Is an IFA really worth it?

NoMore

money4sb said:

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.

None of the six questions would seem to lead it to change its mind about only drawing the pension from 64.

It's about how you frame the question, I'm sure if you had mentioned tax efficiency it might make a difference, the problem is some people using AI like this don't know the detail and what questions to ask, so things can easily be overlooked. An IFA would definitely want more detail than what you provided initially.
 

I for one would not use AI to come up with a detailed plan for retirement. 

dunstonh

money4sb said:

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.

But if you don't know the right questions to ask, then that won't be much help. And if you have to give the AI the answers in advance, that sort of defeats the point.

Plus, the UK SWR is typically between 3% and 3.5% depending on age. 4% is too high for a 59 year old.  Plus, it doesn't say what equity ratio was in play (and here I have assumed 60%).    The 4% SWR is if you are based on Dollars not Sterling.

money4sb

dunstonh said:

money4sb said:

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.

But if you don't know the right questions to ask, then that won't be much help. And if you have to give the AI the answers in advance, that sort of defeats the point.

Plus, the UK SWR is typically between 3% and 3.5% depending on age. 4% is too high for a 59 year old.  Plus, it doesn't say what equity ratio was in play (and here I have assumed 60%).    The 4% SWR is if you are based on Dollars not Sterling.

Ask it as many questions as you like and give it every scenario you can imagine too.  4% might be perfect for a man who doesn't think he'll live past 75 for example.   

AI is probably not your thing or you have no faith in it or understand how fast it's developing.

There won't be any need for human IFAs within about 3 years.  

Monoecho

Many thanks for all the comments and information.

However, this is exactly the issue I'm having with the IFA's - probably caused by me not understanding how to phrase the questions, to obtain the answers I'm investigating.

I could phrase it in this manner:

If you had £200K to save/invest would you pay an IFA £4K, who might tell you to put 20% in an ISA and 10% in a pension and the rest in shares? Which then leaves you with £196K before you have invested a penny. Is this value for money?

I suppose I am asking an impossible question - which is what am I actually paying an IFA for, if all they can tell me are a selection of options I already understand.

Albermarle

Monoecho said:

Many thanks for all the comments and information.

However, this is exactly the issue I'm having with the IFA's - probably caused by me not understanding how to phrase the questions, to obtain the answers I'm investigating.

I could phrase it in this manner:

If you had £200K to save/invest would you pay an IFA £4K, who might tell you to put 20% in an ISA and 10% in a pension and the rest in shares? Which then leaves you with £196K before you have invested a penny. Is this value for money?

I suppose I am asking an impossible question - which is what am I actually paying an IFA for, if all they can tell me are a selection of options I already understand.

You should take into account that investment advice is only part of what an IFA can offer, probably the simplest part.
There are other issues like tax efficiency, drawdown strategies, looking at the whole family financial position, being on top of legislation changes, unravelling trusts etc.

As a very general rule, efficient  decumulation ( using the pot for income) is more complicated than accumulation ( building the pot up)
The more complicated your personal and financial situation, the more value you will get from paying for an IFA.
They are also useful for people who have no knowledge or no interest in personal finance and just want someone else to deal with it all.

So probably you don't need one.

Prism

dunstonh said:

money4sb said:

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.

But if you don't know the right questions to ask, then that won't be much help. And if you have to give the AI the answers in advance, that sort of defeats the point.

Plus, the UK SWR is typically between 3% and 3.5% depending on age. 4% is too high for a 59 year old.  Plus, it doesn't say what equity ratio was in play (and here I have assumed 60%).    The 4% SWR is if you are based on Dollars not Sterling.

You don't need to know the questions - you tell it to ask you what it needs to know.

I am doubtful that a generic chat AI is good enough to be an advisor but a custom built one which points to accurate documentation could be a very effective IFA equivalent. Financial advice certainly seems to be high up the list of likely jobs to be replaced with AI - along with my job of training/teaching.

I agree on the 4% being likely to high. That will be because most of the generic models have been taught on internet based data.

Monoecho

Albermarle said:

Monoecho said:

Many thanks for all the comments and information.

However, this is exactly the issue I'm having with the IFA's - probably caused by me not understanding how to phrase the questions, to obtain the answers I'm investigating.

I could phrase it in this manner:

If you had £200K to save/invest would you pay an IFA £4K, who might tell you to put 20% in an ISA and 10% in a pension and the rest in shares? Which then leaves you with £196K before you have invested a penny. Is this value for money?

I suppose I am asking an impossible question - which is what am I actually paying an IFA for, if all they can tell me are a selection of options I already understand.

You should take into account that investment advice is only part of what an IFA can offer, probably the simplest part.
There are other issues like tax efficiency, drawdown strategies, looking at the whole family financial position, being on top of legislation changes, unravelling trusts etc.

As a very general rule, efficient  decumulation ( using the pot for income) is more complicated than accumulation ( building the pot up)
The more complicated your personal and financial situation, the more value you will get from paying for an IFA.
They are also useful for people who have no knowledge or no interest in personal finance and just want someone else to deal with it all.

So probably you don't need one.

Yes - that's exactly what I mean: I don't have trusts, family, loans am generally on top of financial changes etc. My 'estate' is really simple - and as far as drawdown strategies go, there's really not much you can do, legally, to stop HMRC getting their 'share'. Once you are up to speed with your available allowances etc. Like I said earlier, paying thousands for information readily available seems a lot to me, and I can't help but wonder where the IFA 'value' is?

I can easily understand the value on a complex estate, but when it is as simple as mine, I'm really struggling to see the benefit.

kempiejon

Monoecho said:

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

Have I missed something why have you convinced yourself you need an IFA, most people don't have one do they? I'm sure they would be better than the internet slop but getting a bit of knowledge and takin control enriched me, perhaps you're not that sort of person. Perhaps a professional could improve my position but I don't think I need to disprove or prove that by asking for advice I don't think I need.

Eyeful

1. Which of the following areas are you seeking financial advice on.exactly?

• Pensions 
• investments
• Life insurance and health insurance
• Tax and inheritance planning
• Mortgages (via a broker) and equity release products
• Long-term care planning

2. Maybe if you look through these YouTube Channels you might find the guidance you are seeking.
(a) James Shack
(b) MeaningfulMoney (Pete Matthews)

3. In the UK you have to be correctly qualified to give Financial Advice.
So what you can expect here & on YouTube will be guidance,

Albermarle

Monoecho said:

Albermarle said:

Monoecho said:

Many thanks for all the comments and information.

However, this is exactly the issue I'm having with the IFA's - probably caused by me not understanding how to phrase the questions, to obtain the answers I'm investigating.

I could phrase it in this manner:

If you had £200K to save/invest would you pay an IFA £4K, who might tell you to put 20% in an ISA and 10% in a pension and the rest in shares? Which then leaves you with £196K before you have invested a penny. Is this value for money?

I suppose I am asking an impossible question - which is what am I actually paying an IFA for, if all they can tell me are a selection of options I already understand.

You should take into account that investment advice is only part of what an IFA can offer, probably the simplest part.
There are other issues like tax efficiency, drawdown strategies, looking at the whole family financial position, being on top of legislation changes, unravelling trusts etc.

As a very general rule, efficient  decumulation ( using the pot for income) is more complicated than accumulation ( building the pot up)
The more complicated your personal and financial situation, the more value you will get from paying for an IFA.
They are also useful for people who have no knowledge or no interest in personal finance and just want someone else to deal with it all.

So probably you don't need one.

Yes - that's exactly what I mean: I don't have trusts, family, loans am generally on top of financial changes etc. My 'estate' is really simple - and as far as drawdown strategies go, there's really not much you can do, legally, to stop HMRC getting their 'share'. Once you are up to speed with your available allowances etc. Like I said earlier, paying thousands for information readily available seems a lot to me, and I can't help but wonder where the IFA 'value' is?

I can easily understand the value on a complex estate, but when it is as simple as mine, I'm really struggling to see the benefit.

So your decision would seem to be an easy one.