IFA fees

MQA

I was hoping to get my ISA stocks and shares, the proceeds from the sale of my properties reviewed and replan if necessary with the IFA ( financial planning and wealth
management business) I had used. Unfortunately, it had been bought by Company X. 

I would like to know
1. What are the annual returns for low, medium and high risks (as my investment have been on a (net) return of 5% per annum for last 10 years)

2. As I have no word of mouth, how would I know Company X's performance (as I cannot tell from their website or the internet (I washoping by searching their company name would find something relevant) 

My previous adviser (who had dealt with my investmens) will now be my intial contact,  if I want to speak to the adviser the fee  5% + VAT of the total of my valuation per annum, and additional charge for other services.

It will be helpful to know the return vs the fee, so I know what I will be working with. As the more I try to understand from searching the internet, the less clearer it seems. Appreciate your comments

dunstonh

1. What are the annual returns for low, medium and high risks (as my investment have been on a (net) return of 5% per annum for last 10 years)

What is your definition of low medium and high?   Maybe give us the equity content?

2. As I have no word of mouth, how would I know Company X's performance (as I cannot tell from their website or the internet (I washoping by searching their company name would find something relevant) 

If its an IFA, they have over 30,000 different investment options open to them with a near infinite number of combinations.     Advisory portfolios are not published as they are effectively bespoke.    If its a discretionary model portfolio then it will be published.

If its a FA rather than an IFA, then you shouldn't use them.

My previous adviser (who had dealt with my investmens) will now be my intial contact,  if I want to speak to the adviser the fee  5% + VAT of the total of my valuation per annum, and additional charge for other services.

Advice charges are not VATable.   If you are being told there is VAT then it isn't a full advice service.
It wont be 5% pa.. either (more like 0.5% typically but could get up to 1% with small values)

dunstonh

My previous IFA had signed me on the Aegon platform (VAT).  I am being offered to carry on with the Aegon platform (IFA fee plus VAT).

There is something wrong if VAT is being charged.  Aegon do not charge VAT.
Aegon has two platforms.  Both are bloody awful.

or offering me to use their own platform (IFA Fee without VAT), hence, I want to find out their performance.

IFAs don't have their own platform.   IFAs are independent.  That is what the I is for.    If an adviser firm retails its own products then its an FA not an IFA.  Or more frequently known a sales reps.        Some platforms will white label or co-label (i.e. both the adviser firm logo and the platform logo appear).   

We charge the same level of initial fees across all three service levels. Our typical initial fees are as follows:
Investment Amount
£1 to £500,000
intital fee: 2%
Example:
if you invested £500,000 you could pay £10,000
(£500,000 x 1%) = £10,000

2% is not a problem but the fact there is no reference to tiering or a cap is.    i.e. 2% on £100k is fine.    2% on £500k is a disgrace.

=================
ONGOING FEES:
=================
Service  Level 1 :
an ongoing  fee of !% per annum
An example:
If you have £250,000 invested with us, you could expect to pay an ongoing fee of £2,500. (For values in excess of £1,000,000 the charge is 0.75% pa)

Service  Level 2:
an ongoing  fee of !% per annum plus VAT
An example
If you have £500,000 invested with us, you could expect to pay an ongoing fee of £5,000 plus VAT. 0.75% pa on excess of investments over £1 million. If your average value was £3,750,000, you would pay £30,625 plus VAT.

Again, references to VAT are wrong.    So, that really doesn't give much confidence.

1% ongoing adviser fee is typical for smaller values (say under £250k ish) but like the initial fee you would expect to see tiering.    There is some tiering here but it only amounts over £1m.       i.e. the first £1m is 1% then the excess over is 0.75%.    That is greedy again.    You would expect something closer to 0.50% on the whole amount at 1m. 

I see the following issues:
1) Damned expensive.  Not quite St James Place expensive but not far off them.   Indeed, pure greed
2) VAT is not charged on intermediation (which is what advisers fall under).    They are inconsistent in telling you that Aegon charge it (they don't), their own platform doesn't charge it (so are they really IFAs?) but then go on to say their adviser charges are subject to VAT which they shouldn't be unless they are not offering an ongoing advice service but non-personalised guidance or generic services.    Those could  be subject to VAT.      THey are all over the place on VAT.
3) If they have their own platform then are they FAs or sales reps of their own product?

Getting off Aegon, if possible, is not a bad thing.  Both of their platforms are horrible to use.    Although they do have the best CGT calculator of all the platforms on the Aegon Cofunds platform.  But its not enough to rescue it.   Aegon have been throwing around special terms to buy business as they know the reputation of their software and service.   So, if you are cost focused on the advice firm has those special terms and you know the issues, you may accept that.    But that's about it - note personal opinions about platforms may vary.  This is my opinion.

Albermarle

MQA said:

Good to hear your thoughts. I was a bit surprised with their fees.

I am now thinking whether I can DIY? as finding an excellent IFA is not easy.. I need to know where to start), as the funds have  more a less stayed the same (some had been closed so the FM moved them to another). What is the expected return as so far it has been average about 5%?

Aegon is not ideal - also need to learn how to master the systems and about funds

The classic medium risk portfolio fund is 60% equities and 40% bonds .
Had a look at a couple of well known simple funds like this and from Jan1st 2020 ( just pre covid) they have grown about 17 to 20% . So about 5% pa .

ColdIron

Why would you sell and buy new funds? I won't be selling anything until and if my circumstances and needs change

gravel_2

MQA said:

@ dunstonh  I am not sure what 'equity content' means ? All my SS ISA are in fund, do you mean what market or industry?

Which funds? What % of the fund is invested in equities?

eskbanker

MQA said:

My SS ISA returns was around 8% (net) prior to Covid (5%), I am wondering when do people diecide to sell and buy new funds??  as the valuation is over 5% and I am starting to pick funds myself.

People should consider switching funds only if/when doing so aligns their investments more accurately with their objectives, strategy, etc, rather than simply reacting to past performance in isolation.

Albermarle

MQA said:

@ dunstonh  I am not sure what 'equity content' means ? All my SS ISA are in fund, do you mean what market or industry?

Equity in investment terms = shares quoted on the stock market.
Your fund(s) will normally have a certain % of equity in them.
The more equity the more long term growth, but the more volatility ( potential for big drops) 

My SS ISA returns was around 8% (net) prior to Covid (5%),

The previous decade was a boom one for investments. This one is more muted so far for various reasons.
5% on average so far is actually quite a reasonable result.

Linton

MQA said:

@ dunstonh  I am not sure what 'equity content' means ? All my SS ISA are in fund, do you mean what market or industry?

Equity means shares or funds that invest in shares.

GeoffTF

MQA said:

I have read that some people draw their income from the investment gain / profit,  if II have worked out if I make 5% gain a year, I will need to draw out all the gain then there will be no gain left to re-invest - is that the norm? so the investment with stay more or less the same?

Most people will want the amount of money that they withdraw to grow with inflation. If you withdraw all the income and capital gains, that will not be possible for long. Nobody knows what future investment returns will be.

dunstonh

MQA said:

I have read that some people draw their income from the investment gain / profit,  if II have worked out if I make 5% gain a year, I will need to draw out all the gain then there will be no gain left to re-invest - is that the norm? so the investment with stay more or less the same?

If you have a spending need that requires 5% draw then you are possibly better off with an annuity (or a combination).   Anything above 3.5% means you are at risk during bad negative periods of eroding your capital and never recovering.

In most periods you would get away with drawing 5% (I have several clients that started 5% of initial amount draws in the late 90s (prior to dot.com etc) and they still draw the same amount today. Their value is a higher than they started.   However, there isn't much scope for inflation increases.