If you are reasonably financially literate, is a wealth manager ever worth it?

[HappiestLabrador]

NC for this.
We are in our forties with a high joint income. We already fill up all our tax wrappers efficiently, including the kids’ and invest the rest through an investment platform, plus early mortgage payments. We manage our own investments with a balanced, medium risk approach, with a reasonable diversification and have mostly done okay (and sometimes much better than the market.) We recently had a consultation with a chartered tax advisor and there was not much we could be doing differently to be more tax efficient. We are reluctant to get into EIS’s or VCT’s, investing in property, art or fine wine (I’m sure there are many other options.) DH (the highest earner) gets regular communications from wealth managers (I guess these are just IFA’s?) offering to assist us in parting with 1% of our investable assets a year in exchange for strategising and managing our money. But is there really anything they can do with our money that we can’t? Surely they would be using the same platforms and funds and would simply be taking a calculated risk like we do, but would need a stronger performance to break even? I’d be really interested to hear peoples’ thoughts about this, or their experiences, positive or otherwise.

I suppose it depends on how much time you have to spend looking at it all. We have one and we get a portfolio/update document every quarter, usually 30-40 pages long of different investments, why they made changes etc, quite interesting reading actually, but there is no way we have the time available to dedicate to looking into every little thing and making all the decisions they do, so its worth the money for us.

My view is that if you are reasonably financially literate and interested then there's nothing that a wealth manager is going to for you that you couldn't do yourself. But, you do have to be interested, and willing to spend time on it. Many people are not, and do not want to...and there's nothing wrong with that. A lot of people are happy paying people to do things they don't want to. When I was working full time and earning a lot or money I was very happy to outsource that activity; now I have more time and so I do more myself :)

As @Jellybunny56says.

Also, it’s a bit like people googling symptoms and thinking they know as much as a doctor.

If “reasonably financially literate” is enough for you and you’re happy with that, then fine. But I’m sure you’d roll your eyes a bit at someone who thought they could do your job as well as you without the qualifications and experience.

Financial advisor, no. He screwed me over a bit despite being qualified and I think registered.

My in-laws used someone to get everything setup, and now they run it themselves. They say it was a good investment.

Have you completed a risk appetite profile? That might help you to decide. If your appetite leans towards high risk, high reward, you might think the cost is worth it for more active research and investment action than you have the time and inclination for. If lower/balanced risk, the lower returns are unlikely to outweigh the cost of active management.

you might decide on a divide and conquer approach, with a proportion of higher risk actively managed investments and a proportion of “steadier” investments- in which case the proportions might weight your views.

the other thing to consider is timelines and goals - longer timelines or sooner goals (eg university fees/home deposit for children, early retirement, 2nd home or fun car purchase etc)

the last thing is to review regularly- life has a habit of happening whilst you are busy and a strategy that works now may not work in 5/10 years time

Fwiw, I think it’s worth having one. I remember only too well the hours spent pouring over figures and literature DH used to do (And I resented). Once he died, I found an IFA/wealth manager who does it all for me. I do go to regular meetings and get quarterly updates and can even look a the investments myself daily. But it doesn’t interest me and my time spent otherwise is of far more value to me. So yes, for me, worth the money he costs.

A wealth manager is completely different to an IFA.

I use one and I have traded money professionally in the past.

He has access to discounted funds and does a lot of the work for me that I don’t do myself. The funds are very cheap (fractions of a percent in management fees) and he charges me 0.9% on equities, nothing on fixed income.

I like having someone objective who reviews my portfolio and does a lot of the presentation work and tax work as well.

You could pay for advice by the hour from
a chartered planner if you are concerned
or want to see modelling of different scenarios and check your assumptions.

I think it’s helpful to have an idea of what you want a WM to provide rather than assuming you ought to have one at any particular level.

We don’t have one and manage our investments ourselves- reasonably substantial at £1.6m. We have decent returns and I’d be surprised if many WMs beat them net of fees. We also have pretty straightforward affairs at the moment so there’s not much more we could be doing for tax efficiency etc.

However I think once we get closer to retirement I’ll consider paying for a one-off review regarding both retirement and estate planning. The problem is that you don’t know what you don’t know- my in laws made a number of mistakes with their finances despite being quite savvy, and catching any one of them would have more than covered the fees for one-off advice. This would be with a planner rather than a WM.

Personally I enjoy financial things so paying 1% or more for ongoing management doesn’t really appeal. But if you’re short of time or find it boring then that’s a different story.

We have a wealth manager, and he is way more than an IFA. Worth it for us - we do do things like VCTs as well as other investments, but the level of knowledge and forward planning is incredible

Sounds like you are sorted for now so no need to add an IFA or wealth manager. I have one just so I don’t have to think about financial stuff. I could self manage if I had the time and interest, but I don’t.

Thanks everyone for the thoughts. It’s really helpful. I think it is a good point that we need to think really carefully about what value they might add. I have just read that only 8% of wealth managers beat the S&P 500 over 10 years and so it seems unlikely that they will offer any additional value from that perspective, given we have used trackers successfully (with some other investments) and our tendency to inaction has worked in our favour. And the fees would be huge. I’m also concerned that wealth manager is not a protected title and do not understand how they are regulated.

The idea of a one-off meeting with a chartered financial planner (especially one who is happy to tell us to change nothing if that’s best) every few years is a great idea. I have found having an accountant who is also a chartered tax advisor really useful so that might be a good add-on.

I think when you are in accumulation phase with a long investment time horizon the value add is limited. As you get towards wanting to draw down I think they can add more value.

What is a “high joint income”?

I would also say a Certified Planner every so often is not a bad idea. Much better bet than an IFA.

One of my relatives used to work for a wealth mgt firm, so he uses them and the fees seem astronomical to me.

It doesn't sound like you need one. We're in a similar situation and haven't seen anything they can add that justifies the fees

Thanks everyone. This has been very helpful and reassuring. I think we are good for now but will look to use a Chartered Financial Planner in tax future. It’s not a profession I even really knew about until this discussion.

Any tips on how to find a good one (aside from personal recommendations?)

I've used a WM for over 10 years with superb results. No way could I have done that alone.

We don't feel we need a wealth manager, I'm quite comfortable with investing in trackers etc but our finances are complicated because we run a business, we have no hesitation in getting tax advice every couple of years when something big has changed. A few of our friends use them - they have no interest in managing their money - so they pay someone else to do it - I would not feel comfortable with that. Just as I don't feel comfortable with one doctor giving me a diagnosis - I need to get a second opinion or check with google - too many doctors screw up.

I’m the same. But I have paid for specialist advice as required eg for DB pensions. I will probably be looking to get some more advice soon as I need to start de risking for retirement but the stock market is doing so well at the moment, as well as up date my pension forecasting.

I am also reviewing the need for an IFA. I eventually found one I thought was competent & reputable. He charged me £90/mo. He then sold his company to a bigger outfit that is now charging me much more £170/mo. I am retired, most of my income is in 2 state pensions, rental income & 1 SIPP that is now in drawdown. I have maxed out contributions to the SIPP and strictly draw it down now. It is in a Quilter pension platform, and the IFA in the past would occasionally re-balance what funds the SIPP was in. The new IFA is either not doing that or is not telling me about it. The re-balancing was helpful as the SIPP performed well.
Particularly as the fees have gone up so much, I am reviewing the need for the IFA.At my point in life, there is not much further fancy footwork I can do.(When I was younger, I maxxed contributions, needed to look carefully at tax implications, etc) Now it is pretty much stasis. My taxes are very simple & I do them myself. I could cut out the IFA and deal with Quilter directly.
The SIPPis invested in around 12-15 funds (I think it is a glorified tracker TBH) and it may do perfectly well left to tick over.
Much to ponder. The idea of a one off periodic review by an IFA/ financial planner is one idea.
But is AI an option? My concern is that I may be best having an occasional review & rebalance of my SIPP, maybe AI could do this.
Thoughts appreciated. Thx!

By how much have you been outperforming the market overall?

Between the OP and her husband, their joint income is high.