Financial Advisor advice

gm0

Yes.  The choice is yours.  Always.  As well to remember that.  The adviser recommends (within FCA rules as to process and audit trail). And the client decides to accept and adopt that recommendation, or to leave the relationship, or to trigger a further discussion/recommendation loop to reach a more acceptable recommendation.  

Many people rock up here saying woe is me (based on unlucky cohort timing and markets) e.g. people who were entering retirement and de-risked allocation upwards into more bond funds into the "once in a hundred year" reset.  Or waking up 5 years into a wealth management relationship and no longer feeling the value added

The unhappy story can be my adviser put me in X - yet often this misunderstands - legally - what actually happened - and who was bearing which risks.  Not knowing after it has gone wrong somewhat implies not understanding it at the time.  Adviser recommends a suitable thing. Client decides they like the idea and assumes risk of the suggested thing. Approves action.  Adviser implements thing per client instructions.  Risk of thing is entirely borne by the client.  Fees are not at risk or linked to performance outcomes.  Audit trail of client decision and contracted fee exists.  Factfind, FCA deliverables etc. etc.

FCA regulation only covers against the adviser recommending something manifestly unsuitable for the client situation and failing to capture the regulated deliverables (process failures) - fact find, cash flow, critical yield blah blah blah.  A foolish thing which bar technical violations of paperwork - is unlikely and the PI insurers are not keen on letting people operate in this space and be slack about it.

It is not good salesmanship to overemphasise these points.  So while there are a lot of regulated disclosure and risk of investments going down as well as up boilerplate to wade through.  The incentive misalignment issue between principal and agent does not receive much attention.   

Trust once lost - is lost.  And this can be a matter of ill luck (for the client) and their timing not the adviser doing anything particularly unusual or indeed "wrong" as such.  As with the bonds examples from a few years ago.  Particularl cohorts.  Yet at other times people in the "rogue" end of the business have done truly terrible things (c.f DB transfer scandals on a spectrum from "poor yet very self serving advice sold to the naive" to active offshore investment frauds attached to pension transfer with kickbacks layered all the way down). And then folded their small ltds to shed downstream risk of blowback. It's how we ended up with lifetime liability for suitable advice and compulsory insurance for it.  The sound of an empty stable door slamming in the wind.  Reduced opportunity for rogues becomes a burden to all and a loss of flexibilty for some

Choice is influenced.   The adviser (who does hundreds of cases) can easily lead the witness in revealing their preferences - indeed that is a key part of the job - both from a regulated viewpoint and practically.  They know what structured questions to ask to fit you into a suitable category.  To translate need and want - into an approach. 

And if this exploration leads to discussions about desiring "flexibility" of income.  Or it reveals an "inheritance" objective weak or strong - then it can lead quickly to an FCA compliant discussion of using pension freedoms and drawdown.  It need not be overt manipulation. Nor explicit.  Nor are motivations often wholly impure, nor wholly pure.

My take is that it would be easier if advice was sold for what it is - and less on what it is not.  Investment outcomes.  Superior returns.  *"Magic beans" wealth management products.

*which turn out not to be as magic as all that. Your mileage may vary.  Terms and conditions apply.  
High fees. Client paid last.

Value is in the help from someone who does hundreds not one - and in general tax advice appropriate to family situation.  And tracking thereof over time as it changes.

Product recommendation value.  Close to nugatory.

The only product thing which is difficult to DIY.  Is monitoring of fund managers and selected funds.  Consumer data sources, especially free ones, are lacking vs what advisers can and do subscribe to.    DIY investors have to mitigate that risk another way - via mainstream shopping (being wrong in lots of company - sticking to big long term offerings from the main providers), hedging impact - using more than one of those.  Avoiding multi-asset bundles which combine the illiquid with the liquid - so fund suspendable - PE and Property with other things.  

That sort of risk management.  DIY monitoring from media is unlikely to be effective by the time it reaches the financial press.  Adviser monitoring has not always proved effective either.  Some advisers saved clients from Woodford and pushed them to exit well ahead. And some did not.  

artyboy

logies said:

Yes, this is how I feel artyboy. I have a basic knowledge of pensions but I would benefit from some precise and targeted advice regarding IHT planning. There are so many “experts”’out there, it’s difficult to know who ti trust.

I suppose the exam question out of all this, is whether there is a viable business model for IFAs in providing this sort of targeted estate planning service, without the expectation that they will take a broader investment advisory/management service.

If there wasn't before, the IHT changes to pensions might mean there is in future...

dunstonh

It maybe possible my IFA would rather I don't buy them annuities from a business point of view, I understand an IFA must act in accordance with all the rules, but it could be tuff to switch off a nice income stream. 

It doesn't work that way.   I have done over £3m in annuities this year.  However, ongoing AUM is up over £7m.   A group of owner small IFAs in our area meets about once a month for an early breakfast.  It frequently turns into a collective moan about something, and most of the moaning in recent times is that there is not enough time in the day for the work required.   One recently said that the improved annuity rate is a godsend, as it allowed her to reduce her ongoing servicing workload.   And pretty much all the rest of us agreed.

AUM increases naturally.   Clients die or their needs come to an end as objectives are met, and they naturally drop off (one way or the other!).   It's just part of the normal cycle.      

Now, if you were referring to FAs being targeted to grow net AUM, then that is a different matter; however, GP IFAs operate under a different business model.  

DT2001

Marlax said:

Hi all

I'm 55 and other half is 53 and I feel like I should get my finances in order and start planning when I want to/am able to retire? I get so many adverts on my social media feeds saying "Do you have a 250k pension - download our 9 must do things' or "Do you have a £750k pension - don't fall for these 5 mistakes, download our free guide", etc. etc. I'm very cynical about these kind of things, but I also don't think I'm managing my money as optimally as I should? (Has anyone ever got decent advice from any of the companies who advertise like this?)

What's the best option for finding a trustworthy excellent financial advisor in North London? Have you guys tried vouchedfor.co.uk and unbiased.co.uk - were they good/worth it/helpful?

Thanks

10 years ago at 55 I did an internet search for local IFAs and identified 3/4 that looked suitable. I then spoke to each of those and chose on the basis of how we connected. I had some experience of investing through the 80’s, 90’s and 00’s suffering some losses in the dot com bubble. I was looking to invest a lump sum into a pension and wasn’t confident enough to do that myself. 10 years on and I was moved from one IFA to another within the same firm at the same time as they reviewed their business and looked to double their ongoing fees to 1% maximum £10k. I had started researching DIY by reading threads on here, reading about Lars Kroijer, listening to James Shack etc. some months before the changes as service levels appeared to drop. My new advisor, as part of their company’s review, suggested a move to a different platform and using a global fund which my research had concluded was the way to go. 

I have parted company with the IFA and am utilising HL and Fidelity platforms with ETFs mirroring the approach suggested by the IFA and my own research. The savings of £1k p.m. are being put aside to pay for one off advice re IHT when a number of projects have been completed. We have/are in the midst of gifting excess assets on the basis that we can then deplete our estate/use our money for us. 

The key in my opinion is not losing sight of your goals. Decide what you want/need in retirement and have the ability/willingness to adapt to whatever circumstances arise. You can give away capital or excess income so nothing is set in stone, adapt it to your own requirements.

Bostonerimus1

artyboy said:

logies said:

Yes, this is how I feel artyboy. I have a basic knowledge of pensions but I would benefit from some precise and targeted advice regarding IHT planning. There are so many “experts”’out there, it’s difficult to know who ti trust.

I suppose the exam question out of all this, is whether there is a viable business model for IFAs in providing this sort of targeted estate planning service, without the expectation that they will take a broader investment advisory/management service.

If there wasn't before, the IHT changes to pensions might mean there is in future...

With the inclusion of DC pension balances in the estate for IHT there will be many more people thinking about taxes as they begin to hear the "choir invisible". So there is probably a pretty lucrative business in estate planning and selling annuities, trusts insurance wrappers. The thing to remember is that such advice usually comes with hefty fees and the strategies often just defer the tax to the next generation. Simple strategies of spending, giving and buying annuities are probably the first ones to consider.

If (and increasingly when) I return to the UK from the USA I will use one of a few US/UK tax specialists I know to file my taxes because the interaction of the two tax systems has become so complicated. They will provide some tax strategy advice and probably advise me against the usual investing pitfalls, but if I stay longer than 10 years under the new FIG regime I expect to pay a big IHT bill...or at least my estate will.

Cobbler_tone

Bostonerimus1 said:

artyboy said:

logies said:

Yes, this is how I feel artyboy. I have a basic knowledge of pensions but I would benefit from some precise and targeted advice regarding IHT planning. There are so many “experts”’out there, it’s difficult to know who ti trust.

I suppose the exam question out of all this, is whether there is a viable business model for IFAs in providing this sort of targeted estate planning service, without the expectation that they will take a broader investment advisory/management service.

If there wasn't before, the IHT changes to pensions might mean there is in future...

 Simple strategies of spending, giving 

Definitely the best option and takes the worry out of it...not that you'll be worrying at the time. Those I care about will benefit when I am here to see it and anything left will be a bonus that won't trouble IHT, unless there is a really significant change in the future. It won't be an issue if I get hit by a bus tomorrow.
I can see how some people are going to be struggling though, although again, you won't be worrying at the time.

artyboy

Bostonerimus1 said:

artyboy said:

logies said:

Yes, this is how I feel artyboy. I have a basic knowledge of pensions but I would benefit from some precise and targeted advice regarding IHT planning. There are so many “experts”’out there, it’s difficult to know who ti trust.

I suppose the exam question out of all this, is whether there is a viable business model for IFAs in providing this sort of targeted estate planning service, without the expectation that they will take a broader investment advisory/management service.

If there wasn't before, the IHT changes to pensions might mean there is in future...

With the inclusion of DC pension balances in the estate for IHT there will be many more people thinking about taxes as they begin to hear the "choir invisible". So there is probably a pretty lucrative business in estate planning and selling annuities, trusts insurance wrappers. The thing to remember is that such advice usually comes with hefty fees and the strategies often just defer the tax to the next generation. Simple strategies of spending, giving and buying annuities are probably the first ones to consider.

If (and increasingly when) I return to the UK from the USA I will use one of a few US/UK tax specialists I know to file my taxes because the interaction of the two tax systems has become so complicated. They will provide some tax strategy advice and probably advise me against the usual investing pitfalls, but if I stay longer than 10 years under the new FIG regime I expect to pay a big IHT bill...or at least my estate will.

As things stand, both Mrs Arty and I are probably going to take out £100k/year from our pensions and spend/give from that. Yes there's 40% tax on half of that, but there was 47% relief on a lot of it going in plus tax free growth for decades. So glass half full eh...

But I do recognise the limitations of my financial planning expertise so it would be good to have a professional tell me if I'm missing a trick anywhere, and quell that nagging sound at the back of my head!

Cobbler_tone

There is an obsession of avoiding 40%+ tax. If certain people have that much money and not taking it from ISA’s, savings, premium bonds or under the bed it’s unavoidable in certain circumstances. Especially if you want/need big money year on year. The state pension adds another layer to that.
I’m sure you’re switched on Arty.

artyboy

Cobbler_tone said:

There is an obsession of avoiding 40%+ tax. If certain people have that much money and not taking it from ISA’s, savings, premium bonds or under the bed it’s unavoidable in certain circumstances. Especially if you want/need big money year on year. The state pension adds another layer to that.
I’m sure you’re switched on Arty.

I think it's an understandable obsession in the current climate... where people may well ask what on earth that 40% is paying for. But then maybe 'twas ever thus. 

I just about remember the days of the 60/80% bands, although I wasn't of working age then. But on the flip side, other 'ancillary' taxes were lower so potato/potaato. 

These days I'm a bit more sanguine, but given the numbers we are talking about, I feel that at least a sanity check is in order...

cfw1994

artyboy said:

Marlax said:

I think I'm looking for advice/opinion on how to structure my retirement plan, given what I have, to make sure I'm not unnecessarily paying more tax than I should or to optimise how I use it. All the things they keep saying in the clickbait social media ads about 'dont make these 5 mistakes' or 'you could retire 5 years earlier if you structure your finances like this'. I keep getting emails from MoneyCoachJoe who says he's helped 100s of people 'just like me' to 'cut 10-20 years off their retirement age' and he doesn't want me to miss out (such a caring guy! 😄). Like you I'm cynical about these things especially when they do such obvious hard sell (50% off but only for the next 4hrs!) - but then again, am I missing something optimisation areas?

This is me 100%

Both Mrs Arty and I are perfectly happy with DIY for ongoing investments - we have a reasonable understanding of our risk appetite, and no concerns with DIYing our investments in terms of fund and platform choices.

However as we are approaching retirement, and with a recognition that as things stand, we have a sizeable estate (that has in fact doubled as a result of the pensions IHT changes), what we are looking for is targeted advice on best drawdown, usage, and pass-on strategy.

Everyone is entitled to their own views on the fairness of IHT, but when our own estate's bill has notionally gone up by 7 figures at a stroke, I have no moral qualms about exploring all legal options to optimise our position and that of our children/future grandchildren.

So what we need is an IFA that is able to take a holistic view of our position, and what we are currently planning, and either validate our approach, or give us some expert advice on alternative strategies, e.g.

- use of annuities with long guarantees
- trusts (*shudder* yes, I know, but they can have a use...)
- alternative tax efficient investments within risk tolerance (not sure how diversified you can get with VCTs, as an example)
- investment bonds
- anything else we've not considered.

What we DON'T want is someone that will just manage everything for us for both an upfront and ongoing fee... 

So, got an intro call with a Costco promoted Wealth Management firm - yes I know, I know... but they are - apparently - IFAs, and I feel I need to start somewhere. I'll get a feel pretty quickly if they have anything to offer...

Costco is an interesting choice - often value for money, I would imagine.
Is it https://www.apw-ifa.co.uk/costco ?


<minor thread diversion alert>
Just skimming some of their pages.  Looking at https://apw-ifa.co.uk/wp-content/uploads/2022/10/apw_wtlexplained_a4digital.pdf, I read:

"Assured Private Wealth’s Costco package 1 uses a property protection trust to leave your half of the house to your children but stops them from inheriting it until you have both passed away. This way if your spouse needs care in later life or remarries after you die, then your half of the estate is safe for your children. This type of planning doesn’t change anything in your lifetimes"

Is that needed? 
Would it be possible to change from Joint Tenants to Tenants in Common (equal shares), with your wills sharing your half to offspring on your death?

Just curious if they are looking for more ££ ways to provide something!!


Do report back!