IFA/ Wealth management query

Kirkmain

Albermarle said:

Kirkmain said:

dunstonh said:

Kirkmain said:

jimjames said:

Kirkmain said:

eskbanker said:

Kirkmain said:

What size of estate (property, stock, cash, chattel) is considered large, and would be worth engaging with a wealth management advisor?

It may depend on what you're hoping to achieve, e.g. to what end would you wish to include your home and chattels in any assessment?

sorry wasn't clear, properties are BTL investment properties and commercial rents. Not the house I live.

I guess to maximise disposable income in the time I have left, but also to leave as much as possible to my descendents without incurring IHT

IFAs don't generally advise on BTL so unless you're planning on selling them you might not actually get much benefit. Most IFAs will do a free initial conversation so maybe worth speaking to some first

Even if the mortgage is fully paid off and its essentially an asset that brings in passive income? 

So, what would you need an IFA for?

I'm getting a bit old to be stressing about dealing with agents and tenants and property upkeep. I don't know what's round the corner. I wany my descendents to be able to benefit from my wealth

So you are thinking about selling up the BTL's and want advice on how to handle the proceeds along with your other assets?
From your other threads I think you have quite a high wealth value.
Also from other threads a 'normal' IFA should be OK to handle funds up to say £3 Million ?? Above that may need some more specialised knowledge, depending on exact circumstances.

Either sell or most tax efficient way to distribute to family or set up a trust/ limited compnay

Bostonerimus1

I’m not sure the complexity comes from the size of the estate here, more from the nature of the assets. I can imagine having millions invested in SIPPs and ISAs and things being relatively simple, but with BTLs I think you might want to consider a business structure that might be tax efficient and maybe a solicitor and accountant company would be best for that.

Aegis

Kirkmain said:

What size of estate (property, stock, cash, chattel) is considered large, and would be worth engaging with a wealth management advisor?

Also how do they charge. Is it a fixed cost per advised or is it calculated as percentage of the estate value they are being asked to manage?

thank you

To my mind, there's no fixed answer to this, it rather depends on whether you feel that you can get value for money. Some of my clients have no Assets Under Management with the firm, instead they choose to retain their investments themselves and pay me a fixed fee for helping them make their decisions.  Others want me to take full control of all their investments.

In both cases I prefer a fixed fee approach and let people decide whether my ongoing services are worthwhile to them. It's feasible that someone with, say, £10 million of investments would decide that my fees aren't worth paying, while someone else with £100,000 might find them worthwhile for the service provided.

I guess the short answer is that it should be you deciding whether your affairs warrant an IFA, not the IFA.

In terms of specifics, there's still a great deal of percentage-based charging out there, e.g. 3% initial and 0.5% ongoing or 1% initial and 1% ongoing.  This indicates that the adviser has a preference for obtaining assets under management and probably has certain minimum thresholds, as 1% of a £10k ISA would only be £100, which many advisers would likely not be interested in (rightly so given the cost of providing a compliant advice service to a client). The corollary is that the same adviser investing £10 million for a client would be looking at a fee of £100,000 on a 1% basis, and it is very hard to see how anyone could see £100,000 as good value for financial advice.

The alternative is fixed fee service.  With fixed fees, the adviser has taken a step back, looked at the time taken to do certain activities and has set up a cost per item based on time and hourly rate.  In this model, clients do not need to worry about minimum thresholds, instead they need to look at whether the fees are worthwhile to them.

So I would say that the best bet is to ignore your estate value (except for calculating the fee in the first place) and look at whether the fee represents good value to you and helps you to sleep better at night.

dunstonh

In terms of specifics, there's still a great deal of percentage-based charging out there, e.g. 3% initial and 0.5% ongoing or 1% initial and 1% ongoing.  This indicates that the adviser has a preference for obtaining assets under management and probably has certain minimum thresholds, as 1% of a £10k ISA would only be £100, which many advisers would likely not be interested in (rightly so given the cost of providing a compliant advice service to a client). The corollary is that the same adviser investing £10 million for a client would be looking at a fee of £100,000 on a 1% basis, and it is very hard to see how anyone could see £100,000 as good value for financial advice.

The alternative is fixed fee service.  With fixed fees, the adviser has taken a step back, looked at the time taken to do certain activities and has set up a cost per item based on time and hourly rate.  In this model, clients do not need to worry about minimum thresholds, instead they need to look at whether the fees are worthwhile to them.

There are also those that have the percentage model but have tiering or cap and collars to avoid excessive charges.   It allows the firm to still deal with clients with smaller values who could be penalised with a fixed fees model that is priced on the basis of medium or larger value clients as its target base.   

There is extra work as your value goes up but there comes a point when there isn't.  That is where the capped option (or tier that has zero percent as its final tier) or the fixed fee can come into play.

It's important to remember that different firms will have different target markets.  A rural firm will typically have lower-value clients than a city firm (although not all areas of a city are affluent).   However, an affluent rural area will have higher-value clients.     So, their pricing model will be based on their typical clients.   If a low value investor goes to a firm that mostly deals in high value clients then chances are it would be expensive and vice versa.

Any firm that has fixed fees or a cap/collar and/or tiering has thought about fairness.     The open ended percentages are just greedy.    

Traditionally, I have focused on being low cost.   However, of late, I have had several clients wanting more and willing to pay more to have that.  I lost a client recently (which is a rare event) who went to a firm that was charging more than double because they wanted more frequent contact and more information.  What they have gone into will give them a worse outcome financially, but they were putting service ahead of cost (even if I personally think the extra was unnecessary).   It made me think about adding a service tier available to a small number of people in that area.   This site is all about cost but not everyone thinks like that.

Aminatidi

Dunston what sort of "more frequent contact and more information" did they want?

I kind of assumed that if people need the services and IFA offered that whilst there are, of course, sensible limits, they're not likely to call you and be told "sod off you've had your allotted hours this year".

What did they want that they felt you couldn't offer?

dunstonh

Dunston what sort of "more frequent contact and more information" did they want?

Personally, knowing the company they have gone to, I suspect they fell for sales talk that ultimately won't deliver.

What did they want that they felt you couldn't offer?

I don't know.  I wasn't told and never got the chance to counter.

I kind of assumed that if people need the services and IFA offered that whilst there are, of course, sensible limits, they're not likely to call you and be told "sod off you've had your allotted hours this year".

Correct.    You tend to provide a service that aligns with what the client wants.   You get some that phone you every few months or pop into the office for a cuppa regularly, and you get some that you deal with once a year (and only more as and when needed).   

However, I don't wine and dine my clients or take them horse racing or to rugby in a corporate box I have hired, etc., as ultimately, that comes out of the charges the investor pays.     I once had another adviser laugh that he only had to see a fraction of the clients I did to earn the same.  He was taking obscene amounts in charges.  One client took £30k initial charge, whereas mine would have been £2500.     

I have started to realise that some people like a "package" that goes beyond advice.   Although I suspect many of them don't really understand that they are paying for that.   However, some do and its what they want.


  

Aminatidi

Thank you that makes sense.  I've never quite got why people don't realise all that "free" hospitality stuff has to be paid for by someone.

What's what book "Where are all the customers yachts"? 😀