IFA

talexuser

I managed to get more on the saga and it is perhaps not as bad as the story that started this thread. The 3% is indeed an initial price as previously suggested above, and the ongoing is 1% a year.

There is no power of attourney - the IFA is setting up a trust for the disabled brother in case the sister dies first so the half inheritance remains with the brother and does not go automatically go to the sisters husband in her estate.

The brother is legally able to sign a will and this will give the sister his half of the inheritance if he pre-deceases first.

I assume this is then a more resonable charge if not a market leading one? 

Albermarle

If all the funds of £390K are involved, then 3%  and 1 % is still high , especially the 3%.

If only part of the funds are involved, then it looks more normal.

Normally trusts are set up by solicitors, not IFA's but they can of course help the process.
Trusts are normally to be avoided, but a disabled persons trust can be an exception to that.

talexuser

I advised the 3% seems high, I assume the trust is for half the amount, and a solicitor must be involved, hopefully his is not a seperate charge, and hopefully the 3% reflects that part included.

dunstonh

talexuser said:

I advised the 3% seems high, I assume the trust is for half the amount, and a solicitor must be involved, hopefully his is not a seperate charge, and hopefully the 3% reflects that part included.

Percentage needs context.  I know an IFA where his initial charge starts at 5% which could be cheaper than 3%.   That is because he tapers it down with the amount and has a cap.      Most IFAs have cap and collars and/or tiering on their charges to prevent a flat percentage fee becoming obscene.

3% on £390k is greedy.     1% to 1.5% would be a more reasonable ballpark on your figure.

talexuser

Thank you for the info, if the inheritance is half for each, and thus only half in a trust, does that affect the result?

Albermarle

talexuser said:

Thank you for the info, if the inheritance is half for each, and thus only half in a trust, does that affect the result?

Normally the money in the trust would need managing, so the IFA may well stay involved for that.

poseidon1

talexuser said:

I managed to get more on the saga and it is perhaps not as bad as the story that started this thread. The 3% is indeed an initial price as previously suggested above, and the ongoing is 1% a year.

There is no power of attourney - the IFA is setting up a trust for the disabled brother in case the sister dies first so the half inheritance remains with the brother and does not go automatically go to the sisters husband in her estate.

The brother is legally able to sign a will and this will give the sister his half of the inheritance if he pre-deceases first.

I assume this is then a more resonable charge if not a market leading one? 

Interesting, as I suspected there is indeed a trust arrangement  in the mix,  albeit by way of sister diverting half her inheritance ( £195k ?) into a suitable trust for her brother. Hopefully a qualifying Vulnerable Person Trust if he fits the HMRC definition.

Since IFAs do not purport to have the competency to draft bespoke trust documents, have to assume the 3% fee also covers the services of an appropriately qualified lawyer to draft the trust deed, register the trust on HMRC's trust register and set up the trust for income tax self assessment depending on the nature of the trust assets going forward.  If the 3 % does not include these elements I would be concerned about exactly what  the IFA is providing for that charge.

Going forward, if the IFA proceeds to invest the son's trust monies in a conventional portfolio of unit trust funds generating taxable income and potential capital gains, does the 1% annual fee also encompass the accounting and tax compliance costs for submitting the annual trust tax returns, not to mention the son's personal self assessment obligations if trust income is distributed to him? Doubtful I would have thought.

In any event this entire matter has transpired to be far more complex than the basic cost of IFA advice, with a number of additional 'cost' elements that have nothing to do with investment advice. 

The sister should ascertain what other ancillary  recurring costs can be expected in administering the trust, assuming  the funds are to be invested conventionally rather than in Investment Bonds.

boingy

If nothing else she should ask one or two other IFAs for their view.

talexuser

Thanks to everyone, I will have another chat and try to discreetly emphasise the relevant points made about which services incuded. Unforunately the first thing I asked is getting several quotes but she had already signed up.

michael1234

So first cards on the table. There are many financial advisors on this forum and I'm sure many are conscientious and do a good job. I am not one of them and I've regularly put my head above the proverbial parapet to say I don't like the industry.

Since we know the pot here lets stop talking in percentages - those who are taking your money love doing that. So your friend was charged £11,700 as a one off fee followed by £3900 annually or £325 every month. Enough to lease a brand new BMW every 3 years. 

And all that to just "advise" keeping the cash in a low rate savings account?