Advisor Charges

[Spydaman]

There was an article about advisor charges on R4’s Moneybox at the weekend which made me realise I didn’t know exactly how much mine charges in £s. Turns out it’s £3700 for me and Mrs Spydaman for which we get an annual face to face review and a few corporate emails. I don’t know if he reviews our investments every week in the background but suspect not.
Does this sound about right?

[loafer123]

Spydaman said:

There was an article about advisor charges on R4’s Moneybox at the weekend which made me realise I didn’t know exactly how much mine charges in £s. Turns out it’s £3700 for me and Mrs Spydaman for which we get an annual face to face review and a few corporate emails. I don’t know if he reviews our investments every week in the background but suspect not.
Does this sound about right?

I heard this, too, and I was interested to hear about the time charge based advisors.

I certainly don't see why we should pay as a %age of amount invested, given the portfolio split is likely the same with £250k, £500k or £1m.

[Ezra]

Difficult to say whether it seems about right without knowing what %age it represents of the portfolio they're advising on, and also what type of assets are invested.

[loafer123]

I pay about 0.65% - it feels quite alot for the service.

[Mr Pointy]

Spydaman said:

There was an article about advisor charges on R4’s Moneybox at the weekend which made me realise I didn’t know exactly how much mine charges in £s. Turns out it’s £3700 for me and Mrs Spydaman for which we get an annual face to face review and a few corporate emails. I don’t know if he reviews our investments every week in the background but suspect not.
Does this sound about right?

What is that as percentage of the fund value, what returrn are you getting & are you happy with it?

[Spydaman]

Does it take 10x longer to advise on £1M or £100k. Is the IFA taking 10x the risk or is the customer 10x more able to pay his fees?

[Ezra]

Spydaman said:

Does it take 10x longer to advise on £1M or £100k. Is the IFA taking 10x the risk or is the customer 10x more able to pay his fees?

I think specifically on this point, there is a relationship between fund value and charge/fee. For instance, liability insurance for the advisor must, in some way, be based on AuM. Also, I'll bet the advisor isn't the asset repository, so there will be some platform fee too, which is value based. It's not all face value, straight line issues - with FA related stuff there's a lot behind the scenes.

[Simpo Two]

Do you feel a payment of £3,700 is reasonable for the advice you receive? Do you think you are more than £3,700 better off each year because of it? Does the FA arrange things to maximise tax allowances, eg selling something to use your annual CG allowance, or any other investment advice? Or do they simply turn up, show you a bottom line and suggest you invest more with them? If you stopped receiving advice tomorrow, how would your affairs be any different next year (other than being better off by £3,700)?

And as Ezra said, presumably he's told you of the ongoing fund management fees and platform fees?

[PM3]

I don't use advise, but wife does . Advice 0.42% . Main holdings, offshore bond , ISA , SIPP. (The bulk is in the first two )
She gets the tax planning associated with the holdings interwoven with her other ( limited) sources of income . Reporting ( main annual meeting, could be quarterly be we don't bother ) Reporting is VERY voluminous and detailed and in my limited opinion is rather good .

Performance : 22/23 tax year not so great , but I will say , he beat me percentage wise hands down on a very difficult year .
The numbers for 23/24 tax year going to be very interesting for comparison ( a clear plus period thus far ) Saying that, her official strategy is on the more conservative side than mine . I make allowance for the fact that my " strategy" is very unsophisticated

[Ezra]

A couple of other points:

If you have a FA that meets once a year, updates on circumstance, reviews risk tolerance etc, and suggests a few general switches or stay same, and then parks the monies in a general strategy, ie cautious, growth, balanced, income etc....I think what you pay sounds quite toppy.

Also, what you're paying to the FA won't be the entirely of the fees you're paying. Whomever constructs the underlying strategies will have a charging structure plus, if the strategies are invested in funds, IT's or other collective investments, these have charges too (in the main, these charges are all effectively taken before you see the investment return - but its useful just to be aware of them).

If you are very inexperienced as an investor, I think an advisor does make sense. However, with a bit of knowledge, and an Investors Chronicle subscription , you can create your own portfolio that would closely match any of the general investment strategies that FA's generally promote, for much less money.

[OddCat]

I'm not sure whether adviser charges, and charges for advice might be conflated here ?

Unless the OP has £750k plus invested then £3,700 sounds like a lot for the advice element alone.

[anonymous-user]

The FCA are on manoeuvres about the poor value ongoing charges.

In many cases and all things being equal there's little relationship between the work done and the value of the assets the advisor manages.

[okgo]

How hard can it be - buy global tracker - the end

[Ezra]

okgo said:

How hard can it be - buy global tracker - the end

Exactly this, or slight variation of.

[Spydaman]

To answer the questions in the replies:
Pension pots are £207k + £242k
Advisor fees £1170 + RL fees £909
Advisor fees £1354 + RL fees £988
This is in addition to what he gets from our S+S ISAs and the initial set-up fee. He hasn’t changed anything since the initial consultation 2 years ago. All the investments are in the positive

[xeny]

Ezra said:

Exactly this, or slight variation of.

Somewhere I've seen a blog post by a former finance journalist where he essentially says just this.

[PM3]

Ezra said:

okgo said:

How hard can it be - buy global tracker - the end

Exactly this, or slight variation of.

Brilliant. Glad she was not being advised by internet experts, tax year 22/23 he beat global equity by almost 6% so that means ( and I'm sure some elements were luck ) compared with those ( and me for that matter ) paid fee in comparison for ...next 14 years . full descension managed, no input from owner of the money

I suspect ( my internet level of being right ) the bad years might be better managed by a very good IFA , as perhaps the good years are often taking care of themselves.

[PM3]

xeny said:

Ezra said:

Exactly this, or slight variation of.

Somewhere I've seen a blog post by a former finance journalist where he essentially says just this.

Brilliant !

" a blog post"
" finance journalist"

got to be case closed m'lord ?


Ok.....my hobby horse dismounted

[okgo]

How have they done vs global equities over 5 years?

I think those sorts of judgements are hard to make over single years.

[Simpo Two]

Spydaman said:

To answer the questions in the replies:
Pension pots are £207k + £242k
Advisor fees £1170 + RL fees £909
Advisor fees £1354 + RL fees £988
This is in addition to what he gets from our S+S ISAs and the initial set-up fee. He hasn’t changed anything since the initial consultation 2 years ago. All the investments are in the positive

Deduce RL = Royal London?

So Royal London has been managing the pensions for £1,897, and on top of that the FA has been earning £2,524 + percentage of ISAs for, er... well nothing.

Try it this way:
Total gain on all investments over last two years = X
Total money paid to FA = Y
Percentage of X taken by Y = ?

Many people don't realise it but you can hold investments directly; FAs do not have a magic portal. If you think that the FA is not earning their keep you can remove them from the chain, then make sure all commissions are switched off and that any shares are in the 'clean' class (other share classes have higher fees to pay the FA).