[Finance] Are IFA’s a waste of money for most people ?

[Weststander]

I use AJBELL for my ISA..havnt invested in any of their funds ..but find the platform and service very good.

This with bells on.

 

[LamieRobertson]

Stuck in your vehicle between the waves of monsoon?

Yep....fortunately I’m doing mainly small blocks of flats in Hove with no grass...but a domestic in Ditchling will probably be pushed onto tomorrow

 

[nicko31]

There are good and bad IFA's, unless you are really interested in investing they are probably still worth it if you can find a decent one

Sadly, some just take their 0.5 - 1% annual cut and do very little, not even a review.

The practice I hate is when they try to take a wedge for new money invested that involves no advice, just a paperwork exercise. I had an IFA that brought that in and we parted ways...

 

[nicko31]

I had a SIPP through a local firm of IFA's (@Rugrat has through his profession, knowledge of their vast wealth management portfolio. Last time I looked they managed £400m).

They actively invest in their limited very own funds, through a third party 'platform'.

The bottom line annual management charges, openly disclosed in periodic reports, were 1.58%. Add to that a few hundred quid a year in platform charges and minor admin fees. All above board.

But the compound effect of that circa 1.75%, in low inflation times, is devastating.


[1.58% of £400m is £6m annual income to this single owner director IFA limited company, he draws annual dividends in the £m's. Several key members of staff are paid 6 figure salaries.

My advice to any intelligent 18 or 21 year old is to take a career in wealth management, or a solicitor working in IHT/wills/trusts/estates.

Incredible income awaits you].


I proscatinated and finally took control myself. Vanguard, HL, iWeb, AJ Bell, are all far better value.

But, only do this if you have the wherewithal to properly carry out your own research, including checking fund charging.

If not, find a wealth manager with low annual charging.

For those that know the basics. Some like HL have set funds for various risk profiles, they charge 0.45% p.a which isn't bad

 

[Weststander]

For those that know the basics. Some like HL have set funds for various risk profiles, they charge 0.45% p.a which isn't bad

Similar for me and I like their website.

But I plan to have a look at lower charging platforms. [MENTION=27279]dazzer6666[/MENTION] and others gave good advice on this in the investments thread (some time in the last 9 months).

 

[LamieRobertson]

Stuck in your vehicle between the waves of monsoon?

Can someone turn the tap off

 

[Mancgull]

I am an IFA although one who specialises in pension work and pension transfers.
There are very many excellent IFAs out there and generally the standard of advisers has increased over the years due to tightening regulation and increasing need for qualifications. Obviously a good thing.

There are areas of finance where you can probably do things yourself. Investing in an ISA could be one of those. The AJ Bell platform is a decent one and Vanguard funds are good value although you should always check that the risk you are prepared to take, matches the fund.
However, there are other areas where it is very sensible to take advice, as getting it wrong and making a mistake can cost you a lot of money in tax or penalties of one sort of another.if you are looking for a good IFA Google 'vouched for' or 'unbiased' or better still take a recommendation from someone who has benefitted from their IFAs work.

 

[Lower West Stander]

As someone who works in the investment industry and someone who has an excellent IFA, I would say for anyone who has vaguely complex finances, they are extremely valuable.

Sure you can just bung it in an investment platform but as Hargreaves demonstrated on Woodford they aren’t always impartial.

Plus what about asset allocation? Bonds? Equities? Commodities? Etc Growth assumptions for pensions? Tax treatment on pensions? Final salary buyout assumptions? I could go on.

Sure there are some clueless ones but don’t underestimate the value of good ones.


Sent from my iPad using Tapatalk

 

[cardboard]

Fusion Wealth is the way forward

 

[Kazenga <3]

IFA here. To answer the OP, if somebody is just sticking you in a managed fund and slapping an ongoing charge on it, that's not proper financial planning and isn't worth the fee. There are many who charge 3% on every new contribution, just for telling you to fill your ISA allowance.. come on. As others have said, there are a multitude of inexpensive ready-made investment solutions out there now if all you want to do is try to grow your assets without any wider considerations.

A good IFA will create a plan taking into account your lifestyle (current and future anticipated/desired), identify potential cashflow pinch points, insurance shortfalls etc and put in place strategies to mitigate. Investments and tax efficiency is generally always a part of this, but really should only be considered as tools helping towards achieving the overall personalised plan. If an IFA's barometer is investment performance, they are doing it wrong IMO as the markets will do what the markets will do; all things being equal there is little alpha that can be added long-term vs a DIY Vanguard solution for example. When you come to decumulate assets, however, that is an entirely different ball game.

On the tax planning point, there is a fair amount that most accountants will not be qualified to advise on, eg pensions and trusts. A key distinction between accountants and IFAs on the tax planning side is also that an accountant's work is generally more backwards rather than forward-looking (not meant in a disparaging way). The most successful outcomes, particularly for business owners, are where there is synergy between a good accountant and an IFA.

It is true that all the information anybody needs to manage their own financial planning is out there. But most will not have the time and the inclination to stay abreast of annual allowances and regulation, or necessarily be able to interpret and apply it correctly. It is very easy to screw things up and then the consequences fall squarely on the individual, so there is also the value of having security and accountability. Many people also would not have the discipline to save/invest prudently without being given a prod!

That all said, there is undoubtedly an affordability issue. The costs of PII, software, investment research, licences, support staff and the amount of time spent, unfortunately, necessitate a minimum annual fee for a client to be viable from a business perspective. This is an unintended consequence of the FCA banning commission from being paid on investment advice (unless you are St James's Place!), as it means the charges simply aren't worth it unless the client has a certain level of wealth. The FCA aren't going to renege on this as they are very clear in their stance that commission encourages bias and malpractice, which was sadly true of the more unscrupulous 'advisers'. As such, good advice is now inaccessible for many. There needs to be far better financial education in schools for a start to combat this.

 

[Tim Over Whelmed]

My IFA is superb and provides significant value and confidence for me

 

[Weststander]

IFA here. To answer the OP, if somebody is just sticking you in a managed fund and slapping an ongoing charge on it, that's not proper financial planning and isn't worth the fee. There are many who charge 3% on every new contribution, just for telling you to fill your ISA allowance.. come on. As others have said, there are a multitude of inexpensive ready-made investment solutions out there now if all you want to do is try to grow your assets without any wider considerations.

A good IFA will create a plan taking into account your lifestyle (current and future anticipated/desired), identify potential cashflow pinch points, insurance shortfalls etc and put in place strategies to mitigate. Investments and tax efficiency is generally always a part of this, but really should only be considered as tools helping towards achieving the overall personalised plan. If an IFA's barometer is investment performance, they are doing it wrong IMO as the markets will do what the markets will do; all things being equal there is little alpha that can be added long-term vs a DIY Vanguard solution for example. When you come to decumulate assets, however, that is an entirely different ball game.

On the tax planning point, there is a fair amount that most accountants will not be qualified to advise on, eg pensions and trusts. A key distinction between accountants and IFAs on the tax planning side is also that an accountant's work is generally more backwards rather than forward-looking (not meant in a disparaging way). The most successful outcomes, particularly for business owners, are where there is synergy between a good accountant and an IFA.

It is true that all the information anybody needs to manage their own financial planning is out there. But most will not have the time and the inclination to stay abreast of annual allowances and regulation, or necessarily be able to interpret and apply it correctly. It is very easy to screw things up and then the consequences fall squarely on the individual, so there is also the value of having security and accountability. Many people also would not have the discipline to save/invest prudently without being given a prod!

That all said, there is undoubtedly an affordability issue. The costs of PII, software, investment research, licences, support staff and the amount of time spent, unfortunately, necessitate a minimum annual fee for a client to be viable from a business perspective. This is an unintended consequence of the FCA banning commission from being paid on investment advice (unless you are St James's Place!), as it means the charges simply aren't worth it unless the client has a certain level of wealth. The FCA aren't going to renege on this as they are very clear in their stance that commission encourages bias and malpractice, which was sadly true of the more unscrupulous 'advisers'. As such, good advice is now inaccessible for many. There needs to be far better financial education in schools for a start to combat this.

Obviously, a very good post.

On that final point, I thought individuals could pay an IFA a fixed agreed in advance fee (from what I've seen, often in the £100's, not £1,000's) for advice? If so, can that apply to SIPP's and ISA's?

 

[Kazenga <3]

Obviously, a very good post.

On that final point, I thought individuals could pay an IFA a fixed agreed in advance fee (from what I've seen, often in the £100's, not £1,000's) for advice? If so, can that apply to SIPP's and ISA's?

Yep fixed fee approach totally valid. I suspect that will be the next big change at some stage in the future, with % based charging phased out entirely.

Must admit I am not really in favour though. To go down that route would mean time needing to be costed hourly most likely and that would change the dynamics of any relationships if there is always the awareness of being on the clock. People will be even more reticent to seek advice. For the vast majority of people (ie not the multi-millionaires) it is also generally much less costly being on a % basis rather than an hourly rate.

My hope is that if the barriers to entry to the profession continue to rise, PII and associated costs across the board will begin to come down, fees can be lowered and advice becomes more accessible for those without vast sums of wealth. Not holding my breath though, as suspect there are a lot of claims on ill-advised defined benefit pension transfers to come out in the wash yet, the costs of which will unfortunately be passed on to fee paying clients in part.

 

[Weststander]

Yep fixed fee approach totally valid. I suspect that will be the next big change at some stage in the future, with % based charging phased out entirely.

Must admit I am not really in favour though. To go down that route would mean time needing to be costed hourly most likely and that would change the dynamics of any relationships if there is always the awareness of being on the clock. People will be even more reticent to seek advice. For the vast majority of people (ie not the multi-millionaires) it is also generally much less costly being on a % basis rather than an hourly rate.

My hope is that if the barriers to entry to the profession continue to rise, PII and associated costs across the board will begin to come down, fees can be lowered and advice becomes more accessible for those without vast sums of wealth. Not holding my breath though, as suspect there are a lot of claims on ill-advised defined benefit pension transfers to come out in the wash yet, the costs of which will unfortunately be passed on to fee paying clients in part.

Expanding the discussion, the IFA's I worked with and used, also gave mortgage advice/acted as intermediaries with lenders.

I get the impression that fears of being sued for advice on interest-only mortgages back in the day, is also a concern for mortgagors and intermediaries. This would hit the fan when home owners typically get to 65, with a large balance still due and no means of paying it off without selling up. I can see ambulence chasers targeting this, going back to the original advice.

 

[dazzer6666]

Fusion Wealth is the way forward

Thought that was a platform for advisors/IFAs……..doesn’t negate the need for good advice ?

 

[Shropshire Seagull]

I used an accountant for my limited company [professional advise] and she introduced me to a pension advisor [professional business].
Between them they have cost me thousands but between them, they have saved me money [increased my wealth] by a lot more than their fees ...

 

[The Antikythera Mechanism]

I have an excellent IFA, who is also a friend. He’s managed my ISA’s, Bond’s and SIPP all at a cautious level and the annual returns have averaged out at over 8%.

 

[trueblue]

Tricky one this. For complicated financial affairs, definitely worth the expertise I think. If it's putting money in something like an ISA, not really. On that score, my Vanguard funds have wiped the floor with all other investments. Dead easy, choose how long to invest for, very little in the way of charges to erode the gains.

 

[Sirnormangall]

IFA here. To answer the OP, if somebody is just sticking you in a managed fund and slapping an ongoing charge on it, that's not proper financial planning and isn't worth the fee. There are many who charge 3% on every new contribution, just for telling you to fill your ISA allowance.. come on. As others have said, there are a multitude of inexpensive ready-made investment solutions out there now if all you want to do is try to grow your assets without any wider considerations.

A good IFA will create a plan taking into account your lifestyle (current and future anticipated/desired), identify potential cashflow pinch points, insurance shortfalls etc and put in place strategies to mitigate. Investments and tax efficiency is generally always a part of this, but really should only be considered as tools helping towards achieving the overall personalised plan. If an IFA's barometer is investment performance, they are doing it wrong IMO as the markets will do what the markets will do; all things being equal there is little alpha that can be added long-term vs a DIY Vanguard solution for example. When you come to decumulate assets, however, that is an entirely different ball game.

On the tax planning point, there is a fair amount that most accountants will not be qualified to advise on, eg pensions and trusts. A key distinction between accountants and IFAs on the tax planning side is also that an accountant's work is generally more backwards rather than forward-looking (not meant in a disparaging way). The most successful outcomes, particularly for business owners, are where there is synergy between a good accountant and an IFA.

It is true that all the information anybody needs to manage their own financial planning is out there. But most will not have the time and the inclination to stay abreast of annual allowances and regulation, or necessarily be able to interpret and apply it correctly. It is very easy to screw things up and then the consequences fall squarely on the individual, so there is also the value of having security and accountability. Many people also would not have the discipline to save/invest prudently without being given a prod!

That all said, there is undoubtedly an affordability issue. The costs of PII, software, investment research, licences, support staff and the amount of time spent, unfortunately, necessitate a minimum annual fee for a client to be viable from a business perspective. This is an unintended consequence of the FCA banning commission from being paid on investment advice (unless you are St James's Place!), as it means the charges simply aren't worth it unless the client has a certain level of wealth. The FCA aren't going to renege on this as they are very clear in their stance that commission encourages bias and malpractice, which was sadly true of the more unscrupulous 'advisers'. As such, good advice is now inaccessible for many. There needs to be far better financial education in schools for a start to combat this.

This - perfect response. In pure cash terms the fees seem high, but a good IFA will save you far more in general planning, investment strategy, tax tips etc.
An increasingly ageing population will increase the demand for advice. At the same time there’s a reduction in supply because IFAs are also getting older and retiring. As I keep telling my kids, it’s a good sector to get into as a future career.

 

[CP 0 3 BHA]

I moved my pension from a final salary scheme to a SIPP and certainly wouldn't trust myself to manage it. My IFA charges me 0.5% p.a. and manages the funds to my risk profile and drawdown needs across a range of funds and defensive structured products that generate a decent fixed return. I'm very happy with the arrangement and having a pot of money that will go to the kids rather than disappearing when my wife and I shuttle off this mortal coil has been transformative.