Do You Need Financial Advice? When To Get It, When Not To Get It Discussion Area
Comments
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All this seems like good advice but he says that if we decide to take his advice he will produce a report which will cost £800. This seems like a large amount for a relatively small investment, but as he's the only IFA we have seen, we have nothing to compare the charge to. Can anyone tell me if this charge seems expensive or whether it would be good value?
The advice seems good based on what you say.
The fee is high. The commission option would be around £420 for that amount. However, the problem is that fee basis is often more expensive than commission for small transactions. The IFA has actually been a little silly in how he has positioned this. he should have told you his fee for advice was £800. Therefore you are paying for the advice, not the product. The product would then have no fee/commission. He has now left himself open to giving you advice whilst you take the advice and do it elsewhere cheaper.
it is possible that his fee is £800 whether you invest £14,000 or £140,000. That is increasingly common.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thank you for your response/advice.
So would it be better for us to go with an IFA on a commission basis, or go through a discount broker?0 -
hisneilness wrote: »So would it be better for us to go with an IFA on a commission basis, or go through a discount broker?
Do you know what funds to invest in if you go DIY?
If the answer is yes then do it yourself. If the answer is no then see if you can find an IFA willing to transact on commission basis.0 -
hisneilness wrote: »Thank you for your response/advice.
So would it be better for us to go with an IFA on a commission basis, or go through a discount broker?
The point of using an IFA that charges on a fee basis (provided it really is a proper fee basis, and not a percentage basis where the fee earned will be dependent on how much they persuade you to invest) is to try to avoid the long-standing problem of "commission bias" that has plagued the industry. Dependent on the sum involved it won't necessarily be cheaper though it should be of more value than potentially biased advice that generates commission.
The problem with commission is that advisers are reluctant to sell products that pay them little or no commission and will usually have little knowledge of products that pay no commission. Some products pay better commission than others. If you want objective advice on a fuller and generally more rewarding range of investments then you are more likely to get that from a proper fee-based adviser.
Due to the problems of bias, the FSA will ban IFAs from selling on commission from 2013 but they will continue to be allowed to work on a precentage basis - which is the way most existing commission-based IFAs are likely to go.
But paying £800 will hugely effect your returns and it's hard to know in advance the value of the advice you'll get when the basic qualifications currently required for IFAs are minimal. Most unit trusts pay the IFA an ongoing "trail commision" of 0.5% pa; a fee-based IFA should rebate that commission back to you and not keep it himself.
If you've decided you want to invest in unit trusts then read the guide by Investor's Chronicle here: http://www.investorschronicle.co.uk/InvestmentGuides/Funds/article/20080616/7fe8eca8-3ba1-11dd-b45c-0015171400aa/Funds-unit-trusts-investment-trusts-and-Oeics.jsp You can read their other guides if interested in the alternatives.
Worth noting their comment that "Investors looking for a more informed approach to choosing a good investment recognise that the performance record of a fund should come some way down the checklist. Right at the top are the issues of risk and charges.".
Doing it yourself would give you full control, would save you money, and isn't difficult. Best Invest at www.bestinvest.co.uk give good advice on allocation and choosing funds and Hargreaves Lansdown at www.h-l.co.uk are used by many people on this board.0 -
Thank you for your responses they have been very helpful.0
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I have had several jobs in the last fifteen years and as a result have five pensions varying in length from five months to five years. Should I get some advice about what to do about these different pensions to get the maximum benefit from them?
If so, where?0 -
I have had several jobs in the last fifteen years and as a result have five pensions varying in length from five months to five years. Should I get some advice about what to do about these different pensions to get the maximum benefit from them?
If so, where?
if you cant DIY then you should IFA. Ignore all the other types.
https://www.unbiased.co.uk is the UK database of IFAs. You can postcode search (untick the option that defaults to show only paying IFAs if you want a longer list of local firms).I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Hi, my family are trying to help my elderly father who has just sold his home and gone into residential care. We've been recommended an IFA, who after an initial meeting, has offered a report for 750 pounds, and then a one-off charge of 2% of the amount invested plus an annual charge of 0.5% to manage the portfolio. This 2% plus 0.5% is quite a lot of money, as my father has about 600,000 to invest.
Would this be value for money? I'm concerned that my father might only live a year or two, in which case paying 12,000 now seems an awful lot. On the other hand, neither he nor the family are able to take on the work of setting up a variety of savings accounts or buying into stocks and shares etc. And we would need advice on tax issues.
Is this arrangement the norm or would most IFAs offer an hourly fee for one-off advice and setting up the investments, which is what we need? He is not going to be interested in investments that involve much risk. He just needs to maximise his income from the lump sum. Any advice much appreciated.0 -
You'll probably save a lot of money by finding someone willing to do the work on an hourly fee basis. I've got to say that charging £750 PLUS 2% and 0.5% per year strikes me as ridiculously expensive. Most commission based IFAs apparently average under the 2% when they're doing the whole job (i.e. including the report) on that basis.DoratheExplorer wrote: »Hi, my family are trying to help my elderly father who has just sold his home and gone into residential care. We've been recommended an IFA, who after an initial meeting, has offered a report for 750 pounds, and then a one-off charge of 2% of the amount invested plus an annual charge of 0.5% to manage the portfolio. This 2% plus 0.5% is quite a lot of money, as my father has about 600,000 to invest.
Would this be value for money? I'm concerned that my father might only live a year or two, in which case paying 12,000 now seems an awful lot. On the other hand, neither he nor the family are able to take on the work of setting up a variety of savings accounts or buying into stocks and shares etc. And we would need advice on tax issues.
Is this arrangement the norm or would most IFAs offer an hourly fee for one-off advice and setting up the investments, which is what we need? He is not going to be interested in investments that involve much risk. He just needs to maximise his income from the lump sum. Any advice much appreciated.
Depending on where you're based, you should be able to get a professional working for you for under £250 an hour, so even assuming this takes 2 full business days of that person's time, the cost should be no higher than £4,000. If you're not looking for ongoing service, there's no excuse for charging an annual retainer.I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
DoratheExplorer wrote: »Would this be value for money? I'm concerned that my father might only live a year or two, in which case paying 12,000 now seems an awful lot. On the other hand, neither he nor the family are able to take on the work of setting up a variety of savings accounts or buying into stocks and shares etc. And we would need advice on tax issues.
No I would say that it's terrible value for money. At the most an IFA working on fee basis would charge around £1500-£2000 for doing this.
See this thread where two IFAs set out their charging structure - posts 25 and 29 specifically.
http://forums.moneysavingexpert.com/showthread.php?t=3044404&page=2&highlight=Is this arrangement the norm or would most IFAs offer an hourly fee for one-off advice and setting up the investments, which is what we need?
Do you not want the IFA to monitor the investment side of things on an ongoing basis?0
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