Should I change financial advisors?

[fluffedup]

Seven years ago I used an independent financial advisor to invest £80k in a trust fund for my children for when they would be old enough to use it sensibly.

The investments were hit by covid / world events so the fund has only grown by £4k, however in that time the IFA has earned about £6,400 and the investment platform has charged a further £6000.

I am naturally pissed off. I would have earned more in a low interest bank account at 1%.

I asked about this on the Martin Lewis website and was told that the IFA’s charges were at the high end of normal and the platform cost at over 1% is what stands out as being pricey, also the fund is not performing particularly well.

I emailed the IFA and asked if we should change the fund but he just said the fund was ok and I should come in for a review. We do this every 2-3 years and it costs just under £500. I don’t think I am getting good quality advice and am thinking of changing IFA.

A recent thread on here mentioned that £90k was too little for an IFA to be interested – should I be using one at all? The problem is that I want to put the money in a trust so it's not just a matter of finding a good place to invest it.

I don’t know anything about investments which is why I used an IFA but should the advice have been to not use an IFA? The IFA was recommended to me by a solicitor so I trusted the recommendation.

@Hadalifeonce thanks, the charges I'm paying / have paid are definitely too much

@Hopelesslydevoted2Gu
All the paperwork the adviser gave me relates to the fund (Standard Life) and not to what kind of trust it is - so that's another question to ask him.

@fiorentina
Yes, I may complain. I can't understand how he can still be in business if this is what he's like. There must be very few people recommending his business, apart from the solicitor who recommended him to me (who is actually his sister).

Thank you everyone for all your replies and advice. I'm going to ask the adviser what kind of trust it is as @Hopelesslydevoted2Gu suggested, and ask again what I'm getting for the annual fee and the review fee. Then I'll change the adviser and the fund.

the solicitor who recommended him to me (who is actually his sister

It gets worse.

Did she recommend him in her official capacity as a solicitor, or does she know you socially and it was during an informal chat in the pub?

Because I have a feeling there may be rules about the former. (If there aren't, there should be.)

@NoBinturongsHereMate

it was in her official capacity as solicitor. She was my late father's solicitor - he didn't engage her, his solicitor retired and she was the replacement. She was handling my probate after both my parents had died.

It did fleetingly occur to me that it was not professional behaviour but I wasn't thinking straight with my illness and parents' death so I just went along with it - big mistake.

Has the Trust been registered on HMRCs online Trust Register. This has been a legal requirement since October 2020. There are some exemptions but they are very niche. See link for more info. IFA should have told you about this. Negligent if they haven't. www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=www.gov.uk/guidance/register-a-trust-as-a-trustee&ved=2ahUKEwiHi_fbz9uGAxU9VfEDHfd5AhYQFnoECC0QAQ&usg=AOvVaw15SwAUYXYokkFcI95j30xw

@poshfrock

The trust was registered although that wasn't done till 2022.

Presumably your risk tolerance was low when you discussed this at outset ?

how old are the kids?

HI OP.

I currently have JISAs for my kids. My kids are much younger than yours. When they turn 18 i am considering the following accounts either stand alone or as a combination as i need to do more research first and thinking and planning for the future as one is disabled.

SIPP (possibly might start JSIPPS now)
LISA
S&S ISA
Cash ISA
Premium bond account

If i were in your position i would probably go for JISAs now and then move to LISA (when 18) for all your kids due to 1k government contribution per 4K and the kids can only take it out for a deposit on a first property or retirement. With a LISA you get 25% plus interest and the fees can be very low. Its not instant access though so they don't get any flexibility what to spend on but you can also move money from the JISA into other tax wrapper accounts as above depending on the needs of each child.

One of my children will always be dependent so wont be buying a property so a LISA would not suit her for example. To do any of the above you just need to read and research yourself and they are easy to set up and manage yourself as well so no need for IFA fees.

I would look at disolving the trust now based on receiving bad advice but i imagine getting the money out may be a legal process.

@SlopeT yes I did ask for a medium to low risk investment. The children are aged between 14 and 24 years. The eldest is sensible and could have her share now.

@ilovemoney thanks, I've now got a proper recommendation for another IFA and will ask them about it. I don't think I can just take the money out of the trust but I hope to be able to move it so the fees are less.

I think you were poorly advised tbh. Would have been much easier to set up and junior ISA and chuck it in a low cost tracker. You likely wouldn’t have been paying any platform fees or very low fees.

@Bunnycat101 yes I wish I'd never set up a trust now

I got a recommendation for another IFA from a trusted friend but it turns out that IFA won't deal with me as his firm only deals with amounts in excess of £200k. By having a trust I need to use a financial advisor to change it.

I don't know many people who are likely to have paid for financial advice, but I'll try to get another recommendation from less rich friends.

@fluffedup Your existing adviser charges you for each review. And then you are paying ongoing advice fees of £500 every year. Please ask him, best by email - what you are getting for the £500 you are paying every year.

Do you have the policy documents for the investment? It sounds as though you are investing in an insurance bond . This is a common way of investing with a company like Standard Life when you want to put the money in a trust.

I presume you have the policy documents and you should have the trust document with it. If you have an insurance bond eg the trust will be registered with Standard Life.

If you do not have the trust document it may be that you are not the only trustee(s) but the settlor(s) ie the person who provided the money. You need to confirm who are the trustees. If eg the solicitor and /or the IFA are the trustees you might want to remove them as they are likely to want to charge the trust for their oversight in the future whereas you wouldn't.

It is likely to be a flexible trust. It will say who are the trustees are (you? and at least one other person) and for whose benefit the trusts been set up. Your children.

The trustee(s) have control of the investment vehicle so you could for example look at the different funds that Standard Life manage and choose to move the investment to one you prefer according to your risk profile.

The problem you've had though, apart from the poor fund performance, is the different layers of annual charges ie the platform, the IFA ( Financial Adviser) and the fund managers all taking a cut.

All fund managers will take an annual fee for managing the fund ( typically 0.5-1%, but if you stick with Standard Life but choose another fund you may not have another initial fee. You should be able to contact Standard Life and tell them you are leaving both the platform and the IFA and the latters' fees should stop.

If, for some reason they won't let you cut the relationship with the platform and IFA ( not sure why they wouldn't) you can of course independently decide to take out the money from the fund and put it in a cash fund or invest in other funds and/or company eg Prudential, Aviva etc and free yourself from the ties to both the IFA and the platform. If you do this yourself ( though you may not feel confident enough for this) you should't have the same high initial start up costs or ongoing cost from the platform and IFA. You will have the fund manager costs.

Alternatively you may decide to wind the trust up and give the money to your elder child and invest the other half for your younger ones.

You do really need an IFA to help you through this. Plus possibly legal advice.

This is very good advice op.

You need to find out what type of trust it is. There are several types of trust, and different trusts will have different options for what you can do next. You also need to confirm you are a trustee (decision maker).

If you can't find the original trust documents, ask the current adviser to send them to you, they should have them on record.

It may be best to wind up the trust and distribute the money now rather than start with another financial adviser. So I would definitely find out what type of trust it is and whether you are a trustee before deciding to engage another adviser.