Is an IFA really worth it?

artyboy

Albermarle said:

artyboy said:

I do hope that @Ibrahim5 is ok... 3 pages in to a classic IFA rage bait thread and nothing...

(Sorry OP, just a little in-joke...)

Did you know that this was the Oxford Dictionary Word of the year ?

Of course. It's almost as though you don't realise just how hip, groovy and down with it I really am...

aroominyork

artyboy said:

Albermarle said:

artyboy said:

I do hope that @Ibrahim5 is ok... 3 pages in to a classic IFA rage bait thread and nothing...

(Sorry OP, just a little in-joke...)

Did you know that this was the Oxford Dictionary Word of the year ?

Of course. It's almost as though you don't realise just how hip, groovy and down with it I really am...

Sorry to hear you are down with it. I wish you better soon.

wjr4

Bostonerimus1 said:

IMO most people don't need IFAs as they could manage their own personal finances by doing a bit of reading and following a few simple rules. However, lots of those same people will want an IFA for psychological reasons or because they don't believe that they can manage their own finances. Whether or not an IFA is good value for money really depends on the personal perspective of the client.

I think you’ve been spending too much time with our lovely resident posters who are against anyone who tries to help people with their finances. You’re not going to find many people who will use an IFA/FA on this site as they simply do not have the time to learn on their own. Maybe you’ve just got too much spare time - plenty to spend on being angry over posts on here anyway 😂

wjr4

Cus said:

Honest question to IFA's..
If client 1 has a portfolio of X, an IFA will charge a percentage (call it A%) of that as an ongoing charge.
If they also have another client, client 2, who has a portfolio of 2X, they will charge a percentage likely lower, (let's call it 0.5A%)

Is the charging model based on total fees paid, or is that in reality, the larger the portfolio, the larger the fee charged? And is that because it actually costs more on a like for like basis?  More work?  Or is it that it's a pricing model that clients are willing to pay so why buck the trend even though the cost versus service ratio to the client is worse the more they have?

Edit: this is a business, and pricing models are warped across many industries so this is not a complaint...

Since consumer duty has come into place, most companies will have different service levels with different fees for people who need different things. Eg cheaper cost for people who have pretty basic circumstances but still want help. 

Bostonerimus1

wjr4 said:

Bostonerimus1 said:

IMO most people don't need IFAs as they could manage their own personal finances by doing a bit of reading and following a few simple rules. However, lots of those same people will want an IFA for psychological reasons or because they don't believe that they can manage their own finances. Whether or not an IFA is good value for money really depends on the personal perspective of the client.

I think you’ve been spending too much time with our lovely resident posters who are against anyone who tries to help people with their finances. You’re not going to find many people who will use an IFA/FA on this site as they simply do not have the time to learn on their own. Maybe you’ve just got too much spare time - plenty to spend on being angry over posts on here anyway 😂

I'm genuinely puzzled by your post, particularly the second sentence.

I offer lots of "advice" on here, maybe too much, and that's part of my evangelism. I encourage others to help posters and offer their opinions and I think I have acknowledged that IFAs can be of help to people.

I do have lots of time when I'm not working because I'm retired and social media is a small part of what I do, but an enjoyable way to pass the time on the bus or at a coffee shop.

I hope I don't come across as angry, certainly cynical, but not angry. I think "rankle" is a couple of levels below anger. My signature expresses some of the lack of control and futility that I believe we need to accept in life, as well as when investing, and acceptance is the opposite of anger.

chiang_mai

My industry contains a lot of agents, middle men who insert themselves between the worker and the end client and get paid handsomly for doing so. Agents are facilitators who skim profit by doing work that the workers could do themselves but is often painstakingly laborious. Do they add value and improve outcomes? Not really, they save time and effort mostly. When it comes to investing, I see financial advisors in a similar camp to agents, essential for some, unecessary for others. There is no single answer regarding the need for them or their usefullness.....I think. But there again I've worked in Financial Services, banking and Treasury for decades plus I am no stranger to tax, having worked previously for Big 4. The things that I find easy and take for granted wont appear the same way to someone who has had little or no prior exposure to them. 

LHW99

Rollinghome said:

Bostonerimus1 said:

I don't like the idea that you can spend a few percentage points and hand that responsibility over to some spiv in "The City" or probably now someone with GCSE maths entering data into an algorithm. That's how people end up invested in Woodford, Indonesian pork bellies or with a portfolio of 20 plus funds and no understanding of how to manage their money. 

 Shortly before RDR was implemented, so about 2013, I met three IFAs when looking for someone local to build a relationship with by having them manage a part of my assets - so that my wife had someone around should I inconveniently pop my clogs.  

 Two of them told clear untruths, and you might describe them as "spivs", but it would be fairer to call them typical salesmen. Because that was what most were back then.  Their job was to sell the products for the providers who paid them very generous sales commission - a serious conflict of interest.  The third IFA was very likeable but hopeless - his business folded, and he was gone shortly after I saw him.

 Since payment of commission was banned following RDR, I haven't met any IFAs (apart from a couple of friends) but get the impression that the industry has much improved as a result. Now an IFA is answerable to clients and not to the investment houses that paid them sales commission. The cost of that commission now goes back to the investor by way of lower management fees.

 That said, I would agree that very few people, especially now, really need an advisor.  Investing is so much easier now than it was before the internet. All the necessary information and services can be had without leaving home. We all need to learn how to manage our own finances, because no-one will care as much about our financial wellbeing as we do ourselves.

 But while I don't have any experience of advisors since then, I do meet a lot of IT investment managers now.  There are a small number you might describe as "spivs", but those are usually the ones charging the highest fees that I keep well away from. Most are very earnest and very aware of their responsibilities, as are good directors. They have to be, because it's the performance numbers that are there for all to see that count with canny investors, and shiny shoes alone wouldn't get them far. I assume fund managers are very similar, as many manage both closed- and open-ended investments.

Overall I agree with your comments.

However, I did use a financial advisor back in the late 1980s (not sure whether they would be classed as an IFA or FA now). Myself and OH were young back then, and as said the internet wasn't around. We wanted to open FSAVCs, which had only just been brought in.

He got commission, and we had plans set up with two different providers (our choice) at the princely sum of £25 per month each. Without that commission, us relative paupers at that time, would never have been able to set up these plans although we had dipped our toes into the "Tell Sid" and other campaigns.

When he retired, we didn't like the advisor we were passed on to and that was the first point where we started to try to DIY.

While we probably would have done better nowadays, I'm not sure if someone with no investments, and a very small amount of spare cash would be taken on by an IFA. Without knowledge or the desire to acquire it, I fear they would never begin. It was a small start, but gave a small fund of around £20k to start our SIPPs in around 2010.

Maybe there will be similar positive results from the new proposals, although I would have preferred ISA limits to have remained unchanged and a public education campaign started ('Tell Sidney' ?). The UK needs more people to have more wealth to their names - it would be one way to reduce the welfare bills.

Albermarle

Rollinghome said:

Bostonerimus1 said:

I don't like the idea that you can spend a few percentage points and hand that responsibility over to some spiv in "The City" or probably now someone with GCSE maths entering data into an algorithm. That's how people end up invested in Woodford, Indonesian pork bellies or with a portfolio of 20 plus funds and no understanding of how to manage their money. 

 Shortly before RDR was implemented, so about 2013, I met three IFAs when looking for someone local to build a relationship with by having them manage a part of my assets - so that my wife had someone around should I inconveniently pop my clogs.  

 Two of them told clear untruths, and you might describe them as "spivs", but it would be fairer to call them typical salesmen. Because that was what most were back then.  Their job was to sell the products for the providers who paid them very generous sales commission - a serious conflict of interest.  The third IFA was very likeable but hopeless - his business folded, and he was gone shortly after I saw him.

 Since payment of commission was banned following RDR, I haven't met any IFAs (apart from a couple of friends) but get the impression that the industry has much improved as a result. Now an IFA is answerable to clients and not to the investment houses that paid them sales commission. The cost of that commission now goes back to the investor by way of lower management fees.

 That said, I would agree that very few people, especially now, really need an advisor.  Investing is so much easier now than it was before the internet. All the necessary information and services can be had without leaving home. We all need to learn how to manage our own finances, because no-one will care as much about our financial wellbeing as we do ourselves.

 But while I don't have any experience of advisors since then, I do meet a lot of IT investment managers now.  There are a small number you might describe as "spivs", but those are usually the ones charging the highest fees that I keep well away from. Most are very earnest and very aware of their responsibilities, as are good directors. They have to be, because it's the performance numbers that are there for all to see that count with canny investors, and shiny shoes alone wouldn't get them far. I assume fund managers are very similar, as many manage both closed- and open-ended investments.

Regarding the comments in bold.

In my experience the level of basic numeracy in the population is rather poor, even sometimes for people you would not expect. If you add that to many peoples tendency to be over affected by  what they read,( or what the bloke down the pub tells them ) and to be more emotional than rational, and to be scared of dealing with or talking about money.
The facility to DIY is definitely easier nowadays, but only a minority will be capable of making proper use of that.

Eyeful

DIY is definitely easier nowadays.

Back in 1970's, the ordinary people of my acquaintance did not use FA's or IFA's..

If they went to the bank to seek investment advice they spoke to someone with the fancy title of "Financial Advisor" who was just a sales person who was thinking of the commission they would earn on the sale of a product. 

Or the "Man from the PRU" would try to sale them more insurance.

However even back then, the ordinary person who was willing to learn and do some research could DIY.
There where:
Saving & Investment Magazines at Newsagents.
Books on investing which you could buy or loan from the local library
Saturday newspapers at the library had money and investment sections in them.

I like many others used Investment Trust savings schemes run by: F&C, Alliance Trust, City of London etc 

dunstonh

Back in 1970's, the ordinary people of my acquaintance did not use FA's or IFA's..

If they went to the bank to seek investment advice they spoke to someone with the fancy title of "Financial Advisor" who was just a sales person who was thinking of the commission they would earn on the sale of a product. 

IFAs didnt exist until 1988.   

In the high street banks and building societies, they would have agencies with the providers, but it was a sideline for the bank manager.   Not the bank itself.    Bank managers of smaller branches with valuable agencies would not want to move on.     When it got closer to polarisation in 1988, the banks would buy out the agency from the bank manager.  Some would continue it until they started retailing their own product and went all sales focused.

The main route for the wider public before 1994 was through the insurance agent.     They would call round to collect the money (along with the TV rentals, Washing machine rental, pools etc).

Simpler times.  Awfully expensive and low quality, but it was a period of high inflation and high gross returns.  So, that masked it.  10 year savings plans would pay out 4x what you paid in.