IFA advice please

[whosebootsaretheseshoes]

Very nervous first timer looking to use an IFA to invest for growth and income. Have seen two, but fees seem to vary.

Could anyone give me an idea please, of typical/average set up fees and annual management charges for this - I know I need to pay them, I just don't want to be paying over the odds!

Feeling a bit out of my depth with this tbh, so any advice would be welcome.

Anyone?

Go on....you know you want to...

My IFA doesn’t charge set up fees but has a management fee that is between 1–3% of the invested funds, per year (more invested = lower percentage). That is for an actively managed fund as I have a job in financial services and can get 5 days notice that I have to sell a particular share out of the portfolio because it has become a client of my firm. Hope that helps...

Oh and i never actually pay him, he takes it out of the portfolio gains 👍🏻

Thanks for your reply Captain. I've been quoted a 1% set up fee and 1.8% annually for an actively managed fund, I'm just trying to guage if that's reasonable.

I'm incredibly nervous of taking the plunge, so it's really reassuring to know that your experience has been positive.

My IFA generally charges 1%initial fee plus 0.75 to 1% ongoing annual fee depending on the investment amount. There would be no initial charge for regular monthly premiums.

Ooh, thanks for the info Time, my quote seems a bit high then.

There are no exit fees or switching fees with the quote I've had, is that usual?

You quote may not be too high - it depends on the amount invested. They may have a minimum of, say £1000.

No exit / switching fees is perfectly possible, but it depends on the solution the IFA is suggesting.

Thanks Hereward. I'm considering a fairly substantial investment (which I think is why I'm holding back a bit) so the ongoing charges do rack up quite a lot. Do they still sound reasonable to you?

How does that 1.8% annual charge break down? Is part of it the fund managers' charge and part the IFA's on-going servicing fee? Or is it all the IFA's fee with a further fund charge applied on top?

If it's the former then probably about right but depends on the underlying fund.

Thanks Sunseed, it includes both the advisor and the fund manager charges, so not too bad then?

What do you mean by ‘actively managed fund’ and what is the breakdown of the 1.8% annual fee
An ifa I know charges 1% for ongoing fees subject to minimum £1,000 pa and use Discretionary Fund Managers who also charge 1% pa but fund is very actively managed and has beaten its contemporaries comfortably.
Their initial fee is generally between £1,000 and £1,500 depending on amount of work in setting up investment.

A 'typical' IFA charge would be around 1.25% for selecting the funds, managing tax allowances (i.e ISA, annual CGT allowance). Add to that the fund manager charge and platform fees and you're not too far off 1.8%. It really does depend on the amount though, and the complexity of the investment and investor profile.

If you want to look at something cheaper, a 'robo-advice' platform like Nutmeg can offer good value, but the suitability assessment is down to you rather than the IFA, and you would have to get any tax advice separately.

Look for an IFA that charges straightforward fees for the work involve. They do exist and are much more cost effective. Furthermore, any advice would be totally unbiased as it’s not based on recieving a % of your money. Good luck.

I manage the private wealth team at a City IFA, we offer on the clock charges or a fixed fee menu.

All very ethical.

The ongoing fees are rather high I think, have a look at a discretionary risk rated portfolio with someone like Liontrust or Tatton to keep the cost down