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  • FIRST POST
    • Twointhebush
    • By Twointhebush 20th Aug 19, 7:22 AM
    • 92Posts
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    Twointhebush
    What % To Invest Myself Rather Than Use IFA?
    • #1
    • 20th Aug 19, 7:22 AM
    What % To Invest Myself Rather Than Use IFA? 20th Aug 19 at 7:22 AM
    I'm due to inherit some money and I'll soon be meeting my IFA. What I'd like to consider before meeting him is should I set aside a percentage of the inheritance to invest myself, in order to avoid his fees? If I was to invest a proportion in Tracker Funds, Premium Bonds etc. I wouldn't need him to do that? I'd also fancy taking a punt on some shares, again I'd be able to do that myself I think? Or should I just stick with the IFA? I've already maxed out this year's pension and ISA contributions (I'm self-employed). Or is it part of my IFAs job to advise me on investments that he doesn't get a fee for, as well as those that he does?
Page 1
    • uk03878
    • By uk03878 20th Aug 19, 7:44 AM
    • 130 Posts
    • 102 Thanks
    uk03878
    • #2
    • 20th Aug 19, 7:44 AM
    • #2
    • 20th Aug 19, 7:44 AM
    My IFA charges a flat fee per year depending on the level of service. So the fee conversation you are having doesn't apply in mine.
    • Linton
    • By Linton 20th Aug 19, 7:50 AM
    • 11,250 Posts
    • 11,659 Thanks
    Linton
    • #3
    • 20th Aug 19, 7:50 AM
    • #3
    • 20th Aug 19, 7:50 AM
    The IFAs job is to assess your circumstances as a whole and provide you with a portfolio that he/she believes is appropriate to your needs providing as reasonable resiliance as possible to whatever happens in the markets. The job is not to "beat the index" if that means taking risks that jeopardise you achieving your objectives.


    You running a significant portfolio in parallel destroys the balance you have paid the IFA to provide. And the results are likely to be meaningless. If the market doesnt crash and your portfolio achieves double the return of the IFAs does that mean your portfolio is better? Probably not, it just means that the insurance the IFA provided for you was in the event not needed. Conversely if the market crashes and your portfolio tanks do you say your portfolio was rubbish or do you just curse your bad luck? If the IFA knows you are running a parallel portfolio perhaps he should deliberately de-risk the one he is setting up.



    Of course, if you want to just play its difficult to say you shouldnt, but dont come back here and say what a wonderful investor you are.
    • Albermarle
    • By Albermarle 20th Aug 19, 7:55 AM
    • 1,559 Posts
    • 995 Thanks
    Albermarle
    • #4
    • 20th Aug 19, 7:55 AM
    • #4
    • 20th Aug 19, 7:55 AM
    I think typically an IFA will only include investments when calculating a % fee. Cash savings , premium bonds etc are normally kept separate( unless of course you want them to be included) ..
    Not sure though how things like tracker funds being held separately would be handled.
    • Audaxer
    • By Audaxer 20th Aug 19, 8:22 AM
    • 1,872 Posts
    • 1,173 Thanks
    Audaxer
    • #5
    • 20th Aug 19, 8:22 AM
    • #5
    • 20th Aug 19, 8:22 AM
    I'm due to inherit some money and I'll soon be meeting my IFA. What I'd like to consider before meeting him is should I set aside a percentage of the inheritance to invest myself, in order to avoid his fees? If I was to invest a proportion in Tracker Funds, Premium Bonds etc. I wouldn't need him to do that? I'd also fancy taking a punt on some shares, again I'd be able to do that myself I think? Or should I just stick with the IFA? I've already maxed out this year's pension and ISA contributions (I'm self-employed). Or is it part of my IFAs job to advise me on investments that he doesn't get a fee for, as well as those that he does?
    Originally posted by Twointhebush
    I would be a bit concerned if the IFA was taking a percentage of money I bought Premium Bonds with. If you think it would be best to put your money in tracker funds that is fine, but if so I wonder why you want to keep the rest of your existing investments with the IFA. What percentage fee are you paying your IFA for managing your existing investments? Are you confident that your existing investments net of fees is producing better returns than you would get by investing in a portfolio of low cost tracker funds?
    • SonOf
    • By SonOf 20th Aug 19, 9:03 AM
    • 1,451 Posts
    • 1,719 Thanks
    SonOf
    • #6
    • 20th Aug 19, 9:03 AM
    • #6
    • 20th Aug 19, 9:03 AM
    If I was to invest a proportion in Tracker Funds, Premium Bonds etc.
    You mention tracker funds. So, that means you are considering investing in a portfolio of single sector funds. Probably around 8-12 to get wide coverage. Do you have experience and knowledge on how to build and manage a portfolio?

    Why Premium Bonds? Are you a higher rate taxpayer who has utilised every other option first?

    I'd also fancy taking a punt on some shares, again I'd be able to do that myself I think?
    IFAs invest your money. They dont take punts. So, you would have to do that yourself.

    Or is it part of my IFAs job to advise me on investments that he doesn't get a fee for, as well as those that he does?
    I think you have misunderstood the fee arrangements. You pay the IFA for advice. No provider or investment pays the IFA anything.

    However, most IFAs will not charge against certain things (deposit based) unless you ask them to do the research. NS&I, for example, gets a lot of referrals from IFAs and even has dedicated websites for IFAs.
    • cfw1994
    • By cfw1994 20th Aug 19, 9:34 AM
    • 407 Posts
    • 354 Thanks
    cfw1994
    • #7
    • 20th Aug 19, 9:34 AM
    • #7
    • 20th Aug 19, 9:34 AM
    I think you have misunderstood the fee arrangements. You pay the IFA for advice. No provider or investment pays the IFA anything.
    Originally posted by SonOf
    Curious: you make it sound like a fixed fee. I appreciate some IFAs will work on that,....but I thought most IFAs charged based on a % of the value of the sum they manage (or perhaps took in to begin with?) - perhaps 0.5-1%?
    • bowlhead99
    • By bowlhead99 20th Aug 19, 9:52 AM
    • 9,344 Posts
    • 17,002 Thanks
    bowlhead99
    • #8
    • 20th Aug 19, 9:52 AM
    • #8
    • 20th Aug 19, 9:52 AM
    Curious: you make it sound like a fixed fee. I appreciate some IFAs will work on that,....but I thought most IFAs charged based on a % of the value of the sum they manage (or perhaps took in to begin with?) - perhaps 0.5-1%?
    Originally posted by cfw1994
    The fee paid will likely vary depending on pot size because larger pots may be worthy of more complex solutions, and the IFA may be on the hook for life for complaints against unsuitable advice, so his insurance costs will be higher with more assets being advised.

    People often like to hear the ballpark IFA cost in percentage terms as other costs, and returns, are also in percentage terms. But if the advice is explained as (say) 1.3% initial on 200k, it could also be explained as 2600. It will not necessarily be 13,000 on 1m or only 13 on 1k.
    • SonOf
    • By SonOf 20th Aug 19, 10:30 AM
    • 1,451 Posts
    • 1,719 Thanks
    SonOf
    • #9
    • 20th Aug 19, 10:30 AM
    • #9
    • 20th Aug 19, 10:30 AM
    Curious: you make it sound like a fixed fee.
    Not sure how you inferred that.
    I appreciate some IFAs will work on that,....but I thought most IFAs charged based on a % of the value of the sum they manage (or perhaps took in to begin with?) - perhaps 0.5-1%?
    That is correct. However, it doesn't change the fact that it is the investor that pays it. Not the provider.
    • cfw1994
    • By cfw1994 11th Sep 19, 12:01 AM
    • 407 Posts
    • 354 Thanks
    cfw1994
    Not sure how you inferred that.


    That is correct. However, it doesn't change the fact that it is the investor that pays it. Not the provider.
    Originally posted by SonOf
    Ahh yes, I misread the post!
    As you were
    • AnotherJoe
    • By AnotherJoe 11th Sep 19, 8:29 AM
    • 15,918 Posts
    • 19,139 Thanks
    AnotherJoe
    I'm due to inherit some money and I'll soon be meeting my IFA. What I'd like to consider before meeting him is should I set aside a percentage of the inheritance to invest myself, in order to avoid his fees? If I was to invest a proportion in Tracker Funds, Premium Bonds etc. I wouldn't need him to do that? I'd also fancy taking a punt on some shares, again I'd be able to do that myself I think? Or should I just stick with the IFA? I've already maxed out this year's pension and ISA contributions (I'm self-employed). Or is it part of my IFAs job to advise me on investments that he doesn't get a fee for, as well as those that he does?
    Originally posted by Twointhebush

    Somewhat late to the party here but I think you are operating under a misunderstanding that just because you've told the IFA you have X in total they will charge based on X.

    They will charge based on whats under their management.

    It would be helpful for them to know that you have decided for whatever reason that there is Y you are managing yourself and then you can direct them on what basis you want Y considered - not at all, as a cash buffer (even if some is you investing yourself) and so on.
    However if you are happy to buy index trackers and gamble on some shares, do you need an IFA on a % basis? Why not just pay for a couple or whatever hours advice to get you started and have them focus perhaps on enhancing your tax and IHT positions and you then choose on what actual investments are bought?
    Depends what function you think the IFA is fulfilling. Is it to choose investments? Minimise tax, be that IHT, CGT income? Determine best order in which to liquidate investments? That is specialist knowledge that can be hard to DIY whereas no one has a crystal ball and no IFA can tell you which investments will do best next year, though they can advise on the % of equities vs bonds for a particular risk level. But once you are happy with that, you can choose within that whether to buy HSBC or VLS or whatever..
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • atush
    • By atush 11th Sep 19, 11:33 AM
    • 17,950 Posts
    • 11,397 Thanks
    atush
    You running a significant portfolio in parallel destroys the balance you have paid the IFA to provide.
    Not if the IFA has details of all your cash savings and investments.

    If you want to play around, by all means set your won bond ladder of cash, and open a S&S isa/Sipp to make some of your own investments and let the IFA handle the rest. Just make sure all planning is based on all your assets.
    • bostonerimus
    • By bostonerimus 11th Sep 19, 11:57 AM
    • 3,304 Posts
    • 2,624 Thanks
    bostonerimus
    I'd usually say that you should DIY all of the inheritance, and everything else too, because I don't think IFA's are generally worth their fees. But you saying you would like to "take a punt on some shares" gives me pause. You need a plan with specific goals and a strategy to get there that minimises any gambling aspects. A good IFA should give you that; I have no idea of the quality of your IFA.
    Misanthrope in search of similar for mutual loathing
    • SonOf
    • By SonOf 11th Sep 19, 3:14 PM
    • 1,451 Posts
    • 1,719 Thanks
    SonOf
    I'd usually say that you should DIY all of the inheritance, and everything else too, because I don't think IFA's are generally worth their fees.
    We recently took over the portfolio of a DIY investor (as we have many times before) and the charges were nearly half what he was paying previously. DIY does not automatically mean cheaper.


    edit: word "not" missing. Thanks Bowlhead.
    Last edited by SonOf; 11-09-2019 at 3:48 PM.
    • bowlhead99
    • By bowlhead99 11th Sep 19, 3:40 PM
    • 9,344 Posts
    • 17,002 Thanks
    bowlhead99
    We recently took over the portfolio of a DIY investor (as we have many times before) and the charges were nearly half what he was paying previously. DIY does automatically mean cheaper.
    Originally posted by SonOf
    I think you mean *doesn't* in the last sentence
    • SonOf
    • By SonOf 11th Sep 19, 3:48 PM
    • 1,451 Posts
    • 1,719 Thanks
    SonOf
    I think you mean *doesn't* in the last sentence
    Originally posted by bowlhead99
    slight difference in meaning!!!!
    • bostonerimus
    • By bostonerimus 11th Sep 19, 4:08 PM
    • 3,304 Posts
    • 2,624 Thanks
    bostonerimus
    We recently took over the portfolio of a DIY investor (as we have many times before) and the charges were nearly half what he was paying previously. DIY does not automatically mean cheaper.


    edit: word "not" missing. Thanks Bowlhead.
    Originally posted by SonOf
    Sure, but employing an IFA definitely means paying their fee and if the DIY investor has a bit of common sense they should be able to run their portfolio at less cost than having an IFA do it for them. I weep when I compare my total cost in the USA to DIY of 0.07% to the costs of around 1% or more that many people pay in the UK...and also many people in the US who are still beguiled by financial industry advertising. I imagine the lowest cost you could get in the UK would be around 0.5% for fund and platform fees.
    Last edited by bostonerimus; 11-09-2019 at 4:54 PM.
    Misanthrope in search of similar for mutual loathing
    • AnotherJoe
    • By AnotherJoe 11th Sep 19, 5:53 PM
    • 15,918 Posts
    • 19,139 Thanks
    AnotherJoe
    Sure, but employing an IFA definitely means paying their fee and if the DIY investor has a bit of common sense they should be able to run their portfolio at less cost than having an IFA do it for them. I weep when I compare my total cost in the USA to DIY of 0.07% to the costs of around 1% or more that many people pay in the UK...and also many people in the US who are still beguiled by financial industry advertising. I imagine the lowest cost you could get in the UK would be around 0.5% for fund and platform fees.
    Originally posted by bostonerimus
    I'm getting about 0.4% on my SL SIPP and would be 0.26% if I didn't have one fairly expensive fund out of the three in it.
    Too difficult to work out my HL fees because it's got a mix of funds, ITs ETFs and shares and whilst there's a max amount you pay on everything except funds, the rest have their own internal costs. Maybe one cold winter afternoon I'll have a stab at it.

    P.s. when you say 0.07% I presume you are excluding fund fees because vanguard aren't that cheap are they?
    Last edited by AnotherJoe; 11-09-2019 at 5:56 PM.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • bostonerimus
    • By bostonerimus 12th Sep 19, 12:29 AM
    • 3,304 Posts
    • 2,624 Thanks
    bostonerimus
    I'm getting about 0.4% on my SL SIPP and would be 0.26% if I didn't have one fairly expensive fund out of the three in it.
    Too difficult to work out my HL fees because it's got a mix of funds, ITs ETFs and shares and whilst there's a max amount you pay on everything except funds, the rest have their own internal costs. Maybe one cold winter afternoon I'll have a stab at it.

    P.s. when you say 0.07% I presume you are excluding fund fees because vanguard aren't that cheap are they?
    Originally posted by AnotherJoe
    I own Vanguard funds on the US Vanguard platform and that means the platform costs are zero' it cost me nothing to buy and sell those funds. Th 0.07% is the weighted average of my fund fees, the lowest is 0.04% and the highest 0.16% for the actively managed Wellesley fund.
    Misanthrope in search of similar for mutual loathing
    • AnotherJoe
    • By AnotherJoe 12th Sep 19, 8:54 PM
    • 15,918 Posts
    • 19,139 Thanks
    AnotherJoe
    Wow. As you probably know they are about 3x that cost in the U.K.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
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