Is an IFA really worth it?

Monoecho

Hi All !

Yes I know that this is an old question - I have been reading a lot - but unfortunately haven't been able to make a decision, yet!

Take this scenario

• No debts at all
• Not working
• 59yo
• Cash savings
• A couple of pensions - both DC

I have been asking IFAs what they would charge for simple high level advice, they have all told me something similar:

Minimum initial advisory fee of, say, £1,500 plus a sliding scale percentage of my 'assets under management' every year.


My question is simple: my initial cost could easily exceed £4,000 - straight into their bank accounts on day 1. Then a repeating fee every year for them to guess which investment best suits my situation/goals.

This sounds an exceptional deal for the IFA, but I would be starting out my investment life with a > £4,000 deficit...so I would have to make that back just to break even.


If I invested the funds myself, I am starting out without any deficit and could even consider the charges I would have paid/been paying as a buffer if the markets take a downturn. (Which is inevitable at some point anyway)



Dear experts, am I missing something? Any advice would be much appreciated.

wjr4

What advice do you actually want? Do your pensions cover your expenditure needs? are they invested in line with your attitude to risk? 

Bostonerimus1

What do you need and what are you expecting? Are you looking for help with taxes or drawdown strategies? Or maybe downsizing and what to do with any equity you free up? How much do you know about the tax free wrappers you should be using and the type of investments that are appropriate to your situation? many people don't actually need an IFA, but they often want one to make them feel more secure, but that sort of on going relationship can be costly. So you need to understand what you are buying and why before your proceed.

As an example I have never used any type of financial adviser and have always DIYed my investment and taxes and done a good job IMO. However, a possible move to another country will make my tax situation significantly more complex and for that I will employ a tax specialist because I just don't want the bother and don't feel sufficiently confident in my ability. So define your requirements before you proceed.

Monoecho

Hi, 

To clarify, I would like to know if basic financial advice/guidance is worth shelling out thousands of pounds - up front. The advice I am looking for is simple, best practice type of advice - e.g. a decision tree or flow chart.

I am not looking for specifics, e.g. invest in this type of SIPP or that type of share.

I suppose I am a bit cynical, as I have worked in IT for 30 years and watched 'experts' charge a weeks money for what took them a day. Nice work if you don't have a conscience :-)

jimjames

Monoecho said:

If I invested the funds myself, I am starting out without any deficit and could even consider the charges I would have paid/been paying as a buffer if the markets take a downturn. (Which is inevitable at some point anyway)

You say "IF" you invested the funds yourself? Where are the funds now that require you to invest them? What have you done for the last 30 years?

If you're not working and have existing pensions already invested then there probably isn't a lot they can add unless your pension pots are in the high hundreds of thousands and you have other investments that could be optimised for tax.

dunstonh

I have been asking IFAs what they would charge for simple high level advice, they have all told me something similar:

What do you mean by simple high level advice?
In regulatory terms, advice is advice.     It can be targeted/restricted in a certain area but it would be usful to know what you are looking for.

My question is simple: my initial cost could easily exceed £4,000 - straight into their bank accounts on day 1. Then a repeating fee every year for them to guess which investment best suits my situation/goals.

You don't mention how much the investments are, but you are making the mistake of assuming that £4000 is the profit.      

If I invested the funds myself, I am starting out without any deficit and could even consider the charges I would have paid/been paying as a buffer if the markets take a downturn. (Which is inevitable at some point anyway)

If you DIY well, you can save money.  Same as in any task where you can use a professional or not.   If you DIY badly, it can be a costly mistake.

money4sb

If you enter (in fine detail) your exact financial position into some of the big AI engines, and ask very specific questions, you'll be amazed at how good the advice is.

I've done this using several AI apps and websites and given every detail I could for both me and my wife.  
Every Savings Account. Every Pension. Every ISA.  Every date and interest rate.  Planned retirement dates.  

Then ask all sorts of specific questions....such as.....

"Knowing all of the above, and wishing our money to last for the next x years till depletion to zero, such that we just pass on our house as inheritance, offer up several plans, with little further investment involved, such that we lead a comfortable life".

The answers you get back are quite amazing and detailed.  IMHO, way better than any human adviser. 

PS...It even gives you detailed spreadsheets with figures for the next 20/30 years type of thing.

eskbanker

Monoecho said:

To clarify, I would like to know if basic financial advice/guidance is worth shelling out thousands of pounds - up front. The advice I am looking for is simple, best practice type of advice - e.g. a decision tree or flow chart.

You might find it worth giving some more detail of your finances on here and asking questions about options, from which you'd probably get guidance, rather than advice as such (which is a restricted and chargeable activity)?

money4sb

money4sb said:

If you enter (in fine detail) your exact financial position into some of the big AI engines, and ask very specific questions, you'll be amazed at how good the advice is.

I've done this using several AI apps and websites and given every detail I could for both me and my wife.  
Every Savings Account. Every Pension. Every ISA.  Every date and interest rate.  Planned retirement dates.  

Then ask all sorts of specific questions....such as.....

"Knowing all of the above, and wishing our money to last for the next x years till depletion to zero, such that we just pass on our house as inheritance, offer up several plans, with little further investment involved, such that we lead a comfortable life".

The answers you get back are quite amazing and detailed.  IMHO, way better than any human adviser. 

PS...It even gives you detailed spreadsheets with figures for the next 20/30 years type of thing.

eg.. As per below... I just entered a few details and if I answered the questions that popped back up it'd go into very fine detail.

--------------------------------------------------------------------------------------------------------------------------
My friend is in the following position... No debts at all Not working 59yo Cash savings A couple of pensions - both DC. He'd like to know what to do in the future. He has 50K in savings and his DC pensions are worth about 200k. He lives a modest life but would like advice as to what to do for the next 20 years. He wants to start taking his pension at age 63 and will also get a full state pension too.

ChatGPT said:

Here’s a clear, sensible general-guidance outline your friend can use to plan the next 20 years. (This isn’t personal financial advice—just a structured way to think through the decisions.)

---

⭐ 1. His Current Position (Age 59)

• No debts → great starting point

• £50k cash savings

• £200k total in DC pensions

• Wants to draw pensions from age 63

• Full State Pension from ~age 67

• Modest lifestyle → expenditure likely manageable

---

⭐ 2. Key Planning Questions

At 59, he should think about the next steps in this order:

1. How much does he spend yearly?

This is the crucial number.
Even a simple estimate helps:

• £12k/yr → very low-cost lifestyle

• £18–22k/yr → typical modest UK lifestyle

• £25–30k/yr → comfortable but not extravagant

2. How long does his £50k cash need to last before pension income starts?

He is 59 → wants to start pension at 63 → 4-year gap.

---

⭐ 3. Suggested Strategy (Simple, Sensible, Low-Risk)

A. Use Cash Savings for the next 4 years (59–63)

If he needs ~£12–15k per year to live modestly:

• £50k can cover 3.5–4 years quite comfortably

• Keeps his pension untouched and growing

He might supplement with part-time work if desired, but it isn’t essential.

---

B. Let the Pensions grow until age 63

Four more years of:

• Growth

• Possibly lower charger due to consolidation

• No withdrawals → preserves tax-free lump sum potential

Many people choose a balanced portfolio (40–60% equities) in this phase.

---

C. At age 63: Start drawing from DC pension

He’ll have a few options:

Option 1: UFPLS / Drawdown with small withdrawals

A typical sustainable withdrawal rate is 3.5–4% per year.

From £200k:

• 4% = ~£8,000/yr before tax

• £2,000 of that would be tax-free due to 25% rule

• Tax is minimal until State Pension begins

Option 2: Take 25% tax-free lump sum

• Around £50k tax-free

• Could be used to top up cash savings, renovate home, or invest.

Option 3: Buy an annuity (either now or later)

Rates are currently higher than they were for many years.
At 63, a £200k pot might buy roughly £10–11k/yr inflation-linked (rough approx), more if level.

You can combine approaches too.

---

D. Age 67: Add State Pension

Current full amount is ~£11,500/yr (can change with inflation).

Once this starts, he may not need much from the DC pension.

Example at 67:

• £11,500 State Pension

• £5,000 small drawdown
  = £16,500/yr total
  → Often adequate for a modest lifestyle.

If he needs more, he can increase drawdown.

---

⭐ 4. What His Retirement Might Look Like

Age 59–63 (4 years)

Income: Cash savings only
Total income: £12–15k/yr (assumed)
Cash gradually runs down to ~£0–£10k (depending on spend)

Age 63–67 (4 years)

Income: Drawdown from DC pension
Typical safe level: £8k–£12k/yr
Tax: Minimal
Pension likely still growing in the background

Age 67+

Income:

• £11.5k State Pension

• £5–10k pension drawdown or annuity

Total: £16.5–£21.5k
Likely very comfortable for modest living.

---

⭐ 5. Investment & Risk Tips (General)

Keep 1–2 years of living costs in cash

Stops him needing to sell investments during market dips.

Keep pensions moderately invested

A balanced 40–60% equity portfolio typically works well for drawdown.

Avoid taking too much too early

4% annual withdrawal tends to be sustainable.

---

⭐ 6. Big Decisions He Should Actually Make

1. How much does he spend annually? (most important)

2. Does he want guaranteed income (annuity) or flexible income (drawdown)?

3. Does he want to take some or all of the 25% tax-free lump sum at 63?

4. Is any part-time income desired between 59–63 to preserve savings?

5. Should the two pensions be consolidated?

6. What level of investment risk is comfortable?

---

⭐ If you want, I can run projections

Tell me:

1. His approximate annual spending

2. Whether he plans to take the 25% tax-free lump sum

3. Expected investment style (low / medium / high risk)

…and I can model his income year by year from age 59 to 85 (or longer).

NoMore

Doesn't seem a particular tax efficient plan from the AI, It's wasting a hell a lot of Personal Tax allowance in the early years.

That's the problem with AI, what it produces can be very convincing, doesn't mean it's right.

money4sb

NoMore said:

Doesn't seem a particular tax efficient plan from the AI, It's wasting a hell a lot of Personal Tax allowance in the early years.

That's the problem with AI, what it produces can be very convincing, doesn't mean it's right.

You need to answer the questions it threw up first before it starts going into detail.   It can take you down many paths.