Anyone use financial advisors or accountants?

[redrabbit29]

Hi

I recently jumped a significant amount in salary and now earning just over £100k a year. I know a lot of the theory behind the tax situation, and using pensions to avoid the higher tax band, etc. But there are certain questions such as investments, how much should I put in pensions, ISAs, long term vs short term, etc. Many posts online are helpful but obviously not about me personally so it's always hard to be confident in what I am doing.

A financial advisor came recommended to me. I spoke with her briefly last week and she seems really good, with a very strong background in international investments, equities, hedge funds, etc.

All advice is free but investments are charged at 3% for initial fee and 1.75% for ongoing.

She also said the biggest focus is on taxation as that has the most significant impact over time. She can also make recommendations on investments based on my current situation and long term plans.

So it all sounds really good.

Just wondering if anyone has personal experience of using an advisor on a frequent basis, how did you find it and was it worth it?

Thanks

[Wilmslowboy]

What you earn is less important than what you have left to invest (after living costs).

As she only earns if she gets you to invest in 3rd party products, how likely is she to suggest you save, max out your pension, overpay your mortgage, buy a bigger house etc

I’d suggest you start by getting some long term independent advice (even if you need to pay for it), and work out if investing is the right strategy for you.


Edited to add. - well done on the pay rise.

Edited by Wilmslowboy on Thursday 4th May 17:38

[alscar]

Firstly congratulations on the pay rise.
Most FA’s or IFA’s seem to follow a fairly well trodden path of suggestions.
Taxation is a favourite topic as they can then suggest all manor of VCT and EIS type investments which can offset income tax and of course also pay dividends ( literally ) and indeed capital growth.
You can also do these yourself directly.
As the previous reply has already identified the nett issue - ie in real terms you have to work out just how much “ spare “ you now have to play with and of course what your existing savings / investments / pension plans are like or are you effectively starting from scratch ?
Up until a decade or so ago I did all of my own research and investing directly and then decided I wanted a bit more structure for the longer term.
I had investments largely in Unit Trusts and Funds with my Banks asset management entity during this time but although the returns were ok I rarely received what I would call decent advice and certainly not regularly.
I then moved these all to someone I knew as a number of my then work colleagues had used him for years. I kept separate pots with the likes of F&C etc and still do.
I had previously invested in VCT’s etc but he was able to suggest a lot more entities.
Equally I already had cash investments and ISA’s but he was able to suggest other vehicles like IIB’s which previously I knew little about.
I had 2 Pension schemes already in place and no mortgage so somewhat easier to take his advice if I chose to.
In short he has made my “ investing “ easier and overall I would say financially I am probably better off all told than doing it all myself but I haven’t just sat back and done everything he suggests by a long chalk.
Accountants - we have used one for probably 15 years + as frankly the benefits outweigh the costs but I started to use one when I started to acquire share options - without these I probably would have continued with SA by myself.

[Simpo Two]

redrabbit29 said:

All advice is free but investments are charged at 3% for initial fee and 1.75% for ongoing.

It's always worth converting seemingly-small percentages into money. 3% can be many £Ks to pay for a very small amount of work. And if the investment you paid them that amount to invest in grows by 5% in year 1, then their 1.75% is 35% of your gain. Worse, if your investment goes down you still pay them. In short, you take the risk but they will always win. At which point they will wheel out the 'crystal ball' defence.

I agree some planning/tax advice might be handy but can you employ her on a simple hourly basis?

As for accountants, in my experience they simply add up the numbers and tell you how much to pay. (EricMc excepted of course!)

[CharlesElliott]

redrabbit29 said:

Hi

I recently jumped a significant amount in salary and now earning just over £100k a year. I know a lot of the theory behind the tax situation, and using pensions to avoid the higher tax band, etc. But there are certain questions such as investments, how much should I put in pensions, ISAs, long term vs short term, etc. Many posts online are helpful but obviously not about me personally so it's always hard to be confident in what I am doing.

A financial advisor came recommended to me. I spoke with her briefly last week and she seems really good, with a very strong background in international investments, equities, hedge funds, etc.

All advice is free but investments are charged at 3% for initial fee and 1.75% for ongoing.

She also said the biggest focus is on taxation as that has the most significant impact over time. She can also make recommendations on investments based on my current situation and long term plans.

So it all sounds really good.

Just wondering if anyone has personal experience of using an advisor on a frequent basis, how did you find it and was it worth it?

Thanks

Maybe she is really good, but that is a really high fee - so she had better be. A 'normal' fee range would be around 0 - 1% initial and about 1% ongoing. Remember that charges compound just like growth does, so it adds up quickly.

[PositronicRay]

At those rates your investments need to work hard just to overcome the headwind.

[nickfrog]

redrabbit29 said:

Hi

All advice is free but investments are charged at 3% for initial fee and 1.75% for ongoing.

FM. Probably extremely poor value.

Most of the tax optimisation piece is not that difficult to understand yourself. Depending on your age, objectives etc then pension is your first port of call and will save you loads of tax, most of which you won't have to pay back when you retire if you play your cards right.

As for choice within the wrapper, a little more complex but again a lot of research will probably yield better value than her fees if you have a moderate appetite for risk and happy to diversify.

[85Carrera]

PositronicRay said:

At those rates your investments need to work hard just to overcome the headwind.

This. On your salary, you’re almost certainly brighter than 95% of financial advisers, so do your own research and save them taking a cut. If you need advice on taxation/how to invest tax efficiently (which you probably don’t - pension (particularly, if employer contributing) and ISA is probably all you’ll need) speak to an accountant.

I’ve spoken to three financial advisers in my life. I asked each of them a few fairly basic questions about personal finance you could have answered if you’d bothered to read the money supplements of the Sunday papers. Not one them got them all right.

Then you have those running race cars and it’s quite easy to see where the fees go (but you might get invited to a hospitality lounge your fees have contributed to if you’re lucky).

[nickfrog]

If your employer contributes it's likely you have access to free advice from the pension provider. I used to have a one to one every 6 months at work. OK it won't be "whole market" but you can extract fiscal tips from them for instance. (Not that it is complicated).

[C69]

redrabbit29 said:

All advice is free but investments are charged at 3% for initial fee and 1.75% for ongoing.

At this early stage it might be better to pay an IFA for a couple of hours of advice. That way, you can better understand how the various tax planning / investment theories could be put into practice to suit you, without feeling obliged to take a particular finance product.

Also, as others have already said, 1.75% ongoing seems high. If that's just the IFA's trail commission, then you'll have to factor in platform fees and fund fees too.

[Jeremy-75qq8]

The fees are huge. Then remember the find it is in will charge a fee.

I pay 0.5% in and 0.5% ongoing. I object to that level !

[GT03ROB]

As others have said it's really not as hard as you would think. A bit of common sense & some reading will get you where you need to be, I really wouldn't be worrying about financial advisors unless you have a lot to play with. The basics of emergency cash savings, pension, ISAs maxes out most peoples saving capacity long before they need to think about anything else.

[tighnamara]

85Carrera said:

This. On your salary, you’re almost certainly brighter than 95% of financial advisers, so do your own research and save them taking a cut. If you need advice on taxation/how to invest tax efficiently (which you probably don’t - pension (particularly, if employer contributing) and ISA is probably all you’ll need) speak to an accountant.

I’ve spoken to three financial advisers in my life. I asked each of them a few fairly basic questions about personal finance you could have answered if you’d bothered to read the money supplements of the Sunday papers. Not one them got them all right.

Then you have those running race cars and it’s quite easy to see where the fees go (but you might get invited to a hospitality lounge your fees have contributed to if you’re lucky).

Do take it you don’t like FA

You were doing OK until your dig at the end, pointless and childish.

[DoubleSix]

C69 said:

redrabbit29 said:

All advice is free but investments are charged at 3% for initial fee and 1.75% for ongoing.

At this early stage it might be better to pay an IFA for a couple of hours of advice. That way, you can better understand how the various tax planning / investment theories could be put into practice to suit you, without feeling obliged to take a particular finance product.

Also, as others have already said, 1.75% ongoing seems high. If that's just the IFA's trail commission, then you'll have to factor in platform fees and fund fees too.

It seems likely the 1.75% ongoing is an “all in” figure, typically composed of adviser fee (1%), fund charges (0.5%) and platform fees (0.25%).

It’s worth pointing out, pro-adviser or not, that two of those charges will persist in one form or another and may well already be being paid by the OP.

[DoubleSix]

85Carrera said:

On your salary, you’re almost certainly brighter than 95% of financial advisers, so do your own research and save them taking a cut. If you need advice on taxation/how to invest tax efficiently (which you probably don’t - pension (particularly, if employer contributing) and ISA is probably all you’ll need) speak to an accountant.

I’ve spoken to three financial advisers in my life. I asked each of them a few fairly basic questions about personal finance you could have answered if you’d bothered to read the money supplements of the Sunday papers. Not one them got them all right.

.

You are generalising rather too much, as suits your narrative.

There are minimum standards to provide regulated advice in the UK and typically firms will ensure their advisers meet that with a Level 4 qualification. Which is indeed, not a terribly high bar.

However, finance is a huge industry, and many advisers move well beyond that basic requirement to Level 6 and 7 qualifications. You’ll certainly need to be “bright” to move through those examinations.

It follows that these advisers in turn move their proposition (or employer) to more wealthy clientele. The round about point being, if you have been unimpressed with the contacts you have engaged with it may be that you aren’t qualifying for a more sophisticated service or aren’t positioning yourself as such.

Or perhaps you haven’t approached an advisory firm at all? Your thinly veiled comments about the site sponsor (whom I have no great love for btw) seems not to appreciate that that example does not provide advice at all.

[Jaguar steve]

PositronicRay said:

At those rates your investments need to work hard just to overcome the headwind.

Indeed. Big returns means taking big risks. No IFA with any reputation to maintain is going to suggest you do that.

To protect their arses and their revenue stream any IFA recommendations will be aligned toward a broad spread of fairly mainstream investments and that means smaller risks and smaller returns which with some reading and thinking and lots of coffee you can easily manage yourself.

If you fkuck up and are 3% down on your return compared to taking an IFAs recommendations you still actually haven't lost any money and if you can't be arsed with any of that malarkey then just stick your stash in a fixed rate bond. At the moment you can get an easy absolutely guaranteed safe as houses 4%+ return and to match that at a 3% fee any IFA needs to come up with an easy, absolutely guaranteed safe as houses 7%+ return.

If anybody knows of such a thing then do please let me know.

[simon800]

redrabbit29 said:

....investments are charged at 3% for initial fee and 1.75% for ongoing........

So it all sounds really good.

I am afraid it doesn't, it sounds horrendous!

[simon800]

Simpo Two said:

It's always worth converting seemingly-small percentages into money. 3% can be many £Ks to pay for a very small amount of work. And if the investment you paid them that amount to invest in grows by 5% in year 1, then their 1.75% is 35% of your gain. Worse, if your investment goes down you still pay them. In short, you take the risk but they will always win. At which point they will wheel out the 'crystal ball' defence.

I agree some planning/tax advice might be handy but can you employ her on a simple hourly basis?

As for accountants, in my experience they simply add up the numbers and tell you how much to pay. (EricMc excepted of course!)

Agree. If an investment returns 6% p/annum and the fees are 1.75% with £100k invested over 25 years there is a gain of £329k. You keep £183k, you lose £146k in fees. Ouch.

[fat80b]

Agree with others here that those fees sound rather expensive to me. Especially when you remember that even the highest paid fund managers don’t beat the market reliably over the long term.

I too have spoken to several financial advisors over the years and have also asked them questions that they failed to answer to a suitable standard. I’m yet to hire one.

I’m sure there are good ones out there and if I could, I’d love to have one of those ones working for me but in the main I can’t help but feel that if they were actually any good at their job, they wouldn’t be doing their job…….

I.e. if you are a small time financial advisor in a provincial town attached to st james place etc why the hell would I want to take advice from you…..

[craig1912]

simon800 said:

I am afraid it doesn't, it sounds horrendous!

He hasn’t said what the £’s are. 3% of what? What is the OPs initial investment.
OP get a fixed fee for the initial advice but if you are paying 1.75% ongoing then that is probably too much.