What questions should a newbie ask an IFA?
Discussion
My opinion is that the service sounds pretty good, and reasonably priced, especially if you don't have the appetite or aptitude for doing it yourself. It does essentially sound like robo investment, with a few other products bundled into an online portal and a guy to walk you through setting it all up / occasional reviews. Frankly this is probably a good fit for the majority.
KTF said:
The way it was explained was that the 1.63% was made up of the nucleus platform, the fund charge that sit in the pots within nucleus and their fee. It is split into 12 and taken monthly. The fee was an example as it varies depending on the fund mix in each risk category.
Their visit last night was primarily to have a chat about the overall process and explain how it all works. If I go with them then they would do the whole fact finding process to decide the risk rating, etc. The setup fee would be £500 which covers the due diligence, setting up the account on nucleus, etc. then the % charge each year.
I'll start with the good bit, because they are very good:Their visit last night was primarily to have a chat about the overall process and explain how it all works. If I go with them then they would do the whole fact finding process to decide the risk rating, etc. The setup fee would be £500 which covers the due diligence, setting up the account on nucleus, etc. then the % charge each year.
Nucleus is a very good platform and charges 0.35% a year (this reduces as your investment grows). If the total annual cost really is 1.63% then it sounds like the adviser is charging 0.5% and the cost of the underlying investments is 0.78% (which sounds about right).
A £500 flat fee to set everything up is also very good value indeed.
My only concerns are:
1) Why haven't they looked into any outstanding finance you have? For example, it usually makes sense to pay down finance on interest rates higher than you could reasonably expect to receive from your investments.
2) I never like it when costs are not broken down (as I attempted to do above) as it is not very transparent.
3) Do you need to be paying for the platform? Often it is the adviser that gets the most benefit of their clients all being on a platform. However, sometimes the functionality is handy for clients and some platforms get better deals of fund pricing/access. As I said Nucleus is one of the best platforms.
4) What is your adviser doing for the ongoing fee? Once set up correctly this should only need changing every few years in line with changes in your own circumstances.
5) Are you being told to leave a certain amount in cash for unseen emergencies? You should.
In a nutshell, if all stacks up this seems pretty good but there is a growing trend with advisers to move away from platforms and put clients in a low cost discretionary managed portfolio directly with the investment manager. That said, there is usually no cost savings as this is matched by the trend for advisers to swallow up the saving by charging 1% a year for their advice!
As I have already mentioned, advisers do not manage your money - the investment/fund manager does this for you. The adviser simply guides you through some third party risk profiling software and maps you to a portfolios within that risk/reward level. Apart from repeating this every few years that is really it.
Where they add real value is ensuring you are using all your tax allowances,, giving you advice on many other aspects (better mortgage rates, full insurance protection (where needed - wife, kids, etc.) IHT planning and ensuring you are actually putting aside enough money to cover everything, including the income you require in retirement.
If you are going to get all of this then great, this sounds like a good deal. Just be weary of the type of adviser who believes he is some sort of investment genius and ignores all these other things (if they were an investment genius they would be an investment manage/fund manager earning a fortune, not a financial adviser). If you manage to find the former and avoid the latter you are onto a good thing!
rsbmw said:
My opinion is that the service sounds pretty good, and reasonably priced, especially if you don't have the appetite or aptitude for doing it yourself. It does essentially sound like robo investment, with a few other products bundled into an online portal and a guy to walk you through setting it all up / occasional reviews. Frankly this is probably a good fit for the majority.
On reflection, after my rather in depth comment above, I would agree with you 100%. You could easily end up paying the same amount doing it yourself with Hargreaves Lansdown (0.45% platform charge, fund costs and their SIPP fees for any pension element) and having to do it all yourself. This does seem to be very good value.I've also read other comments now and can see that this was a pre-meeting chat and all the stuff I was concerned with should be covered at the fact finding hearing.
JulianPH said:
I'll start with the good bit, because they are very good:
Nucleus is a very good platform and charges 0.35% a year (this reduces as your investment grows). If the total annual cost really is 1.63% then it sounds like the adviser is charging 0.5% and the cost of the underlying investments is 0.78% (which sounds about right).
A £500 flat fee to set everything up is also very good value indeed.
My only concerns are:
1) Why haven't they looked into any outstanding finance you have? For example, it usually makes sense to pay down finance on interest rates higher than you could reasonably expect to receive from your investments.
2) I never like it when costs are not broken down (as I attempted to do above) as it is not very transparent.
3) Do you need to be paying for the platform? Often it is the adviser that gets the most benefit of their clients all being on a platform. However, sometimes the functionality is handy for clients and some platforms get better deals of fund pricing/access. As I said Nucleus is one of the best platforms.
4) What is your adviser doing for the ongoing fee? Once set up correctly this should only need changing every few years in line with changes in your own circumstances.
5) Are you being told to leave a certain amount in cash for unseen emergencies? You should.
In a nutshell, if all stacks up this seems pretty good but there is a growing trend with advisers to move away from platforms and put clients in a low cost discretionary managed portfolio directly with the investment manager. That said, there is usually no cost savings as this is matched by the trend for advisers to swallow up the saving by charging 1% a year for their advice!
As I have already mentioned, advisers do not manage your money - the investment/fund manager does this for you. The adviser simply guides you through some third party risk profiling software and maps you to a portfolios within that risk/reward level. Apart from repeating this every few years that is really it.
Where they add real value is ensuring you are using all your tax allowances,, giving you advice on many other aspects (better mortgage rates, full insurance protection (where needed - wife, kids, etc.) IHT planning and ensuring you are actually putting aside enough money to cover everything, including the income you require in retirement.
If you are going to get all of this then great, this sounds like a good deal. Just be weary of the type of adviser who believes he is some sort of investment genius and ignores all these other things (if they were an investment genius they would be an investment manage/fund manager earning a fortune, not a financial adviser). If you manage to find the former and avoid the latter you are onto a good thing!
Thanks for the advice. To answer some of your points raised.Nucleus is a very good platform and charges 0.35% a year (this reduces as your investment grows). If the total annual cost really is 1.63% then it sounds like the adviser is charging 0.5% and the cost of the underlying investments is 0.78% (which sounds about right).
A £500 flat fee to set everything up is also very good value indeed.
My only concerns are:
1) Why haven't they looked into any outstanding finance you have? For example, it usually makes sense to pay down finance on interest rates higher than you could reasonably expect to receive from your investments.
2) I never like it when costs are not broken down (as I attempted to do above) as it is not very transparent.
3) Do you need to be paying for the platform? Often it is the adviser that gets the most benefit of their clients all being on a platform. However, sometimes the functionality is handy for clients and some platforms get better deals of fund pricing/access. As I said Nucleus is one of the best platforms.
4) What is your adviser doing for the ongoing fee? Once set up correctly this should only need changing every few years in line with changes in your own circumstances.
5) Are you being told to leave a certain amount in cash for unseen emergencies? You should.
In a nutshell, if all stacks up this seems pretty good but there is a growing trend with advisers to move away from platforms and put clients in a low cost discretionary managed portfolio directly with the investment manager. That said, there is usually no cost savings as this is matched by the trend for advisers to swallow up the saving by charging 1% a year for their advice!
As I have already mentioned, advisers do not manage your money - the investment/fund manager does this for you. The adviser simply guides you through some third party risk profiling software and maps you to a portfolios within that risk/reward level. Apart from repeating this every few years that is really it.
Where they add real value is ensuring you are using all your tax allowances,, giving you advice on many other aspects (better mortgage rates, full insurance protection (where needed - wife, kids, etc.) IHT planning and ensuring you are actually putting aside enough money to cover everything, including the income you require in retirement.
If you are going to get all of this then great, this sounds like a good deal. Just be weary of the type of adviser who believes he is some sort of investment genius and ignores all these other things (if they were an investment genius they would be an investment manage/fund manager earning a fortune, not a financial adviser). If you manage to find the former and avoid the latter you are onto a good thing!
1. In short, I don't have any. But this would be covered by the questionnaire I would fill in as part of their process where it asks for income, debt, outgoings that sort of thing.
2. They drew the whole process out last night on a bit of paper and broke down the costs into each chunk - nucleus, the funds and their fee. I cant remember the exact breakdown but it was along the lines of your guess above.
3. As a client I would get 'read only' access to the platform - log in get a grand total with a +/-, ability to drill down into the various holdings, etc. Any changes (for example moving to a different risk rating) would be done by the IFA after a discussion as to why it is needed. It seems to be part of their model as they said they use it to send out correspondence, updates, etc rather than via paper all the time so I dont think it can be opted out.
4. This is the only niggle at the moment as it does seem like they are being the interface for a robo platform which, in theory, I could do myself via fiveraday. As you suggest, once it is up and running, it should look after itself with only minor tweaks needed for life events and the like.
I have multiple pensions so they said they can look at that aspect as well with a view of leaving where they are or combining them plus check that I am investing with a view to minimising tax, etc. I am a while away from retirement/inheritance type events but they could also begin to put the building blocks for that in place.
5. Yes, they said a certain amount should be held back in cash as an emergency and if there were any things planned in the short term - new kitchen or whatever - then this should be held in cash as well because the investments should be a 5-10+ year thing in order to get a reasonable return.
They cover all areas of your finances and look at the full picture. Its not like the so called investment geniuses you see that are busy making a lot of noise and selling their conferences to explain how you can become like them.
JulianPH said:
rsbmw said:
My opinion is that the service sounds pretty good, and reasonably priced, especially if you don't have the appetite or aptitude for doing it yourself. It does essentially sound like robo investment, with a few other products bundled into an online portal and a guy to walk you through setting it all up / occasional reviews. Frankly this is probably a good fit for the majority.
On reflection, after my rather in depth comment above, I would agree with you 100%. You could easily end up paying the same amount doing it yourself with Hargreaves Lansdown (0.45% platform charge, fund costs and their SIPP fees for any pension element) and having to do it all yourself. This does seem to be very good value.I've also read other comments now and can see that this was a pre-meeting chat and all the stuff I was concerned with should be covered at the fact finding hearing.
I have had a go at picking stocks and shares myself and discovered I am no expert so happy for someone else who should be a bit more knowledgeable to have a go instead. Plus they should know how to limit the tax exposure on top.
He also said that because it is a third party picking and choosing the funds then there is no emotional aspect involved - holding on to something when it tanks because you think you may recover your money in the future.
Whilst they were a small company, they are part of a larger network of advisors who all use the same platform so the fund charges are institutional rates compared to doing it yourself which allows them to compete with the online options.
Edited by KTF on Tuesday 13th September 10:10
It sounds like a really good and genuine deal to me, knowing all of this. If the £500 initial fee covers going through all of your existing pensions it is an absolutely fantastic deal!
Fiveraday doesn't offer pensions at the moment I believe (Al - correct me if I am wrong please) so I would take them up on this as it sounds like you have found a great financial adviser (which is not always easy). You are also always free to change your mind at any time so it is not as if you are stuck with anything.
If you end up building a good relationship with them however the cost of their advice could be very much worth it. They seem to have all the bases covered so it looks like you are in good hands and not being ripped off with excessive fees. Result!
Fiveraday doesn't offer pensions at the moment I believe (Al - correct me if I am wrong please) so I would take them up on this as it sounds like you have found a great financial adviser (which is not always easy). You are also always free to change your mind at any time so it is not as if you are stuck with anything.
If you end up building a good relationship with them however the cost of their advice could be very much worth it. They seem to have all the bases covered so it looks like you are in good hands and not being ripped off with excessive fees. Result!
KTF said:
They do fact finding at the start to find out your attitude to risk, what you want to achieve, etc. Then that is split into the various investment categories, pension, ISA, using this nucleus tool. Then within each category you have a portfolio based on your risk.
That's all standard practice, they have to do that.KTF said:
You can change them via the IFA but can see an overview any time via the tool.
In the tool you can click the investment category, click the portfolio to see the make up, drill down into the component parts, etc.
That's a 'platform'. IFA like them because it makes their life easier - but you're paying for it, as well as his fees and the fund charges.In the tool you can click the investment category, click the portfolio to see the make up, drill down into the component parts, etc.
KTF said:
The portfolio composition is overseen by a company who can tweak the contents, monitor the returns, etc. to keep them current rather than the IFA try to keep tabs on 4000+ products all the time.
So you're paying on two levels - the 'company'/platform and the IFA. Who has discretion to adjust the portfolio? Why pay both of them? I have learned the hard way, twice, that 'daily monitoring' sounds great but means nothing of the sort. It means 'I'll surf the net/get some new clients while the 1.63%s roll in'. It also means 'Well the market may have tanked on my watch but they are good funds doing badly and don't do anything because it will upset the strategy'. Yes markets can and do recover, but a 10% fall needs an 11% gain to get back to where it was, and the gain is used patching up the damage not making real gains. At this point the expert will suddenly declare that in fact he knows nothing about the markets, depite his previous confidence, and is only good at strategy and perhaps sir would like to do another risk/return test over the phone. There's no point paying a dog if he's not going to bark. If the dog is not going to do anything, don't pay him - do nothing yourself and save the money!KTF said:
Management charge for an average risk client portfolio is 1.63%. This covers the IFA as the overseer of the whole process. The value add is them working out the tax efficient strategy then the portfolios in each bucket to use plus regular reviews.
Work out how much the IFA will be costing you in ££ and compare it with how much tax he may/may not save you. KTF said:
At a high level the suggestion was to switch from the deposit accounts when the rates drop and regular savers when they mature and drip feed that into a stocks and shares ISA instead to maximise the tax efficiency.
But that's obvious and you can do it yourself...In theory a relationship with an IFA should last a lifetime, or until he retires. How many years do they actually last for I wonder?
Simpo Two said:
So you're paying on two levels - the 'company'/platform and the IFA. Who has discretion to adjust the portfolio? Why pay both of them? I have learned the hard way, twice, that 'daily monitoring' sounds great but means nothing of the sort. It means 'I'll surf the net/get some new clients while the 1.63%s roll in'.
If the dog is not going to do anything, don't pay him - do nothing yourself and save the money!
Just to repeat - this is the aspect you need to watch out for.If the dog is not going to do anything, don't pay him - do nothing yourself and save the money!
Also, the financial services sector is notorious for "friends" selling stuff to their mates. There's a risk you'll then be reluctant to be critical or to change anything because of the friendship - and he can go on pocketing a nice slice of pie for very little activity/value. Sometimes it's best to keep friends separate from your business.
Ozzie Osmond said:
Simpo Two said:
So you're paying on two levels - the 'company'/platform and the IFA. Who has discretion to adjust the portfolio? Why pay both of them? I have learned the hard way, twice, that 'daily monitoring' sounds great but means nothing of the sort. It means 'I'll surf the net/get some new clients while the 1.63%s roll in'.
If the dog is not going to do anything, don't pay him - do nothing yourself and save the money!
Just to repeat - this is the aspect you need to watch out for.If the dog is not going to do anything, don't pay him - do nothing yourself and save the money!
Also, the financial services sector is notorious for "friends" selling stuff to their mates. There's a risk you'll then be reluctant to be critical or to change anything because of the friendship - and he can go on pocketing a nice slice of pie for very little activity/value. Sometimes it's best to keep friends separate from your business.
I approached him rather than he approached me. There was no hard sell, just an explanation of what is involved. As I had no idea about the fees being offered, I came here for some advice and it seems that they are within the expected ballpark and they are not trying to pull a fast one.
I think following your meeting and some of the thoughts on the thread you seem pretty well informed. The decision is whether you're happy to pay a bit of a premium for a platform and someone else doing the legwork, or whether you would be happy doing more of this yourself to save (or make more) money. My personal opinion is that a platform fee from the likes of this, fiveraday etc can be worth its weight in gold for the actively managed portfolio, where the alternative is randomly picking funds from a list (which is what I would do!). The IFA portion, probably not so much but could work out to be great value for someone who is simply not confident with this stuff.
rsbmw said:
I think following your meeting and some of the thoughts on the thread you seem pretty well informed. The decision is whether you're happy to pay a bit of a premium for a platform and someone else doing the legwork, or whether you would be happy doing more of this yourself to save (or make more) money. My personal opinion is that a platform fee from the likes of this, fiveraday etc can be worth its weight in gold for the actively managed portfolio, where the alternative is randomly picking funds from a list (which is what I would do!). The IFA portion, probably not so much but could work out to be great value for someone who is simply not confident with this stuff.
If I were to do it myself I would fill in the questionnaire on (for example) fiveraday, see what it comes up with then set it going with a month feed from a cash account. Whether this would be the best option or not (out of both the platforms available and the funds available on the platform) I don't know which is where (I hope) the IFA would come in to fine tune the options. I realise there is a premium for this service but it is not that much more than the robo options charge when I compare the fees online.
The sorting out the pension(s) aspect would be stage 2 as that isn't something I am going to fiddle with without speaking to an advisor first.
IIRC Fiveraday is around 0.8%, plus 0.25% of contributions. There is a premium, but it's not apples with apples as Nucleus has more products on the platform. However, if you're not using those other products and simply splitting some cash across funds on a regular basis, it would make sense to minimise your fees, and simply pay an IFA a one-off fee to advise on setting you up on a platform and tax breaks etc. I would expect any of the robo services to come up with a broadly similar portfolio based on risk appetite, so the differentiator is mainly what it costs. Then again, if you're putting in lets say £100k, it's only £500pa to have the IFA on board, which doesn't sound unreasonable.
When people talk about costs they often fail to consider value. I think that what the OP has been offered is fair value.
I have an IFA that charged me £500 as a flat fee to do a full review. I'm invested in a managed portfolio that automatically reduces the risk every three years as I get closer to wanting to use the money so I don't need ongoing reviews for this at x% a year. The total investment cost (platform/SIPP/investment management/rebalancing to my target date/underlying investments/everything) is 0.87% a year.
I also pay my adviser £250 a year to retain them for advice on all other matters.
So on a £100k portfolio (to keep the figure raised earlier) I would pay £870 a year for all of the investment management and £250 for having an adviser in place.
Could I do it cheaper? Quite possibly (but it would be difficult when you factor in all the costs). Am I getting great value? 100%!
If the OP wants I can make an introduction - but I obviously have to declare here that I have a connection. It might be an idea to see a different approach (my adviser operates over the phone and internet, rather than does house visits), but I think what he is being offered is good value and he may prefer a 'face-to-face' adviser.
I have an IFA that charged me £500 as a flat fee to do a full review. I'm invested in a managed portfolio that automatically reduces the risk every three years as I get closer to wanting to use the money so I don't need ongoing reviews for this at x% a year. The total investment cost (platform/SIPP/investment management/rebalancing to my target date/underlying investments/everything) is 0.87% a year.
I also pay my adviser £250 a year to retain them for advice on all other matters.
So on a £100k portfolio (to keep the figure raised earlier) I would pay £870 a year for all of the investment management and £250 for having an adviser in place.
Could I do it cheaper? Quite possibly (but it would be difficult when you factor in all the costs). Am I getting great value? 100%!
If the OP wants I can make an introduction - but I obviously have to declare here that I have a connection. It might be an idea to see a different approach (my adviser operates over the phone and internet, rather than does house visits), but I think what he is being offered is good value and he may prefer a 'face-to-face' adviser.
I think from the various comments here, what I am being offered is 'fair' value.
I agree with the comments that it will be cheaper to use a robo option as I would just be converting cash to S&S at this point but (for a small sum in the grand scheme of things) it may be worth having an IFA on hand if you need advice on other matters or want to look at other options, etc.
If it was a mortgage then that would be different as its a one off thing on an infrequent basis.
I agree with the comments that it will be cheaper to use a robo option as I would just be converting cash to S&S at this point but (for a small sum in the grand scheme of things) it may be worth having an IFA on hand if you need advice on other matters or want to look at other options, etc.
JulianPH said:
If the OP wants I can make an introduction - but I obviously have to declare here that I have a connection. It might be an idea to see a different approach (my adviser operates over the phone and internet, rather than does house visits), but I think what he is being offered is good value and he may prefer a 'face-to-face' adviser.
Assuming they all use a similar platform and will offer the same products then it comes down to the difference in fees. I think for the time being I would prefer to go with someone I 'know' rather than someone in another part of the country.If it was a mortgage then that would be different as its a one off thing on an infrequent basis.
KTM,
Split it into the following components, what do you need doing, and what don't you?
Initial chat - 'free', ostensibly, although in reality the cost is merely padded in.
Fact finding, research and report - a few hundred quid. Some now operate on a fixed fee basis, some on percentage. I operate a fixed fee (and the numbers of advisers who do are increasing).
Implementation - normally, established on a percentage basis. Anywhere between 1 and 3 (I've heard 4, which is borderline scandalous, imho) %. A few of us don't charge, it depends on the adviser's business model.
Ongoing management. Depending on the size of your wealth and needs, usually anywhere between 0.5 and 1.0% per annum. Don't forget any fund and facility/platform fees etc, on top.
As mentioned, I founded www.fiveraday.co.uk, and it was for many reasons. Namely to offer a good service at a good price, all in, annually, for about 0.8%. Most people don't need anything more than it, or something like it. There are, of course, others. I'm pleased with what it offers and what it has achieved.
What do you want from an adviser? Why are you investing, do you know what you want to achieve? If you don't, it's probably going to be difficult for you to be happy with your strategy, and difficult for you to work with an adviser, and difficult for an adviser to work with you.
There are a couple of Pistonheaders here who are insightful, I'm sure they'll help you. Speak to a few advisers, don't take the first one who sees you - hold a beauty parade. I'm certainly not touting for business, and I note your comment about staying local, but my profile has a link you can also fire some questions over to - I'd be more than pleased to help if I can.
By way of inviting some informed comment, as well as allowing the less edifying the opportunity to vent their spleens, Paul Lewis published this, last week, about costs and charging structures. Intended, as ever, to get the adviser community drowning in its own frothy sputum, it didn't fool me. No siree.
https://www.moneymarketing.co.uk/issues/8-septembe...
Split it into the following components, what do you need doing, and what don't you?
Initial chat - 'free', ostensibly, although in reality the cost is merely padded in.
Fact finding, research and report - a few hundred quid. Some now operate on a fixed fee basis, some on percentage. I operate a fixed fee (and the numbers of advisers who do are increasing).
Implementation - normally, established on a percentage basis. Anywhere between 1 and 3 (I've heard 4, which is borderline scandalous, imho) %. A few of us don't charge, it depends on the adviser's business model.
Ongoing management. Depending on the size of your wealth and needs, usually anywhere between 0.5 and 1.0% per annum. Don't forget any fund and facility/platform fees etc, on top.
As mentioned, I founded www.fiveraday.co.uk, and it was for many reasons. Namely to offer a good service at a good price, all in, annually, for about 0.8%. Most people don't need anything more than it, or something like it. There are, of course, others. I'm pleased with what it offers and what it has achieved.
What do you want from an adviser? Why are you investing, do you know what you want to achieve? If you don't, it's probably going to be difficult for you to be happy with your strategy, and difficult for you to work with an adviser, and difficult for an adviser to work with you.
There are a couple of Pistonheaders here who are insightful, I'm sure they'll help you. Speak to a few advisers, don't take the first one who sees you - hold a beauty parade. I'm certainly not touting for business, and I note your comment about staying local, but my profile has a link you can also fire some questions over to - I'd be more than pleased to help if I can.
By way of inviting some informed comment, as well as allowing the less edifying the opportunity to vent their spleens, Paul Lewis published this, last week, about costs and charging structures. Intended, as ever, to get the adviser community drowning in its own frothy sputum, it didn't fool me. No siree.
https://www.moneymarketing.co.uk/issues/8-septembe...
JulianPH said:
It sounds like a really good and genuine deal to me, knowing all of this. If the £500 initial fee covers going through all of your existing pensions it is an absolutely fantastic deal!
Fiveraday doesn't offer pensions at the moment I believe (Al - correct me if I am wrong please) so I would take them up on this as it sounds like you have found a great financial adviser (which is not always easy). You are also always free to change your mind at any time so it is not as if you are stuck with anything.
If you end up building a good relationship with them however the cost of their advice could be very much worth it. They seem to have all the bases covered so it looks like you are in good hands and not being ripped off with excessive fees. Result!
Mate, correct. Fiver has come to the end of year one, and I'm washing up and having a review of how it's gone. There is some very minor stuff to change - including chewing over a choice of charging structures. Pensions will come, a SIPP lite, but not for drawdown - just for accumulation. Same cost as the Investment ISA. Fiveraday doesn't offer pensions at the moment I believe (Al - correct me if I am wrong please) so I would take them up on this as it sounds like you have found a great financial adviser (which is not always easy). You are also always free to change your mind at any time so it is not as if you are stuck with anything.
If you end up building a good relationship with them however the cost of their advice could be very much worth it. They seem to have all the bases covered so it looks like you are in good hands and not being ripped off with excessive fees. Result!
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