Is it worth using an IFA for investment planning?

[curlyrebel]

I had an initial meeting with a chartered IFA about investment planning. I need to sign the proforma before our next meeting. I'm hesitating because of the fees. It will most likely be 3% for the implementation fee or minimum £750 and the ongoing fee is likely to be 1%.

Is it worth it if I'm going with a stocks and shares ISA? Shall I try and do it myself?

Both the people I've spoken to about it don't believe it's necessary to invest in stocks and shares at all so it would be good to get other perspectives.

How much do you have to invest? How much do you already have invested?

I have up to £600 per month to invest. I haven't got anything invested currently.

Don’t pay that kind of fee for relatively low investing. You absolutely don’t need it to get started! Just watch some YouTube videos and open a medium risk Vanguard fund or something and sit back. You would be insane to pay for an IFA until you actually have some decent sized investments to manage. Don’t be intimidated into thinking you need to pay this. If you’re just starting out and have nothing built up yet, as I understand it, then run a mile from anyone trying to sign you up to this!

Thanks @TrufflesAndToast. I just wonder if I'll get round to doing it and have time to manage it myself. I will definitely check out those videos though.

That’s the thing, you don’t have to manage it or ‘do’ anything if you choose a fund that is managed on your behalf. Vanguard have a range of risk levels and you pick one and go. I use one and have never done anything beyond set up the standing order.

That sounds easy! Is there a reason you prefer Vanguard over others @TrufflesAndToast?

I was just looking at wealthify and that looks quite simple to use and set up.

sites like Wealthify and Nutmeg are v good for this kind of thing. just buy a fund with a diverse range of shares.

also, keep an eye out for annual fees / charges. Some funds charge 1-2% in management, which doesn't sound like much but if your fund grows 5% per year and HargravesLandsdown is taking 2% each year, then you only get 3% growth and HL get rich.

OP, assuming you have little knowledge, and just want to get started, have £600 a month to invest, and are prepared to leave it alone for 10-20 years, then just do the following ;

1 - tell the IFA / Spiv / parasite, to sod off and never darken your door again (unless you have left out some important details, then they are just after lining their own pockets, not yours).

2 - open a Stocks & Shares ISA with Vanguard (there are many options for this, but they are a good low cost, easy to use, reputable company for this level of investing).

3 - set up a direct debit / monthly payment, and put it in FTSE Global All Cap Fund.

4 - leave it alone, check it from time to time, but just leave it to do it's 'stuff' while you get on with your life. It will go up, and it will go down, that is the nature of investing.

5 - thank yourself in 10-20 years for being so smart to get started when you did, not getting fleeced by financial cowboys, and have the time and space to decide what you want to do next.

And that advice is free, and will save you £1000's compared to what the IFA will offer you.

This ^

You can self manage £600 a month, at least for a while. Once you have £100k then you may want to look at getting advice, though you may be so confident by then that you keep doing it yourself.

As podcast about why most people do not need an adviser:
meaningfulmoney.tv/2021/10/13/you-dont-need-an-adviser/

Have a look at different financial advisors.

There is a website called unbiased.co.uk that lists financial advisors. If I remember rightly you put in your postcode and it lists local ones.

I've set up many new pension plans over the last few years and 1% a year is on the high side. Standard is 0.5% per year. A lot are 0.75% per year. Hardly ever as high as 1%.

@MistyMorningSong

OP, assuming you have little knowledge, and just want to get started, have £600 a month to invest, and are prepared to leave it alone for 10-20 years, then just do the following ;

1 - tell the IFA / Spiv / parasite, to sod off and never darken your door again (unless you have left out some important details, then they are just after lining their own pockets, not yours).

2 - open a Stocks & Shares ISA with Vanguard (there are many options for this, but they are a good low cost, easy to use, reputable company for this level of investing).

3 - set up a direct debit / monthly payment, and put it in FTSE Global All Cap Fund.

4 - leave it alone, check it from time to time, but just leave it to do it's 'stuff' while you get on with your life. It will go up, and it will go down, that is the nature of investing.

5 - thank yourself in 10-20 years for being so smart to get started when you did, not getting fleeced by financial cowboys, and have the time and space to decide what you want to do next.

And that advice is free, and will save you £1000's compared to what the IFA will offer you.

I agree. Why pay someone to invest your money and take a cut? I'd add two things. Firstly, a subscription to Investors Chronicle. It's readable and they often have articles recommending the 50 best funds or similar. Secondly, be very careful if someone calls you out of the blue with a great deal or claiming to be from a firm you have made an enquiry to on line. They should never ever do this but these large firms are not that secure and your details are highly likely to be leaked as a potential investor.

1 - tell the IFA / Spiv / parasite, to sod off and never darken your door again (unless you have left out some important details, then they are just after lining their own pockets, not yours).

Love that piece of advice @MistyMorningSong .
To be fair I approached them, but I will definitely tell them I won't be needing their services.

It's good to know I can easily set this up myself.
The list of funds is quite overwhelming on Vanguards website. I guess I need to do some research. Is FTSE Global All Cap an ethical fund? That's quite important to me.

Thank you everyone for your (free) advice!
Also good to know that 1% is too much as a management fee @whiteroseredrose

@TrufflesAndToast

Don’t pay that kind of fee for relatively low investing. You absolutely don’t need it to get started! Just watch some YouTube videos and open a medium risk Vanguard fund or something and sit back. You would be insane to pay for an IFA until you actually have some decent sized investments to manage. Don’t be intimidated into thinking you need to pay this. If you’re just starting out and have nothing built up yet, as I understand it, then run a mile from anyone trying to sign you up to this!

I agree with this. Its just not worth it for relatively low levels, because it's easy enough to do on your own.

There are funds that invest ethically / sustainably. If you browse the list of funds on a platform such as Hargreaves Lansdown, you'll see that there are different categories, you can also search for keywords like "sustainable".

If you want ethical investing maybe consider an ESG global tracker
www.theethicalinvestor.co.uk/globalequitytrackers
Maybe choose a low cost fund, checking that its concept of ethical matches your own. Then find a low cost platform which allows you to invest in it.

I agree that an IFA is not worth it for this level of investment, but I also think if you are interested in ethical investment you will need to do some of your own research. There is no single definition of what is ethical.

Excellent advice from @MistyMorningSong

OP, you can easily do it yourself. There is so much information out there. FTSE global all cap won’t be ethical, because you are essentially buying the whole market.

I don’t think vanguard does an ethical fund, but you can find ETFs/funds on most investing platforms that offer thematic investing (ethical, clean energy, electric vehicles, solar). You’ll need to do some research, but you can 100% do it on your own. Also, most fund managers (no matter what they tell you) don’t beat the market and their fees will just eat away at your returns.

There’s a Financial Times podcast called money clinic which is a great place to start.

Another vote for Vanguard. Their platform is likely to be the cheapest for you for a few years until you build up a bigger pot (0.15%pa and free to buy/sell). They have a restricted choice of funds which can be good when you're starting out as less decision paralysis.

They do "ethical" ESG funds now too eg ESG developed world all cap equity index fund and ESG global all cap ETF.

Just set up, ignore and spend some time listening to the meaningful money podcast or similar so you're more educated when you have a bigger pot and other decisions to make. The money saving expert forums are good too. There's loads of free resources out there.

Thank you all! Looks like one of the ESG funds on Vanguard are the way to go.
I will do some more research so I can get clued up on share prices, active vs passive etc.
It's quite exciting the thought of learning about something I've known very little about!

FTSE Global All Cap Fund.

can i ask how this works?

What size pot should trigger the move from DIY investing to Paying an IFA to advise and manage investments?

@Alwayscheerful There isn't a straightforward answer to this.
If you start investing regularly and learn from doing so, you may never want or need an IFA.
But if you have, say, over £100,000 to invest and aren't confident, then an IFA might give you some reassurance, although I have come across some untrustworthy and in one case, downright dangerous, ones.

They are all in it to feather their own nests (understandably, it's what pays their mortgages) so even if you do go with an IFA, learn as much as you can first and keep an eye on the costs.

@Mustbeteatime
Yes, several people I know have had dreadful experiences.
Even the good IFAs can be prone to churning, make recommendations to cash in or transfer investments in order to generate commission.

OP, it’s great that you are starting to invest and there are some good ideas here. Are you already investing in a pension? Although you won’t be able to access it until your fifties the taxation benefits are worth considering.