Independent Financial Advisor - worth their fees?

valueman1

With St. James's Place, the advisors all work for St. James's Place. This means they do not have the same 'duty' to search every investment option out there, they are not independent (as they work for an investment firm), and this is called 'restricted' advice.

RolloTomasi68

"Due to an IFA I was able to put kids through college. Unfortunately they were the IFA's kids"
Richard Thaler.

Over 10 years if you have £1M you will pay somewhere between £100-£200k in fees to your IFA.
Just let that sink in.

That is money that is gone. It's never going to compound.

Watch/Read everything you can from Buffett, Munger, Howard Marks, Richard Thaler, Morgan Housel, the late Jack Bogle, and watch Ben Felix's YT videos.

You don't need a IFA, and even more so an active fund manager (take a look at the SPIVA site to see how they do against they benchmarks).

UncleK

Over 10 years if you have £1M you will pay somewhere between £100-£200k in fees to your IFA.

Just let that sink in.

..........and the rest - could easily be £300k with the start up fees, annual fees and cost of the active funds they might talk you into

Albermarle

OP - There are lots of posters on this forum who DIY their investments, pensions etc.
However if you lack knowledge, it is possible to make glaring errors.
On the other hand it is not rocket science and some reading and a basic grasp of numbers, can get you on the right path.
There are also people who do understand investing, but still have an IFA, because they just do not want to be bothered with it all and/or maybe do not trust themselves, especially in turbulent market conditions.

I've had a look at my SIPP, which has performed at 8.51% ave growth per year for the last 5 years. The Vanguard Lifestrategy is 8.64%.

For example his statement would indicate you need get more up to speed.
Firstly a SIPP does not perform, it is the investments you hold in it that perform.
Secondly although the % growth of both is similar over the last 5 years, in a different 5 year period the performance could be markedly different. For example if markets crashed, one may hold up better than the other.
Performance is largely geared around the risk level of the investment ( ignoring very high risk items like bitcoin, or individual shares etc) A higher risk fund should grow more over the long term, but will be volatile at times. Many investors do not have the stomach for the ride, so medium risk funds are more popular, although some growth will probably be sacrificed.

gm0

And SJP do broadly the same heavily FCA regulated pensions advice process to put you into a product for your circumstances and risk tier which does the same thing as a product you can setup for free or with an IFA for less than the tied adviser.  It's still advice and product setup.  And they do the same broader family situation tax stuff.  Many are ex IFAs now working in the tied world.

With all advice FA's and IFAs - most value you obtain is around the product - family plans and tax.  Not "in" the product.    The product may be cheaper or more expensive as part of the total costs of the exercise based on which type and specific adviser you pick.  And the advice may be more or less attentive and focused or generic.

FAs on average overcharge vs independents - bigger branded businesses.  In theory more depth to sustain service if an adviser leaves or is sick - than a small firm.   Many SJP federated agents are in fact small firms of a few partners also.  So real world experience varies.

Their new POLARIS pension product (simpler than what went before which was wildly complex and layered and  obfuscated and churned the better to prevent you tracking performance easily) is about taking cost out for them.
For the "low end" of who SJP find interesting and driving profitability.  Deeply unexciting.  Just another risk tiered set of multi-asset funds with much the same asset class contents - obtainable from anywhere.  A bit expensive for what you get.  It's not BAD as such in terms of the assets in in it.  Nor is it BETTER than alternatives. It's not the assets - it's the drag.

Price inclusive of advice.  The drag of the higher costs will tend to make fund A vs fund B look meh.  The actual investments within - are not really that different.  Nor will the outcomes be that surprising based on what happens in the world.

At the wealth tier that frequents MSE.   SJP are the canonical evil wealth manager FA firm.  Other wealth manager FA's are available some aimed at richer folks.  Some just smaller and jealous of SJP's reach in the market and assets under management.  But not noticeably less evil.  Just less successful.

If you must have advice use a proper IFA is correct advice. 

Not tied to a single firm product with a padded price.  More likely to offer something near market price.  But not always.  Beware - a high price "offer" from an IFA to a marginally wanted customer ALSO happens a lot. 

There are no fixed prices here.  They can offer you zero or sub 1% upfront 0.5% ongoing on a large pot - if they really want you as an ongoing customer and/or are just setting out to build their book.  Towards loss leader on the setup work.  Or they can offer 2% upfront and 1% ongoing deterrent prices - if they don't really care if you take it unless you pay over the odds - small pot.  Profit per customer. Customer effort each per year.  And then you contract or you don't.  Dynamic pricing.  There is no standardised or fair price.  Just an offered price and whether it is near the market average for your wealth level.  Due diligence on whether offers are good or bad is for you to do

In implementation IFAs also match categories of clients to patterns of products - A for this.  B for that.  We are not unique.  And they are not in the business of fully bespoke tailoring each one either.  Though marketing may imply otherwise.  Reviewing things ongoing is easier and cheaper for the IFA (profitable) if they are done in a sensible pattern matched way. So IFA product select is also largely off the peg from a few providers only.  But >1. And they will suggest you change it up eventually if product companies drift in cost/quality of offer.

IFA and FA introduced basic multi-asset portfolios often come in similar risk tiering to their DIY equivalents. And the volatility managed stuff as a variation.  All also available DIY.  It's not the having.  It's the choosing.

For DC pensions and high street IFA (or FA)

- How much it costs

- Do I trust the other family financial planning and tax advice - is it neccessary (to me), useful, timely and adding value and delivered in a way I can use it.  Is the value acceptable.  Am I willing to continue to shop around.

The basic flavours of the DC pension fund product you get put in are largely commoditised. 
You can pay Aldi beans price.  Or Heinz price.  Or Waitrose price.  But it's still basically beans.

Some choose to do their own monitoring of the tax landscape and swerve complex stuff. And just DIY buying beans spending the time needed.  And buy the Aldi beans.  Or Heinz if preferred - paying a bit extra for whatever product or provider (platform) features that appeal. 

They are paying sub 0.3% pa on their assets in drag on returns (and owning the risk of getting it wrong) if passively invested.  More to taste with active.

Others would rather pay the advice fees and not have to think about it much. And they pay from 0.8% pa to whatever SJP et al are doing this week. 

Pay or do not.

Also be aware it is bandit country and that the I(FA) doesn't save you from harm on its own.

wjr4

Are they providing a full holistic financial plan with cash flow models? It sounds very expensive to me for a very basic set up! 

poolboy

You can q easily diy the isa and sipp.  I can't see 10k worth of fee to do it, just do a bit of research and sit down every few months to review it.  I listen to podcasts, meaningful money, investors chronicle for ideas.  Both free.
I self manage isa, sipp and general inv account.  Sadly I can't blame anyone but myself if I make a sub optimal decision.

Bostonerimus1

The IFA has given some straightforward and good advice, but is it worth their fee? For some people who would have made mistakes or through inaction not taken advantage of their financial opportunities the fee is worth it, but for those who can DIY the fee would be exorbitant. The difficulty for IFAs today is that people increasingly see through all the verbiage and confusing financial "information" that's spread to make basic finances seem complicated. The IFA will have a place for complicated situations and for those that need some hand holding, but for anyone with basic maths and a few hours to spend reading they can put in place a good financial plan using index and multi-asset funds. 

I've never paid any type of financial advisor and have successfully managed my own finances, pensions etc for 40 years. But I am thinking of moving from the US to the UK and that will significantly complicate my tax situation and while I think I could probably navigate the IRS and HMRC requirements it would be a lot of worry and take a lot of time. So I will pay for a specialist to file my taxes and to validate my overall tax strategy. So whether or not advice is "worth it" always comes down to individual circumstances.