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  • FIRST POST
    • seb2020
    • By seb2020 13th Jun 19, 4:00 PM
    • 17Posts
    • 1Thanks
    seb2020
    Sipp - To use or not to use an IFA
    • #1
    • 13th Jun 19, 4:00 PM
    Sipp - To use or not to use an IFA 13th Jun 19 at 4:00 PM
    Is there any real benefit (financial or otherwise) in using a regulated Independent Financial Advisor or Financial Planner for the purposes of setting up and running a Sipp investment portfolio?

    What are your views on going down the DIY route (if you have the confidence to do so) and use a number of passive diversified tracker funds and managing the Sipp yourself?

    What are your reasons for:-

    1/ Not using an Independent Financial Advisor or Financial Planner for the purpose of choosing a Sipp funds portfolio.

    2/ Using an Independent Financial Advisor or Financial Planner to choose the Sipp funds portfolio.
Page 2
    • Lungboy
    • By Lungboy 14th Jun 19, 7:15 AM
    • 1,834 Posts
    • 2,089 Thanks
    Lungboy
    How much time would you expect to spend as an individual managing a self invested portfolio? Including researching funds, assets etc.

    And what happens if you are otherwise engaged (I’ll, v.busy, dealing with death etc) and things happen in the market? Is this a risk?
    Originally posted by lisyloo
    Zero, a single fund covering the global market means I need to do no further research (other than mayyyyybe a quick check every 6 months to make sure the fees are still competitive.)

    What happens to the market doesn't matter at all, unless there's a big drop and I'd try to find some extra cash to buy more units of the single fund while it's cheap.

    This is why passive investing is so appealing to me and others, it takes all of that stress and effort out of the equation.
    Last edited by Lungboy; 14-06-2019 at 7:17 AM.
    • Apodemus
    • By Apodemus 14th Jun 19, 7:26 AM
    • 1,463 Posts
    • 1,235 Thanks
    Apodemus
    ....itís impossible to outperform the market.
    Originally posted by dmelife
    What has outperforming the market got to do with it? I really donít get this fixation with ďthe marketĒ all the time! In a an entrepreneurial economy, I would hope that ďthe marketĒ is taking greater risks than I will take with my retirement investments. My only goal is for my investments to sustainably provide me with a comfortable standard of living through my retirement years. It matters not a jot if ďthe marketĒ is beating me or I am beating it. In life there will always be people earning more or earning less than you!
    • uk03878
    • By uk03878 14th Jun 19, 7:27 AM
    • 134 Posts
    • 106 Thanks
    uk03878
    Those 3 portfolios are tracking really closely.

    If you went with Vanguard on a cheap SIPP platform, with a e.g. £500k portfolio you should be paying <0.4% in fees/charges in total

    With your IFA portfolio, what is total % in charges? (IFA+Platform+fund+dealing)?

    If you plot out the effect of that difference in charges over e.g. 30 years (or whatever period suits you) what is the overall cost to you?
    Originally posted by beamyup
    Platform 0.25%
    IFA (flat fee but works out at) 0.3%
    OCF on this portfolio 0.69%

    It is something I am worried about - I am currently putting my partners various SIPPs (only £35k) into a Vanguard 60:40 on Cavendish - well I would but their platform (Fidelty) is not working at the moment on creating new customers. (well it wasn't last week - they confirmed it in an email)
    I will use the IFA to initially get me into retirement and if I don't see the value (and as mentioned above in some of the posts, its more than the portfolio) compared to my partners SIPP then I will change over the next few years
    • beamyup
    • By beamyup 14th Jun 19, 8:22 AM
    • 146 Posts
    • 43 Thanks
    beamyup
    According to a quick excel

    Platform 0.25%
    IFA (flat fee but works out at) 0.3%
    OCF on this portfolio 0.69%
    Originally posted by uk03878
    My Assumptions
    6% growth PA
    £500K fund today
    No further investment or withdrawal
    vs a low cost SIPP of 0.4% total charges

    Result : That difference in fees would cost you about £500k of cash by the end (which is less in today's money value of course)!
    • OldMusicGuy
    • By OldMusicGuy 14th Jun 19, 8:32 AM
    • 1,086 Posts
    • 2,265 Thanks
    OldMusicGuy
    How much time would you expect to spend as an individual managing a self invested portfolio? Including researching funds, assets etc.

    How much time in spent gaining the initial knowledge.

    This isnít my bag, I donít want to take the risk and I donít want to spend my time doing it but it would be interesting to see the numbers.

    And what happens if you are otherwise engaged (Iíll, v.busy, dealing with death etc) and things happen in the market? Is this a risk?
    Originally posted by lisyloo
    I think you may be misunderstanding how a simple low cost portfolio using multi-asset funds works.I am not managing anything on a day to day basis, and I don't need lots of knowledge or time to spend worrying about how the funds are performing or keeping up to date with anything. I operate largely on a "fire and forget" basis.

    It's pretty much effortless. And it costs far less than I would pay for an IFA. It's globally diversified, and the funds I have chosen are there to minimize downside risk at the cost of upside. Seems to be working so far.

    It has taken me about 5 years of spending time on this forum, reading various books and trying various strategies (including working with an FA) to reach this point and I accept there are many people who don't want to do that, which is why it's fine to use an IFA. But now I am at that point and an IFA would add no value for me at a lot of extra cost.
    • Prism
    • By Prism 14th Jun 19, 8:39 AM
    • 1,166 Posts
    • 879 Thanks
    Prism
    I like the smoothness of the IFA portfolio - this doesn't really show the fact that the IFA balanced portfolio can change maybe twice a year (this portfolio started to be used in Jan 2019 so history doesnt really make any sense - but its good for reference)
    Originally posted by uk03878
    This is a really important point that people seem to miss when just looking at returns and charges, especially during retirement. A lower level of volatility is prefered when withdrawing and therefore if the IFA portfolio can produce a good return for a lower level of risk then that is worth considering. If the IFA can also out perform then thats great too.

    Way too much time is spent worrying about charges compared to thinking about someone's goals. Things get more complicated when you get close to retirement.
    • Albermarle
    • By Albermarle 14th Jun 19, 8:39 AM
    • 1,582 Posts
    • 1,023 Thanks
    Albermarle
    I think IFA or not IFA, is also down to personal preference .
    Some people like to DIY either because they enjoy it/are interested in it.
    Or that they do not like to give control of their money to a third party .

    So its not just an argument about value for money or not .
    • lisyloo
    • By lisyloo 14th Jun 19, 8:42 AM
    • 25,439 Posts
    • 13,645 Thanks
    lisyloo
    I think you may be misunderstanding how a simple low cost portfolio using multi-asset funds works.
    Originally posted by OldMusicGuy
    Yes and thank you (and lungboy - that was almost lunchbox !!)

    Good to come on here and learn something on a polite thread.

    I don’t think I’ll be changing my ways.
    Partly because Im not inclined, but also because there is only so much time to go round various responsibilities (I’m in the elderly parent phase).
    • fred246
    • By fred246 14th Jun 19, 9:11 AM
    • 1,824 Posts
    • 1,137 Thanks
    fred246
    I was reading yesterday on another forum about germans having a keen sense of value for money and not tolerating rip offs. This was in relation to breakdown cover. The germans have ADAC which is less than £43 a year. Similar AA cover is £135. I was alerted to this one year when the AA was more than my car insurance. I remember a german telling me they wouldn't tolerate UK football ticket prices. You can watch Bayern Munich for £13 a ticket. These IFA prices are outrageous. You can always tell there is a problem when they quote percentages. How do you pay IFAs these days. You're not going to write a cheque out for £4k for a 'pension review' are you? I bet they take it out of the pension so you don't really spot it. I would be happy to use an IFA if they charged reasonable prices for the service.
    • beamyup
    • By beamyup 14th Jun 19, 9:16 AM
    • 146 Posts
    • 43 Thanks
    beamyup
    I was reading yesterday on another forum about germans having a keen sense of value for money and not tolerating rip offs. This was in relation to breakdown cover. The germans have ADAC which is less than £43 a year. Similar AA cover is £135. I was alerted to this one year when the AA was more than my car insurance. I remember a german telling me they wouldn't tolerate UK football ticket prices. You can watch Bayern Munich for £13 a ticket. These IFA prices are outrageous. You can always tell there is a problem when they quote percentages. How do you pay IFAs these days. You're not going to write a cheque out for £4k for a 'pension review' are you? I bet they take it out of the pension so you don't really spot it. I would be happy to use an IFA if they charged reasonable prices for the service.
    Originally posted by fred246
    I agree with this - I think there is a real problem with IFA charges however I do not know who will have the bottle to do anything to fix it!

    MSE?

    Its been fixed already a few times, now the advice is probably high quality - less rip-offs. But the charges are too much.

    Maybe it needs a disruptive fintech type company to come along and undercut IFAs significantly while still providing great advice. Like what is happening in other financial areas.
    • lisyloo
    • By lisyloo 14th Jun 19, 9:21 AM
    • 25,439 Posts
    • 13,645 Thanks
    lisyloo
    I was reading yesterday on another forum about germans having a keen sense of value for money and not tolerating rip offs. This was in relation to breakdown cover. The germans have ADAC which is less than £43 a year. Similar AA cover is £135. I was alerted to this one year when the AA was more than my car insurance. I remember a german telling me they wouldn't tolerate UK football ticket prices. You can watch Bayern Munich for £13 a ticket. These IFA prices are outrageous. You can always tell there is a problem when they quote percentages. How do you pay IFAs these days. You're not going to write a cheque out for £4k for a 'pension review' are you? I bet they take it out of the pension so you don't really spot it. I would be happy to use an IFA if they charged reasonable prices for the service.
    Originally posted by fred246
    Yes and no.
    If you don’t use your IFA then you could say the prices are high.
    I do actually use mine and they do a lot of work that I don’t explicitly pay for, for example advising whether to move old pensions.
    I did ask how to do that DIY on here and the answers I got did not fulfill the requirement, for example on here i was told to enquire about “guaranteed benefits”.
    I was told no there weren’t any, there were however some non-guaranteed benefits that I didn’t find out about DIY even with forum help as I didn’t ask exactly the right questions.

    Yes you are correct you don’t see the charges although I can drill down and see mine if I wanted to.

    Whilst I agree the savings are meaningful, it still relys on there not being anything you haven’t thought of when choosing your platform/funds/strategy/tax treatment.
    Last edited by lisyloo; 14-06-2019 at 9:28 AM.
    • fred246
    • By fred246 14th Jun 19, 9:56 AM
    • 1,824 Posts
    • 1,137 Thanks
    fred246
    One area where prices were 'fixed' was boiler replacement. British Gas started to charge £3K for a boiler.
    https://www.boilersprices.co.uk/british-gas-boilers-prices/
    All the plumbers started to copy these outrageous prices. I had a plumber round.
    "How much for a new boiler?"
    "£2.5K"
    "Well the boiler is £700. That's £1800 then to connect two water pipes a gas pipe and an electrical cable?"
    "Er Er"
    "£1800 in labour? How many days to install?"
    "Er Er I'll do it in a day."
    "£1800 a day labour?"
    "OK I'll install it for £1300 £700 boiler £600 labour"
    If you challenge outrageous prices you often get a better deal.
    Last edited by fred246; 14-06-2019 at 10:03 AM.
    • OldMusicGuy
    • By OldMusicGuy 14th Jun 19, 10:17 AM
    • 1,086 Posts
    • 2,265 Thanks
    OldMusicGuy
    This is a really important point that people seem to miss when just looking at returns and charges, especially during retirement. A lower level of volatility is prefered when withdrawing and therefore if the IFA portfolio can produce a good return for a lower level of risk then that is worth considering. If the IFA can also out perform then thats great too.

    Way too much time is spent worrying about charges compared to thinking about someone's goals. Things get more complicated when you get close to retirement.
    Originally posted by Prism
    I'll have to disagree that a DIYer can't manage volatility whereas an IFA can. My choice of funds was made to reduce volatility (at the expense of upside) and it appears to work, based on its performance during corrections over the last 18 months. You don't need some specialist skill to do this.

    However, I agree that goals are most important, along with understanding your attitude to risk. That's what enabled me to construct an investment strategy that is low cost and lets me sleep at night. The mistake that most people make when they start out on their own is "fund chasing" (I know I did). Once I did some detailed long term planning and defined my objectives, I was able to create a strategy that met those objectives.
    • Prism
    • By Prism 14th Jun 19, 10:20 AM
    • 1,166 Posts
    • 879 Thanks
    Prism
    One area where prices were 'fixed' was boiler replacement. British Gas started to charge £3K for a boiler.
    https://www.boilersprices.co.uk/british-gas-boilers-prices/
    All the plumbers started to copy these outrageous prices. I had a plumber round.
    "How much for a new boiler?"
    "£2.5K"
    "Well the boiler is £700. That's £1800 then to connect two water pipes a gas pipe and an electrical cable?"
    "Er Er"
    "£1800 in labour? How many days to install?"
    "Er Er I'll do it in a day."
    "£1800 a day labour?"
    "OK I'll install it for £1300 £700 boiler £600 labour"
    If you challenge outrageous prices you often get a better deal.
    Originally posted by fred246
    True but then you could also argue sometimes you get what you pay for. If you pay too little for a service then you can get a poor job. Price isn't everything. If an IFA is doing what you consider a poor job for their cost then find another. Same for a poor fund if doing it yourself. The trouble is you need to leave it a good while before making that decision.
    • Prism
    • By Prism 14th Jun 19, 10:25 AM
    • 1,166 Posts
    • 879 Thanks
    Prism
    I'll have to disagree that a DIYer can't manage volatility whereas an IFA can. My choice of funds was made to reduce volatility (at the expense of upside) and it appears to work, based on its performance during corrections over the last 18 months. You don't need some specialist skill to do this
    Originally posted by OldMusicGuy
    I never said a DIY investor couldn't. You do it. I do it. However do you really think the average person in the population is happy managing diversification during variable withdrawal to keep standard deviation within scope. Not many people I know personally would want to do that or have the slightest bit of interest in trying.
    • waveydavey48
    • By waveydavey48 14th Jun 19, 10:53 AM
    • 63 Posts
    • 86 Thanks
    waveydavey48
    Sadly it's a fact that many people will exploit the ignorance of others to cheat them.

    I'm sure there are a great many IFA's who are hardworking, diligent and worth every penny they charge (some of them come on here give great info to the rest of us). I couldn't do what they do so fair play to them.

    I think the problem is that the average customer just doesn't have the knowledge to know whether what they are getting is good advice/value for money. If you go to an specialist for their expertise then self-evidently you don't know enough to sort the situation out for yourself and that disparity leaves you open to potential exploitation.
    • seb2020
    • By seb2020 14th Jun 19, 12:15 PM
    • 17 Posts
    • 1 Thanks
    seb2020
    Surely some passive tracker funds which provide good diversification (for example only: Vanguard Life Strategy funds) would be sufficient to hold within a Sipp without the need to be constantly managing the fund and requiring an IFA.
    • Prism
    • By Prism 14th Jun 19, 12:35 PM
    • 1,166 Posts
    • 879 Thanks
    Prism
    Surely some passive tracker funds which provide good diversification (for example only: Vanguard Life Strategy funds) would be sufficient to hold within a Sipp without the need to be constantly managing the fund and requiring an IFA.
    Originally posted by seb2020
    Yup, that will likely do it assuming you can pick the correct risk level. Trouble is it seems that a lot don't do that. It can begin to go wrong when investors start picking individual funds to try and increase their returns - chopping and changing too much. It can work but ups the research requirement a bit.

    Then later unless you are willing to read up on withdrawal then maybe an IFA to help with that strategy.
    • OldMusicGuy
    • By OldMusicGuy 14th Jun 19, 12:57 PM
    • 1,086 Posts
    • 2,265 Thanks
    OldMusicGuy
    Surely some passive tracker funds which provide good diversification (for example only: Vanguard Life Strategy funds) would be sufficient to hold within a Sipp without the need to be constantly managing the fund and requiring an IFA.
    Originally posted by seb2020
    Absolutely, that's the whole point of them. I'm very happy with that approach, as are many others.
    • bostonerimus
    • By bostonerimus 14th Jun 19, 1:16 PM
    • 3,339 Posts
    • 2,654 Thanks
    bostonerimus
    Mine is approx 1.44% but that includes all ongoing advice required about anything.
    I say approx because funds have different %s so each switch could alter the figure slightly.

    How much time would you expect to spend as an individual managing a self invested portfolio? Including researching funds, assets etc.

    How much time in spent gaining the initial knowledge.

    This isnít my bag, I donít want to take the risk and I donít want to spend my time doing it but it would be interesting to see the numbers.

    And what happens if you are otherwise engaged (Iíll, v.busy, dealing with death etc) and things happen in the market? Is this a risk?
    Originally posted by lisyloo
    Using and IFA, or not, is a very personal decision and if you don't have the knowledge or confidence to DIY then you should probably seek advice. However, there is a lot of industry mis-information that can make DIY seem more difficult than it really is. With a bit of knowledge and a pretty simple plan you can successfully invest and generate income.
    I've been retired for 5 years and most of my money is in a simple 3 fund tracker portfolio. I don't "manage" it at all and I have a simple plan for withdrawals when I need to make them. I'm in the US and by doing DIY with Vanguard funds on the US Vanguard platform I keep my annual costs below 0.1%....that's just fund fees as I have zero platform or IFA fees. I feel that keeping known fixed costs low is better than trusting that and IFA can produce value over and above my simple investments strategy.
    Misanthrope in search of similar for mutual loathing
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