Best method for validating strategy?

dunstonh

When you say "operating on a consolidator model" do you mean large corporations?

Consolidators tend to be national or regional firms.

I'm dealing with two local companies. I just get the impression it's easier and they make more money from percentages and on going fees.

Transactional is actually easier in most cases.  Ongoing has a higher workload.   However, it may be that they prefer ongoing.   Many long-service IFAs have been dealing with the same clients for 20-30-40 years, and the long personal service is their preference.

Does transactional advice mean they charge for the advice and then to carry out the execution of advice (maybe as the platforms are only available to IFA's) or just leave the execution to the individual (obviously this would need to be possible under DIY).

It could be either of those.  However, VAT would apply if there is no intention to buy via the IFA.  Its ad-hoc/one off advice.  (or charge per advice event).

IFAs cannot insist on ongoing advice.   However, as mentioned, there are business models that target that and don't really want transactional.  So, they may find ways to put you off.

The default situation seems to be free advice then charge for execution and build in ongoing fees.

Whilst the first meeting (30-60 minutes typically) is without cost, its rare for any advice to be given in that meeting.   The charge is usually for the advice, with the execution only included in that price.   

Ongoing is for those with ongoing requirements.  It isn't for those that don't need that.

Do I just need to be clearer of my requirement when approaching them?

Yes.  You want one-off advice.  That is what they need to know.

Bostonerimus1

magd36 said:

dunstonh said:

fixed fee is one of the most common models for transactional advice.

Have you perhaps been looking at the IFAs operating on a consolidator model rather than a general practitioner model?  The former exists to hoover up assets.   The latter is your typicaly smaller localised independent.

However, most small independents are working at or above capacity and if they don't fancy a job, they can price themselves accordingly (like many trades)

When you say "operating on a consolidator model" do you mean large corporations?

I'm dealing with two local companies. I just get the impression it's easier and they make more money from percentages and on going fees.

Does transactional advice mean they charge for the advice and then to carry out the execution of advice (maybe as the platforms are only available to IFA's) or just leave the execution to the individual (obviously this would need to be possible under DIY).

I think I'm hoping for the former with no ongoing charges or the latter if it exists!!

The default situation seems to be free advice then charge for execution and build in ongoing fees.

Do I just need to be clearer of my requirement when approaching them?

You exhibit the classic need for affirmation and a psychological crutch that is one of the main reasons IFAs continue to be popular. If it helps I don't think you really need it. Why don't you develop a plan and post it under a new thread so we can critique it. This will stress test your plan and worst case you'll have more knowledge to take to any IFA appointment.

magd36

dunstonh said:

Consolidators tend to be national or regional firms …

That’s very clear. Thanks.

magd36

Bostonerimus1 

You exhibit the classic need for affirmation and a psychological crutch that is one of the main reasons IFAs continue to be popular. If it helps I don't think you really need it. Why don't you develop a plan and post it under a new thread so we can critique it. This will stress test your plan and worst case you'll have more knowledge to take to any IFA appointment.

You’re 100% correct about the affirmation and crutch. I’ll do what you suggest. Thanks

gm0

This confidence building aspect is a huge part of the value.  It isn't in general the product that gets recommended - portfolio or platform.  The overlap with readily available consumer DIY product is massive. There is little value in an adviser recommended 70/30 portfolio on platform X that cannot be achieved by a 70/30 on platform Y (DIY consumer). On cost or performance - which - like for like in terms of assets (or fairly close) - will be broadly similar and unknowable as to the effect of minor tilts and details of specific funds vs benchmarks in advance.  Cost drag is a wash also - bar the advice fee for the IFA which in practice pays for other things (ongoing) and of course their income.

Not having to learn about it to come up with something "good enough" is pretty much the entire proposition of one off advice to implement a pension for drawdown.  This is excellent value or ruinously expensive based on the value you place on your time. And your interest level.  Oh and some implementation admin.

I read up (books/web) and learned to DIY.  I took FCA regulated pension consolidation advice (low end) from a transfer farm. Which as free (at the time) (for initial platform recommendation - as cost of sales - the fee was "one off" to do consolidation).  They were in effect gambling on the high % of accepted recommendations.  A few that did not proceed being a carried cost.  

This was confidence and just FOMO on my part that I had not "seen" the adviser introduced product range.  And confidence building on my home brew "suitable" solution.  

What I learned from the process - is that the outcome you get is bounded by base financial and is critically dependent on what you say in the fact find.   

Suiitabliity (of recommendations) is dependent on risk appetite - capacity (facts) and inclination (subjective).  
Risk appetite is a function of your ability to sustain retirement overall from base financial data - assets, state pensions, DB, savings, liabilities. And then also what you say - subjectively - about loss aversion, investment goals, maximising returns, inheritance goals etc.  You can dial up the adviser recommended portfolio selection tier, or dial it down.  Based on what you say in the fact find.  I believe but cannot prove from real data across lots of cases that this subjectivity and process flexibility likely covers a wide 40 - 80% equities range. 

Once inputs are captured and documented by the IFA.  This protects them from (most) complaint issues later per FCA guidelines - as you got - the recommendation - per the inputs you gave.  Even if your views evolve later - leading to buyers remorse for too risk averse (returns foregone), or too risky (correction losses) from a portfolio.  

The "real" value of ongoing advice is the handling of changing circumstances. And support to family post deaths where perhaps a partner/spouse is less interested in the whole subject - and being dumped complex DIY alongside estate management is going to require professional help from somewhere.  Some high street solicitors make IFAs look parsimonious in their billing.  Probate is a well known profit centre that many fall foul of.

By change I mean individual family issues. Tax regime changes.   Which require more generic what to do within the rules advice from someone paying attention and doing lots.

Some DIY folk are more scientific than others.  And more elaborate in their investing choices.  From conviction.  The requirements for monitoring and ongoing care are obviously less - if you keep it fairly simple. Mainstream portfolio.  Large provider(s) - a couple perhaps for impact hedging.  Passive indexer mandates for core (if not all) keep things simpler on fund managers and such like than concentrated stock picking funds.

And also subscription by the IFA to fund monitoring services - they do not in general do all their own due diligence on the investments they recommend. Shocking as this may be to some.   

Scrutiny which may - but may not - provide a timely alert for an investment shift "away" from something which is becoming a poor performer/dodgy/at risk - star managers leaving etc.  

e.g. Woodford becoming overly exposed to illiquid private equity via outflows and breaking "the rules" and getting suspended/dissolved.  Many noticed in good time and got out. Some did not. 

Which applies to both IFA and DIY.  Advice not a panacea.  Nor was this warning subjective judgement not happening something which consumers could claim for under most advice contracts. AFAIK.

magd36

gm0 said:

This confidence building aspect is a huge part of the value.  It isn't in general the product that gets recommended - portfolio or platform.  The overlap with readily available consumer DIY product is massive. There is little value in an adviser recommended 70/30 portfolio on platform X that cannot be achieved by a 70/30 on platform Y (DIY consumer). On cost or performance - which - like for like in terms of assets (or fairly close) - will be broadly similar and unknowable as to the effect of minor tilts and details of specific funds vs benchmarks in advance.  Cost drag is a wash also - bar the advice fee for the IFA which in practice pays for other things (ongoing) and of course their income.

Not having to learn about it to come up with something "good enough" is pretty much the entire proposition of one off advice to implement a pension for drawdown.  This is excellent value or ruinously expensive based on the value you place on your time. And your interest level.  Oh and some implementation admin.

I read up (books/web) and learned to DIY.  I took FCA regulated pension consolidation advice (low end) from a transfer farm. Which as free (at the time) (for initial platform recommendation - as cost of sales - the fee was "one off" to do consolidation).  They were in effect gambling on the high % of accepted recommendations.  A few that did not proceed being a carried cost.  

This was confidence and just FOMO on my part that I had not "seen" the adviser introduced product range.  And confidence building on my home brew "suitable" solution.  

What I learned from the process - is that the outcome you get is bounded by base financial and is critically dependent on what you say in the fact find.   

Suiitabliity (of recommendations) is dependent on risk appetite - capacity (facts) and inclination (subjective).  
Risk appetite is a function of your ability to sustain retirement overall from base financial data - assets, state pensions, DB, savings, liabilities. And then also what you say - subjectively - about loss aversion, investment goals, maximising returns, inheritance goals etc.  You can dial up the adviser recommended portfolio selection tier, or dial it down.  Based on what you say in the fact find.  I believe but cannot prove from real data across lots of cases that this subjectivity and process flexibility likely covers a wide 40 - 80% equities range. 

Once inputs are captured and documented by the IFA.  This protects them from (most) complaint issues later per FCA guidelines - as you got - the recommendation - per the inputs you gave.  Even if your views evolve later - leading to buyers remorse for too risk averse (returns foregone), or too risky (correction losses) from a portfolio.  

The "real" value of ongoing advice is the handling of changing circumstances. And support to family post deaths where perhaps a partner/spouse is less interested in the whole subject - and being dumped complex DIY alongside estate management is going to require professional help from somewhere.  Some high street solicitors make IFAs look parsimonious in their billing.  Probate is a well known profit centre that many fall foul of.

By change I mean individual family issues. Tax regime changes.   Which require more generic what to do within the rules advice from someone paying attention and doing lots.

Some DIY folk are more scientific than others.  And more elaborate in their investing choices.  From conviction.  The requirements for monitoring and ongoing care are obviously less - if you keep it fairly simple. Mainstream portfolio.  Large provider(s) - a couple perhaps for impact hedging.  Passive indexer mandates for core (if not all) keep things simpler on fund managers and such like than concentrated stock picking funds.

And also subscription by the IFA to fund monitoring services - they do not in general do all their own due diligence on the investments they recommend. Shocking as this may be to some.   

Scrutiny which may - but may not - provide a timely alert for an investment shift "away" from something which is becoming a poor performer/dodgy/at risk - star managers leaving etc.  

e.g. Woodford becoming overly exposed to illiquid private equity via outflows and breaking "the rules" and getting suspended/dissolved.  Many noticed in good time and got out. Some did not. 

Which applies to both IFA and DIY.  Advice not a panacea.  Nor was this warning subjective judgement not happening something which consumers could claim for under most advice contracts. AFAIK.

This has helped me reframe my thoughts on the function and benefits of an IFA. Thanks,