset mix, it may have just been two).   The five years that followed had significant gains.

If I leave then I have no idea what better options to consider because all IFAs will charge more fees.

I doubt that is the case unless your IFA is already at the low cost range of the scale.     IFAs charge different amounts and you cannot assume that all the other IFAs will charge more than your current one.

JohnWinder

 what other options I could consider if I leave?

Leaving or not, consider going to your local library and borrow Tim Hale’s book Smarter Investing if you haven’t read it already. It’ll help you decide whether your advisor’s performance has been up to scratch, and how to proceed if you do leave. Don’t hesitate to let us know if that option is ruled out for you, as there may be other help.

Lookingforanswer

Thank you for all the replies. @Albermarle The investments are a variety of funds, is that what you meant? The main investments were made in May 2018. I withdrew for the first time last year about £16k but didn't take that into account in my comments about the value reducing.

Lookingforanswer

@older_and_no_wiser. Feeling like that tag right now! The ongoing fee is 1% which I believe is not unusual.

MallyGirl

Lookingforanswer said:

Thank you for all the replies. @Albermarle The investments are a variety of funds, is that what you meant? The main investments were made in May 2018. I withdrew for the first time last year about £16k but didn't take that into account in my comments about the value reducing.

It would help if you could give more detail on what funds / the split between them and an approx value overall. Then you might get some more specific comments

Lookingforanswer

@dunstonh Yes I'm looking at a graph over the last three months and the investment values have gone down.

I understand it's been a difficult five years for investment. I guess I appointed an IFA because I know very little about investments so hoped he would invest better than I would.  I'm trying to find out if this is still the right approach or not. There doesn't appear to be much in the public domain about how well other people are getting on with investments so the main question here is whether I would probably have fared better elsewhere and where that might be.

The fees point is ambiguous. My IFA is not at the lower end of the fees scale. To appoint another means spending more money without knowing whether it would lead to better outcomes. That is what it is supposed to convey.

Marcon

Lookingforanswer said:

I paid a percentage up front to invest with this IFA (who has about 25 years experience) as well as an ongoing fee. I retired thinking that I had enough savings but am now very worried about my financial situation. I don't know how to compare this performance to other IFAs over the period, or whether to leave. He is recommending I stick with the investments on the basis that they should pick up, but I've literally waited years for this to happen.

If I leave then I have no idea what better options to consider because all IFAs will charge more fees.

I would really appreciate any advice on how I can compare IFA performance, what the pros and cons are of leaving and what other options I could consider if I leave? Thank you.

You don't normally pay for the privilege of investing 'with an IFA', nor is the IFA a fund manager, so I wonder exactly what you paid - a %age of funds transferred to fund(s) recommended by the IFA? - and why?

Lookingforanswer

@JohnWinder Thanks, I'll definitely have a look at that book.