Any experience of wealth managers?
Discussion
I’ve been speaking with some of the large wealth managers recently and wondered if anyone had any experiences to share?
I went in thinking it would not be right for me in a million years, but the pitch is fairly strong from an upside and downside protection perspective.
The flip side is that the fees are fairly high. I have been quoted 0.8% of the portfolio and then there are fees on some of the underlying investments which pushes the average fee to close to 1.5-2% a year.
So it’s expensive, but there are also a lot of investments you can access through them which are tax efficient, and fees are paid before tax which helps.
I am currently invested with Vanguard which has done well so far, but I know trackers and passive approaches have had a very good run and we might be in for a different environment from here.
Any thoughts appreciated as not sure what to do next :-).
I went in thinking it would not be right for me in a million years, but the pitch is fairly strong from an upside and downside protection perspective.
The flip side is that the fees are fairly high. I have been quoted 0.8% of the portfolio and then there are fees on some of the underlying investments which pushes the average fee to close to 1.5-2% a year.
So it’s expensive, but there are also a lot of investments you can access through them which are tax efficient, and fees are paid before tax which helps.
I am currently invested with Vanguard which has done well so far, but I know trackers and passive approaches have had a very good run and we might be in for a different environment from here.
Any thoughts appreciated as not sure what to do next :-).
Edited by dmahon on Friday 31st January 12:07
Edited by dmahon on Friday 31st January 12:08
dmahon said:
I went in thinking it would not be right for me in a million years, but the pitch is fairly strong from an upside and downside protection perspective.
The flip side is that the fees are fairly high. I have been quoted 0.8% of the portfolio and then there are fees on some of the underlying investments which pushes the average fee to close to 1.5-2% a year.
So it’s expensive, but there are also a lot of investments you can access through them which are tax efficient, and fees are paid before tax which helps.
They will have a strong pitch, they are salesmen. You could move to a platform like Fidelity and access more funds than you can shake a stick at.The flip side is that the fees are fairly high. I have been quoted 0.8% of the portfolio and then there are fees on some of the underlying investments which pushes the average fee to close to 1.5-2% a year.
So it’s expensive, but there are also a lot of investments you can access through them which are tax efficient, and fees are paid before tax which helps.
Genuine question - any difference between an IFA and a 'wealth manager'?
dmahon said:
So it’s expensive, but there are also a lot of investments you can access through them which are tax efficient, and fees are paid before tax which helps.
Like what?Genuine question by the way as I'm not sure what access they would have to things you couldn't do by yourself.
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hstewie said:
hstewie said:dmahon said:
So it’s expensive, but there are also a lot of investments you can access through them which are tax efficient, and fees are paid before tax which helps.
Like what?Genuine question by the way as I'm not sure what access they would have to things you couldn't do by yourself.
What is more tax efficient than a pension, followed by ISAs/LISAs?
I guess there are "bed & breakfasting" to take advantage of some capital gains tax.....selling a primary home & living in any secondary home before selling it (bit extreme perhaps!) to avoid CGT there.....
Probably some dodgy & funky trust arrangements - maybe they deal in these?
I'd love to hear more!
We have a lot of clients that use a whole range of wealth managers from the Rahthbones and Hoares down to to the smaller IFA/broker model.
If you already have a very clear idea, and certainty, that your current investment strategy is correct and that you have the time to management your portfolio then they probably won't add much value.
If you want to actually plan your life out, work out where the money is going to go (and when), then work out the investments you need and the management of your financial assets then wealth managers can be transformative.
We have clients who have significant liquidity events (in the millions) and I have seen numerous occasions when their lives are immeasurably made better by the intervention of a top wealth manager.
If you already have a very clear idea, and certainty, that your current investment strategy is correct and that you have the time to management your portfolio then they probably won't add much value.
If you want to actually plan your life out, work out where the money is going to go (and when), then work out the investments you need and the management of your financial assets then wealth managers can be transformative.
We have clients who have significant liquidity events (in the millions) and I have seen numerous occasions when their lives are immeasurably made better by the intervention of a top wealth manager.
CharlesElliott said:
I think you need to let us know what it is that you are looking for in the service, and so what you are happy to pay 1.5%-2% for. There will be advisor fees, platform fees, fund fees and fees within the funds as well.
This is what I didn't like. It feels like you are inviting half of the financial services industry to have a hand in your pocket by the time you have these layers of fees.What I am looking for is to beat inflation and avoid downside risk. I have bought into the Vanguard model of 'buy the world' and 'low fees' but I do worry if indexes turn I could be looking at significant losses in the short to medium term. A wealth manager tries to reduce correlation with equities by investing in uncorrelated products and strategies.
Wealth manager does seem similar to an IFA in concept. They place your pot across a mixture of active and passive funds and strategies.
Some of the products you could access with someone like this include strategies where they pay a coupon on the understanding that equities don't fall more than 30% etc which limits upside and downside. I guess they are doing something with options under the hood.
They also roll in pension and tax advice and cash management as part of the service.
What would be attractive is leaving it all to the experts so I don't have to manage investments. However, I read a lot that nobody ever beats the indexes and monkeys can outperform active managers so I am unsure about the whole concept of letting someone else do this for me.
This is UBS by the way, not a back street operation.
Edited by dmahon on Friday 31st January 18:55
Have you checked the permissions of these IFAs/Wealth Managers (on the FCA records)?
They usually have no authority to hold/control your money, they just pass it to someone who can and take a cut of this (regardless of the outcome).
They are not wealth managers, they just call themselves this,
Edited to add, ignore this as I have just seen you are talking about UBS, which does manage money (though, as you say, at painfully high fees).
They usually have no authority to hold/control your money, they just pass it to someone who can and take a cut of this (regardless of the outcome).
They are not wealth managers, they just call themselves this,
Edited to add, ignore this as I have just seen you are talking about UBS, which does manage money (though, as you say, at painfully high fees).
Edited by JulianPH on Saturday 1st February 08:22
Simpo Two said:
dmahon said:
I went in thinking it would not be right for me in a million years, but the pitch is fairly strong from an upside and downside protection perspective.
The flip side is that the fees are fairly high. I have been quoted 0.8% of the portfolio and then there are fees on some of the underlying investments which pushes the average fee to close to 1.5-2% a year.
So it’s expensive, but there are also a lot of investments you can access through them which are tax efficient, and fees are paid before tax which helps.
They will have a strong pitch, they are salesmen. You could move to a platform like Fidelity and access more funds than you can shake a stick at.The flip side is that the fees are fairly high. I have been quoted 0.8% of the portfolio and then there are fees on some of the underlying investments which pushes the average fee to close to 1.5-2% a year.
So it’s expensive, but there are also a lot of investments you can access through them which are tax efficient, and fees are paid before tax which helps.
Genuine question - any difference between an IFA and a 'wealth manager'?
An IFA will do financial planning only, with outsourced investment management.
The one thing that a large wealth management firm can offer that a smaller IFA can’t is lending. All the big banks in this space (UBS, CS, Deutsche, RBC etc) are very keen to lend money and for wealth management clients the rates can be low - much lower than a conventional btl mortgage for example. Whether that’s worth paying the fees is another matter (and may depend on what need / access you have to alternative sources of finance)
Compounding is the friend of investors. From a modest beginning, the figures in year 30 or 40 can become remarkable.
Unfortunately, compounding also applies to the fees paid, if you use an 'advisor'.
If you invest over say 40 years, a 1% / 2% annual fee, can make a staggering difference to your investment at the end.
It obviously depends upon the performance of your investments, but if you average say 7% annual growth, a 1% annual fee can reduce your final total by 25%.
Jon39 said:
Compounding is the friend of investors. From a modest beginning, the figures in year 30 or 40 can become remarkable.
Unfortunately, compounding also applies to the fees paid, if you use an 'advisor'.
If you invest over say 40 years, a 1% / 2% annual fee, can make a staggering difference to your investment at the end.
It obviously depends upon the performance of your investments, but if you average say 7% annual growth, a 1% annual fee can reduce your final total by 25%.
Research shows advice adds c 3% per annum for clients, more than offsetting the costs involved. It’s a good investment in itself.
Helicopter123 said:
True, but for some the comfort of advice will keep them invested when markets become volatile. Good tax planning advice will also ensure that your carefully compounded return is yours not the taxmans.
Research shows advice adds c 3% per annum for clients, more than offsetting the costs involved. It’s a good investment in itself.
I’m curious to hear more evidence around that claim.Research shows advice adds c 3% per annum for clients, more than offsetting the costs involved. It’s a good investment in itself.
Perhaps you are referring to this research Vanguard did?
If not, please do correct me!
Interesting stuff.
Half the gain is from “behavioural coaching” (eg, don’t bail out in a crash, don’t leap in at the top).
I get that general ethos, but find it hard to imagine IFAs proactively predict those points other than in broad generalisations, no?
I guess each person is a bit different, with different calls on their money, different lifestyles etc.
Or maybe it is simply that many, many people are “rubbish with money”, to coin a phrase: the IFA is the teacher we never had, explaining how to treat money, guiding on investing, family finances etc? (& later, perhaps, spending!)
The rest split between “wealth management” (rebalancing, spending strategy) and portfolio construction.
I am not entirely convinced, in this day and age, that those things cannot fairly easily be self managed IF someone is interested enough: use broadly global funds with lowest costs associated. Don’t battle to “beat the market”: ride the broad waves at lowest costs.
Perhaps I am off the mark with that. Or perhaps it is simply that most people are not that interested in learning and taking responsibility. I suspect that might be the case.....
Anyway: any detail around how that value is truly gained might help some people who are wavering around use of IFAs!
The lending/borrowing aspect is really useful with this type of arrangement. Base rate plus 2% and up to 70% coverage. Also potentially gives you access to preferential mortgage rates and can give you a leg up on other types of borrowing/products (e.g. starting a new business) because the wealth manager has access to poke people that might not necessarily be possible otherwise.
mikeiow said:
I am not entirely convinced, in this day and age, that those things cannot fairly easily be self managed IF someone is interested enough: use broadly global funds with lowest costs associated. Don’t battle to “beat the market”: ride the broad waves at lowest costs.
Perhaps I am off the mark with that. Or perhaps it is simply that most people are not that interested in learning and taking responsibility. I suspect that might be the case.....
Anyway: any detail around how that value is truly gained might help some people who are wavering around use of IFAs!
Perhaps I am off the mark with that. Or perhaps it is simply that most people are not that interested in learning and taking responsibility. I suspect that might be the case.....
Anyway: any detail around how that value is truly gained might help some people who are wavering around use of IFAs!
You are right Mike. No need to be a boffin to do well, just make an effort to learn the basics, then experience adds to that knowledge, but it takes a long time for the compounding to gather pace. You don't even need a lot of money to start. However as you surmise, few people seem interested.
I started as many do, buying in to small companies and doing short-term trading. Thought that was the get rich quick way. Soon realised that it was akin to gambling. Far too much risk involved. Short and medium stock market movements cannot be foreseen, even though many attempt to do just that. I then changed strategy to the Warren Buffet system of buying and holding for the very long-term, eventually about 25 large UK international businesses. Many of those were first bought in the 1980s and 1990s. No help with internet information then of course. Steady profits growth is what you need and that should be accompanied by rising dividend income. A few now provide annual dividend income, which is greater than the original purchase cost, but inflation puts that into perspective. Dividends provide a surprisingly significant portion of the total return. Forget about hoping to find the next Google.
IFAs and fund managers don't all (by any means) beat the market over the long-term. If I did not want a DIY approach, I would use a low cost index tracker. That won't beat the market (including income) either, but there should be more certainty about the performance.
( I hope the previous post referring to borrowing, was not linking borrowing directly to investing. Never use gearing (debt) to buy equities. Losses will be magnified, which could lead to disaster. Anyone buying equities or funds is risking their capital, but there are sensible rules to follow. )
Edited by Jon39 on Tuesday 4th February 19:21
Jon39 said:
( I hope the previous post referring to borrowing, was not linking borrowing directly to investing. Never use gearing (debt) to buy equities. Losses will be magnified, which could lead to disaster. Anyone buying equities or funds is risking their capital, but there are sensible rules to follow. )
As you say, leverage for equities is not a good idea. From a personal perspective having access to such a facility means I keep less cash on hand and leave more invested. Jon39 said:
Never use gearing (debt) to buy equities. Losses will be magnified, which could lead to disaster. Anyone buying equities or funds is risking their capital, but there are sensible rules to follow.
Never is a strong word. Borrowing to invest is normal behaviour in many circumstances whether it's into a business, buying shares or a buy to let.I effectively did this for many years by saving into an ISA and buying equity funds instead of paying off my mortgage.
dazmanultra said:
Jon39 said:
( I hope the previous post referring to borrowing, was not linking borrowing directly to investing. Never use gearing (debt) to buy equities. Losses will be magnified, which could lead to disaster. Anyone buying equities or funds is risking their capital, but there are sensible rules to follow. )
As you say, leverage for equities is not a good idea. From a personal perspective having access to such a facility means I keep less cash on hand and leave more invested. Access to low cost credit for business or personal purposes let’s you really invest for the long term and suffer less cash drag on a portfolio. Not everyone needs it (like advice itself) but both are very helpful to many, and of real value.
mikeiow said:
Helicopter123 said:
True, but for some the comfort of advice will keep them invested when markets become volatile. Good tax planning advice will also ensure that your carefully compounded return is yours not the taxmans.
Research shows advice adds c 3% per annum for clients, more than offsetting the costs involved. It’s a good investment in itself.
I’m curious to hear more evidence around that claim.Research shows advice adds c 3% per annum for clients, more than offsetting the costs involved. It’s a good investment in itself.
Perhaps you are referring to this research Vanguard did?
If not, please do correct me!
Interesting stuff.
Half the gain is from “behavioural coaching” (eg, don’t bail out in a crash, don’t leap in at the top).
I get that general ethos, but find it hard to imagine IFAs proactively predict those points other than in broad generalisations, no?
I guess each person is a bit different, with different calls on their money, different lifestyles etc.
Or maybe it is simply that many, many people are “rubbish with money”, to coin a phrase: the IFA is the teacher we never had, explaining how to treat money, guiding on investing, family finances etc? (& later, perhaps, spending!)
The rest split between “wealth management” (rebalancing, spending strategy) and portfolio construction.
I am not entirely convinced, in this day and age, that those things cannot fairly easily be self managed IF someone is interested enough: use broadly global funds with lowest costs associated. Don’t battle to “beat the market”: ride the broad waves at lowest costs.
Perhaps I am off the mark with that. Or perhaps it is simply that most people are not that interested in learning and taking responsibility. I suspect that might be the case.....
Anyway: any detail around how that value is truly gained might help some people who are wavering around use of IFAs!
I’ve met some very successful DIY investors (hats off to them) but I’ve met others who have torpedoed returns by bailing out or derisking in a falling market and missing recovery, or those who increase risk in a rising market. Some of these were finance professions themselves (mostly in banking).
I’ve also met a number of DIY investors who have done quite well but are now locked in by tax As a result of poor tax planning. Some will sadly be leaving the bulk of their estates to HMRC rather than to the family due to lack of advice.
All of this could have been avoided with advice.
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