Does anyone here use an IFA?

Aminatidi

Appreciate this is mostly a forum of DIY investors but as I get older, and whilst I don't think it's necessary right now, I've not ruled out the idea of getting professional advice at some point.

If you live reasonably frugally and have built up a decent pot - and if you have an ongoing relationship with an advisor v one-off planning - how did you or do you reconcile the fact you might be paying an advisor what might be a third to half of what you're spending on yourself?

Seems a simple question but I've not seen too many people ask it and many threads I've read elsewhere where people use an advisor seems to involve "complex" stuff like significant tax planning or IHT and legacies or family trusts and all sorts that's miles away from my situation.

I'd sooner this didn't turn into an "advisors are all rubbish" thread please 👍🏼

elsien

I do I’m paying for more of a service than I  actually need at the moment because there are various levels and I probably only need an annual review so I will be reconsidering that.
Otherwise and quite simply, I don’t have the headspace or the desire to do it myself. 

I have a lot going on in my life at the moment and reading upon investing isn’t going to be happening. I did try one of the books recommended a couple of years ago now before I contacted an advisor, but quite honestly it made my brain hurt. 

I’m not a stupid person, but I have a mental block around this so for me it’s worth having someone else having that oversight.
Yes I’m paying for a service that maybe I don’t need according to other on here because my affairs are not complicated.  But it works for me.

Albermarle

 how did you or do you reconcile the fact you might be paying an advisor what might be a third to half of what you're spending on yourself?

Not sure how you have made this calculation?

Lets say you had £500K, the ongoing fee should be 0.5% = £2,500 pa
If you had say £300K the fee would be more like 0.75% = £2,250 pa

eskbanker

Aminatidi said:

If you live reasonably frugally and have built up a decent pot - and if you have an ongoing relationship with an advisor v one-off planning - how did you or do you reconcile the fact you might be paying an advisor what might be a third to half of what you're spending on yourself?

I think that's an odd comparison to be making - engaging an IFA is just paying for a service, which, if you find it beneficial, should deliver value, but measuring that against an arbitrary benchmark of what you spend on yourself seems strange to me.  Do you compare, say, council tax or energy costs with what you spend on yourself?

zagfles

Albermarle said:

 how did you or do you reconcile the fact you might be paying an advisor what might be a third to half of what you're spending on yourself?

Not sure how you have made this calculation?

Lets say you had £500K, the ongoing fee should be 0.5% = £2,500 pa
If you had say £300K the fee would be more like 0.75% = £2,250 pa

Suspect OP is looking at drawdown eg a 3% withdrawal rate and 1% fees. Over the long term seemingly low % fees can take a large chunk out of any investment, this site has a calculator Impact of Fees Tool - Rebel Donegans

Section62

eskbanker said:

Aminatidi said:

If you live reasonably frugally and have built up a decent pot - and if you have an ongoing relationship with an advisor v one-off planning - how did you or do you reconcile the fact you might be paying an advisor what might be a third to half of what you're spending on yourself?

I think that's an odd comparison to be making - engaging an IFA is just paying for a service, which, if you find it beneficial, should deliver value, but measuring that against an arbitrary benchmark of what you spend on yourself seems strange to me.  Do you compare, say, council tax or energy costs with what you spend on yourself?

I think what the OP might be asking in a roundabout way is if you have decent reserves and don't spend much, then does it make sense to pay a not insignificant amount for ongoing IFA help, vs accepting lower returns from a simpler (perhaps DIYable) arrangement?

It's a more fundamental question which goes deeper than just costs... i.e. is there a point in spending more to get more growth, when the outcome could be largely the same from a different strategy.

Alternatively, I might be projecting my own circumstances onto the OP's question.

eskbanker

Section62 said:

eskbanker said:

Aminatidi said:

If you live reasonably frugally and have built up a decent pot - and if you have an ongoing relationship with an advisor v one-off planning - how did you or do you reconcile the fact you might be paying an advisor what might be a third to half of what you're spending on yourself?

I think that's an odd comparison to be making - engaging an IFA is just paying for a service, which, if you find it beneficial, should deliver value, but measuring that against an arbitrary benchmark of what you spend on yourself seems strange to me.  Do you compare, say, council tax or energy costs with what you spend on yourself?

I think what the OP might be asking in a roundabout way is if you have decent reserves and don't spend much, then does it make sense to pay a not insignificant amount for ongoing IFA help, vs accepting lower returns from a simpler (perhaps DIYable) arrangement?

It's a more fundamental question which goes deeper than just costs... i.e. is there a point in spending more to get more growth, when the outcome could be largely the same from a different strategy.

Alternatively, I might be projecting my own circumstances onto the OP's question.

It's a fairly common misconception that the role of the IFA is to increase returns, so it is important that anyone seeking to engage one is clear about what they're likely to achieve by doing so!

Aminatidi

zagfles said:

Albermarle said:

 how did you or do you reconcile the fact you might be paying an advisor what might be a third to half of what you're spending on yourself?

Not sure how you have made this calculation?

Lets say you had £500K, the ongoing fee should be 0.5% = £2,500 pa
If you had say £300K the fee would be more like 0.75% = £2,250 pa

Suspect OP is looking at drawdown eg a 3% withdrawal rate and 1% fees. Over the long term seemingly low % fees can take a large chunk out of any investment, this site has a calculator Impact of Fees Tool - Rebel Donegans

That sort of thing.

The numbers might change a bit but the basic point stands i.e. low withdrawal rate means even a sensible level of fees would see a decent chunk of what I'd be spending on myself going on advice.

As I said I think I'm a way off yet but I doubt I'm the only one who's found myself in a similar situation.

QrizB

You could just buy an annuity and let the insurance company pay you, month after month, with no intervention needed.

etienneg

eskbanker said:

It's a fairly common misconception that the role of the IFA is to increase returns, so it is important that anyone seeking to engage one is clear about what they're likely to achieve by doing so!

That's a very interesting comment. Perhaps you could expand on it for the sake of those of us who are left wondering just what is the point of an IFA if not to increase returns.

Please understand, I'm not saying you are wrong. However, I'm one of those currently embracing this "common misconception", but open minded enough to want to learn from those who know better.

NoMore

etienneg said:

eskbanker said:

It's a fairly common misconception that the role of the IFA is to increase returns, so it is important that anyone seeking to engage one is clear about what they're likely to achieve by doing so!

That's a very interesting comment. Perhaps you could expand on it for the sake of those of us who are left wondering just what is the point of an IFA if not to increase returns.

Please understand, I'm not saying you are wrong. However, I'm one of those currently embracing this "common misconception", but open minded enough to want to learn from those who know better.

Not an IFA, but most I think would say that to produce a financial plan for you that meets your objectives and timescales within your risk tolerance in the most tax efficient way possible.