IFA fees

cloud_dog

RogerPensionGuy said:

What I was showing in my last post is there's lots of press just highlighting that IFAs can be poor value for people. 

But isn't that just 'bleeding obvious'?

If you have Person 1 (DIY) with cost X, and then you have Person 2 (IFA) with cost X + Y, doesn't it stand to reason that the IFA option will cost you more money than DIY (from an ongoing cost perspective)? 

Your previous comment, where you added in the throwaway...
"I get that IFAs can make you feel warm and secure and help planning if a person needs it..."

...isn't this really the crux of the matter, and in fact the most important reason why people who need IFAs use IFAs, and if they have come to the conclusion that they need an IFA, then logically the cost of using a IFA is likely worth it.

I do not have a dog in this fight, and am able to see both sides of the fence, simply because I live with someone who has zero interest and therefore zero knowledge of financial matters.

dunstonh

But isn't that just 'bleeding obvious'?
If you have Person 1 (DIY) with cost X, and then you have Person 2 (IFA) with cost X + Y, doesn't it stand to reason that the IFA option will cost you more money than DIY (from an ongoing cost perspective)? 

You are correct.  On a like for like basis (same investments/platform) the addition of an adviser charge will be more expensive than without an adviser charge.

However, just look at the number of DIY investors who go into expensive own-brand platform funds and end up paying more for going DIY than using an adviser.

Your previous comment, where you added in the throwaway...
"I get that IFAs can make you feel warm and secure and help planning if a person needs it..."


...isn't this really the crux of the matter, and in fact the most important reason why people who need IFAs use IFAs, and if they have come to the conclusion that they need an IFA, then logically the cost of using a IFA is likely worth it.

Again correct.   The comfort side is very important to a lot of people. 

Linton

boingy said:

Albermarle said:

 it looks to me like DIY will just keep growing and growing, the IFA has had a good long run in the old days, but its all different now.

Yes it is much easier DIY investing at low cost nowadays.

However away from the bubble of these forums and other investing websites, publications etc , the public remains woefully ignorant of personal finance issues, and would no more know how to DIY invest, than they would to DIY a nuclear reactor.

If you asked 100 people what a global equity index fund was, how many do you think would know? Five ? and maybe another five with a close guess. 

Or out of a 100 working adults, how many could explain how pension tax relief actually works? I would guess less than 10%.

What percentage of those 100 people have any significant money to invest?

A very large number of people will have >> £100K coming up to retirment from pensions, life savings or possibly earlier from inheritances.  Bearing in mind that the money may well be essential for maintaining their ongoing standard of living for the rest of their lives maximum long term return would be a foolish objective.  The higher the return the higher the risk that you wont meet the objectives.

The focus should be on defining realistic objectives and choosing appropriate strategies to meet them.  Controling risk becomes more important than returns.   This is complex, especially if people have multiple and possibly conflicting requirements.  Then of course you get onto issues of tax, inheritance, plannig for ongoing care or the death of a spouse. Simply putting all your money in a global tracker or even VLS60 could be woefully inadequate.

These are the sort of reasons why an IFA could be essential.

RogerPensionGuy

My personal experience with IFAs and FAs is they want me to jump on their boat and generally tell me they can bring me great rewards and they can pick various vehicles that will out perform anything I could do alone and after all charges I'll be better off. 

I have asked them typical questions like will they guarantee they will out perform pretty standard index investing on low cost platforms? None of them have agreed to this. 

The cost of going with, joining or leaving some organisations can be pretty expensive. 

I agree that plenty % of the population will indeed do much better with a good IFA or FA or any such outfit to view, understand, plan and organise money matters. 

I also feel as time goes by, less DB and more DC SIPP schemes in the mix, it will be a good time for the finicial industry, but as low cost easy platforms keep getting better, we will see how it pans out. 

Below is a link a friend sent me today, much spoken about in the video is pretty similar to my views, a nice video with a polite rounded general view in my opinion. 

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https://youtu.be/g7fEEXIPwso?si=vNm6DT0RkgrU-SOB

cloud_dog

I know this digresses from the the OPs post, but this is an area where AI could replace a lot of the activity of IFAs, or at least helping people without the ability, knowledge, etc.

I appreciate there are RoBo investors already, but I see this progressing much more on a more individual basis over the coming decade.

GeoffTF

RogerPensionGuy said:

My personal experience with IFAs and FAs is they want me to jump on their boat and generally tell me they can bring me great rewards and they can pick various vehicles that will out perform anything I could do alone and after all charges I'll be better off.

My understanding is that the FCA would take a dim view of any FA saying that they can beat the market. I do not expect that they would be foolish enough to put it in writing. It is empty talk, and I have been told that it is a breach of the rules.

Beddie

IFAs are there for advice, not to beat the market. They will assess often complex needs, look holistically at the overall financial position and come up with a plan based on your attitude to risk. That's what you pay for.

If you know what you need and how to achieve it, you don't need an IFA.

dunstonh

My personal experience with IFAs and FAs is they want me to jump on their boat and generally tell me they can bring me great rewards and they can pick various vehicles that will out perform anything I could do alone and after all charges I'll be better off. 

a) you don't know the difference between an IFA and FA
b) you haven't the experience of seeing different IFAs or FAs.
c) sales reps of years ago, quite possibly those types existed.  Back in the day when there were 200,000 reps, all sorts of silliness went on.    Now its 20,000 under much tighter regulation.
d) my opinion is that you have only been seeing wealth management companies whose aim is to sell you their product or your experiences date back to the days of large salesforces.

I have asked them typical questions like will they guarantee they will out perform pretty standard index investing on low cost platforms? None of them have agreed to this. 

a) it's a daft question
b) any adviser would be even dafter to agree it.

The cost of going with, joining or leaving some organisations can be pretty expensive. 

IFAs do not have any costs for leaving them.   Same with providers that IFAs use.   Again, this harks back to the old days or SJP.   

MQA

ColdIron said:

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

I was thinking of selling and buying, as I thought the return can be better than 5%, and then from the replies, I realised may be better if I reduce the number of funds I hold.

RogerPensionGuy

The link below mentions fees etc, it quotes a figure mention in a video I posted on this thread, this 1.9% is certainly sticking in my mind. 

I feel in a long stream of bumper years of markets going up generally, costs like 1.9% can be easily absorbed from all points of view, however in a longish period of depressed, low or dropping markets these costs may be won't look so reasonable. 

I'm aware IFAs, FAs & FPs do lots more that just cause a drag on performance, in fact overall stratagy and eeking out best net value for clients can be overlooked by some. 

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https://www.which.co.uk/money/investing/financial-advice/how-much-financial-advice-costs-aODa70J6nYs7