IFA

talexuser

A quick one. I've never used an IFA but a friend has asked for advice, she says her adviser is independent but charges 3% a year, which  I think is high. What's a spread for reasonable IFA charges?

ColdIron

Do you have any idea of the sums involved or any complexity involved? Bit of a piece of string otherwise

talexuser

She has an inheritance of well over 390k sitting in a bank at 1.05%. I have had some words about this, but she does not want online savings, hopefully she will now go to the Yorkshire branch near us where she should be able to at least double or triple that rate on 120k at least.
She needs around that amount reasonably liquid because of a disabled brother she takes care of who may need care costs, but I reckon the rest should be in low risk bonds/equities for a better inflation protection. 

dunstonh

A quick one. I've never used an IFA but a friend has asked for advice, she says her adviser is independent but charges 3% a year, which  I think is high. What's a spread for reasonable IFA charges?

I dont believe any IFA will charge 3% a year.   Indeed, I don't think many providers/platforms would allow it to be that high.

The most common ongoing advice charge is 0.50% p.a.   However, smaller values tend to have 1% and as the values get higher, it tapers to 0.75% and then 0.50%.   I don't know of any IFA firm that charges more than 1%.

£390k would typically be in the  0.50-0.75% ballpark.

Even if you include all charges (adviser, platform and investment) you wouldnt expect it to be anywhere near that.  £390k could easily be around 1.1% all in (0.75% plus 0.15% plus 0.18 = 1.08%)

Albermarle

talexuser said:

A quick one. I've never used an IFA but a friend has asked for advice, she says her adviser is independent but charges 3% a year, which  I think is high. What's a spread for reasonable IFA charges?

I think she has got confused, and probably was told there would be an initial charge of 3% to get everything started.

talexuser

Could well be, I didn't want to seem to pry, but was asked for advice and tried to confirm several times that it was independent and 3% (not St James Place or the bank or something) but she was adamant and is a litlle naive in financial matters. I tried to emphasis the risk/reward tilt of investing and having a liquid float of forseeable costs and never having to sell during a downturn.
Thanks to dunstonh for the heads up.

poseidon1

talexuser said:

She has an inheritance of well over 390k sitting in a bank at 1.05%. I have had some words about this, but she does not want online savings, hopefully she will now go to the Yorkshire branch near us where she should be able to at least double or triple that rate on 120k at least.
She needs around that amount reasonably liquid because of a disabled brother she takes care of who may need care costs, but I reckon the rest should be in low risk bonds/equities for a better inflation protection. 

Your reference to your friend looking after a disabled sibling and funds received by inheritance, makes me wonder whether some or all of the cash you mention is actually held on trust for the disabled brother.

If a trust is involved, then your friend is under a fiduciary trustee duty to produce best outcomes for her brother which may mean establishing a trustee investment portfolio. This could be the primary reason for seeking the services of an IFA , however providing investment advice in a trust context is a specialist area. Not all IFAs have the necessary competencies.

Also there is a vanishingly small number of savings institutions that provide banking or saving products for sizeable trust funds.

If your friend has asked for advice, perhaps she could clarify if these funds involve a trust for her brother, which does complicate matters so that it is no longer a simple question of quantum of fees chargeable, but also adviser competency to advise in the 1st place.

talexuser

No trust involved, the inheritance may have been be split between the siblings, but I doubt it very much. They are church going people and the brother is not capable of looking after himself in the most degree, I doubt very much that any power of attourney is involved, but if any further representations are made that is something I should confim. At the moment from what I know of them, it is very likely the sister would inherit and be justifiably trusted to look after her brother.

poseidon1

talexuser said:

No trust involved, the inheritance may have been be split between the siblings, but I doubt it very much. They are church going people and the brother is not capable of looking after himself in the most degree, I doubt very much that any power of attourney is involved, but if any further representations are made that is something I should confim. At the moment from what I know of them, it is very likely the sister would inherit and be justifiably trusted to look after her brother.

Hear everything you are saying.

However If no trust was even contemplated on behalf of the son by the parents (and I would be surprised if a competent solicitor had not suggested this), that leaves him in a vulnerable position if something happens to his sister  (death, incapacity, etc) and she has made no provision for someone to step into her shoes to legally look after his interests.

I note  in this regard, you consider that there is  probably not even  a power of attorney in exsistence on his behalf which in the circumstances appears less than ideal.

In any event I  appreciate this is not the reason you commenced this thread, so I end my observations on this point.

Bostonerimus1

talexuser said:

Could well be, I didn't want to seem to pry, but was asked for advice and tried to confirm several times that it was independent and 3% (not St James Place or the bank or something) but she was adamant and is a litlle naive in financial matters. I tried to emphasis the risk/reward tilt of investing and having a liquid float of forseeable costs and never having to sell during a downturn.
Thanks to dunstonh for the heads up.

Right now your friend needs to stop and do nothing more than placing the money in a savings account. They are obviously not that financially knowledgeable and they need to do some reading and self educating before making any decisions or getting involved with financial advisors that might cost them a lot of money. You should steer them towards DIY simplicity and safety until they understand the basics.

Albermarle

poseidon1 said:

talexuser said:

No trust involved, the inheritance may have been be split between the siblings, but I doubt it very much. They are church going people and the brother is not capable of looking after himself in the most degree, I doubt very much that any power of attourney is involved, but if any further representations are made that is something I should confim. At the moment from what I know of them, it is very likely the sister would inherit and be justifiably trusted to look after her brother.

Hear everything you are saying.

However If no trust was even contemplated on behalf of the son by the parents (and I would be surprised if a competent solicitor had not suggested this), that leaves him in a vulnerable position if something happens to his sister  (death, incapacity, etc) and she has made no provision for someone to step into her shoes to legally look after his interests.

I note  in this regard, you consider that there is  probably not even  a power of attorney in exsistence on his behalf which in the circumstances appears less than ideal.

In any event I  appreciate this is not the reason you commenced this thread, so I end my observations on this point.

I note  in this regard, you consider that there is  probably not even  a power of attorney in exsistence on his behalf which in the circumstances appears less than ideal

If the brother has mental capacity issues, then they will be unable to sign consent for a PoA.
An alternative is to apply for the sister to apply for a deputyship for finances, but if she has all the money in her account anyway, then probably not necessary.
Also if he has no money in his name then he can get benefits, council care etc .