Should I get rid of my Financial Advisor?

[ConsiderTheOyster]

Inherited a sum 5 years ago while poor as a church mouse - no concept of what to do with it so plonked it in with the first FA I met that didn’t make my skin crawl.

Its split between 2 ISAs, 2 pensions and a GIA that is feeding the ISAs until it’s gone.
Emergency fund is in premium bonds and I kept a chunk in cash. This was April 2020 and terrifying.

As time went on I could see that the investments were doing rather well as I’d lucked out on timing. I put a toe in the water with Trading 212 and gradually got what I think is the hang of it. I was fiddling with pocket money numbers to start with but now all the cash has been split between Vanguard and Trading 212. The Vanguard account is 100% in the FTSE global all cap Acc. Trading 212 is in the S&P.

I don’t know if I’ve just learned enough to be dangerous. I could afford for all of what’s in my own sandpits to blow up so I’ve been too risky, I realise this, but I’d not do that with the lions share they currently charge me to do no work with. I’m fully comfortable with ups and downs now and know not to panic and withdraw when crap happens like Ukraine. I understand that a globally distributed fund is going to do better than trying to play the market and even if I just dumped it all in a 60:40 Vanguard Lifestrategy I think it would do better over time without the FA fees .

I’m 50 and not planning on retiring - once that gets closer I would want help to give me peace of mind that I’m not going to run out with my draw down rate but for the next 15 years I’m just doing accumulation- what help are they to me?

Apart from anything else I’ve been given a new guy to work with that’s not my cup of tea and speaks to me for an hour a year tops.

I’m aware I may be Dunning Kruggering my way into poverty…?

any advice?

@ConsiderTheOyster I think it "got weird" because of your phrasing. You mentioned poverty and asked what use accumulation is.

anyway, having re-read your posts, I don't think you need a FA. I think you can run your investments alone. Also, what is right for you personally might be at odds with whatever they recommend.

I think - not sure - that this is why pp suggested accountants. Maybe your issues will need tax advice but you seem to know how you want to run your investments.

Honestly, most FAs are just glorified sales people. It isn't worth what they charge.They will take a management fee, and then invest your money in a bunch of funds which themselves take a management fee. If sounds like you want a safe portfolio which is smart. There are a bunch of resources out there that can help you come up with your strategy (Martin Lewis etc). I'd just invest it directly, or find a platform that does. There are a lot of roboadvisor type options that are really useful for this.

Have a listen to the back catalogue of Meaningful Money podcasts. They cover everything to do with investing including whether you need an advisor - pros and cons. It sounds like you probably don't to me.

Martin Lewis is great but he doesn't do advice on investing

I was just coming in to recommend Meaningful Money too.
They have a very good FB group too.
It sounds to me as if the initial advice and investments were quite sensible but that actually they were rather 'set and forget' options. So that leads me towards thinking that the IFA is probably no longer needed. Perhaps a thorough review in 5 years unless there's significant change meanwhile.
But definitely have a look/listen to Meaningful Money etc.

Remember that since Covid and Trump’s reelection markets have been soaring. You say you’re only 50 so investing for the long term, there will be periods when markets drop. This might be the time you want an IFA to reassure you to stick with the strategy. They should also be able to advise on the timing of when to reduce your risk level as you near retirement.

That having been said yes you can absolutely self manage fine and can always rehire your current IFA or hire a new one in a few years.

I've recently done the Rebel Finance Course because it popped up on Facebook. They are taking the YouTube tutorials down next week to update them, but the Facebook group will still be live. I can't recommend it highly enough.

You already know loads. The Rebel Business School would absolutely say sack off your IFA and you are already doing everything right! You've got an emergency fund to ride out any peaks and troughs - make sure it's big enough to see you through 3-6 months. Invest the rest and do the course to check you are on the right lines once the new videos are available. You could listen to a few in the next week for reassurance.

Considering you are investing in tracker funds with vanguard it seems strange that you're paying a financial advisor large fees. Surely the point of investing in trackers is to keep fees low. I would go it alone as it doesn't sound like he is doing anything useful

The simple path to wealth suggests to lose FAs.
Stick with the funds you have

Whether you should use an IFA depends on your circumstances.
If you are in the accumulation phase and understand the basics and are happy to leave things alone, then perhaps not.
A financial advisor adds value by arranging everything in the most tax efficient manner, most important in the decumulation phase and in intergenerational wealth transfer.
The new rules about pensions coming into your estate in 2 years time will create so much extra work for us. Of course we will have to charge for it.
Many clients who are coming to us now are in legacy pension schemes that do not allow flexibility - they have no option but to use an adviser as the provider requires them to certify that they have taken financial advice. Quite a few of them believe they can just bring in a firm for me to tick and then take out all their money - paying a marginal rate of 60% tax. To put it in a bank account because they don’t trust pensions!

Any “idiot” could have done well in the markets in the last few years. A financial advisor will earn their keep in a downturn and in the approach to retirement.

Be wary of overconfidence.

Yup a layer of protection

Putting part of your inheritance lump sum into a pension (which I presume was your FA's idea) sounds like a terrible plan. The point of a pension scheme is that you get to put earned income into it pre-tax. Otherwise pensions are not good investments compared to buying the same funds (shares, bonds, whatever) outside of a pension scheme as they have higher costs and impose inflexibility. Your inheritance is already net of tax and so there is no benefit in putting it into a pension, unless you literally cannot trust yourself not to spend it.

On the other hand, frequent trading will get you nowhere. Over the long term you are not going to beat the returns of a low-cost index tracker fund. Just choose your preferred degree of risk and on that basis put some into shares, some into bonds or other solid investments, and keep a few thousand in cash. Then look at the numbers once a year and smile.

You get tax relief when you put money into a pension so there is a benefit. And you need to be careful not just putting everything into a GIA which is taxable. Need to use ISA allowances etc as well. Try and keep as much away from Robbing Rachel as possible!

The benefit is obviously that she must have qualifying income that is being taxed. Therefore there is a huge uplift on funds that go into her pension

OP appeared to state that she put her lump sum into two pensions. There will have been no uplift on that. She could have got the future tax benefits of a pension by starting one from scratch. Of course it's nice that it's there and she can now add more money to it tax-free, but that's completely independent of the question of the lump sum.

The text of the OP suggests that the inheritance (i.e., not income that is being taxed) was put into various places by the FA, including two pensions. Of course it's a good idea to have a pension scheme in place to get that tax advantage for ongoing income, but putting the untaxed lump sum in there makes very little sense.

There’s a limit to how much you can pay into pensions, I’m assuming the lump sum is being paid into pensions and ISAs annually. I’m not sure on pensions inheritance rules so maybe it’s possible to pay more in under these circumstances.

I’d say yes, for where you are, and what you are investing Yes get rid.
Its a fee you don’t need to be paying.

www.iwillteachyoutoberich.com/do-you-need-a-financial-advisor/

OP - is your financial advisor independent or are they linked to SJP (St James's Place)? SJP advisors are financial planners but only sell their own products. They are constantly recommended because they network a lot but their fees are often very high.
I have an independent financial advisor and find him very helpful, and I pay a percentage of my investment to him. However, my investments generally perform well so I'm happy to pay him to keep an eye.
It's not just about advisor fees though as you'll also be paying a fee to the investment platform which can vary massively (and is significantly more than the advisor fee) so his advice includes finding ones that have modest platform fees too.

After decades of doing my own investing I now use an IFA. The cost is 0.5% pa, and for that I get ongoing rebalancing of portfolio, a global investment strategy, unlimited meetings with an ifa who knows my personal details including life spending patterns and what I intend to do in my will. I also get the legal advice re tax and inheriting planning but I also have a tax accountant.

I'm now retired and can't be arsed with daily monitoring of s&s, but then I never used trackering funds. An ifa would advise you on balancing your investments to minimise risks at your specified level. I wouldn't recommend going to a bank for this.

There are many Investment Houses /Companies that will invest monies for you. An IFA ( Independent Financial Adviser) will have tracked these over decades and be able to recommend strategies etc.

The important thing is that they ( IFAs) are independent ie not attached to any one investment company like Vanguard or a bank. You don't say why you chose Vanguard.( A US Company). Vanguard or indeed a bank are not allowed to recommend you to invest in any company other than their own even though they may be well aware that there are much better investment houses out there.

Have you compared their performance re the myriad other companies? There are better strategies which will allow you to invest in a range of funds from a range of investment houses but under one umbrella. Have you compared Vanguard's investment managers' record re many others. Do you even know their names?

Beware clone companies eg especially unregulated clones of big ones like Vanguard. An IFA will take an overall view of your past, present and future needs not just recommend investment funds, So eg you may need sickness protection, repaying withdrawn pension monies ,a new mortgage strategy, income/ Inheritance tax planning, investigation into your past employment re pensions , repaying withdrawn pension contributions etc etc.

An IFA's job is not just investment strategy but a comprehensive investigation into your past and future needs. It is a much broader service than an investment house provides.

Hi all. To answer a few questions, my advisor is fully independent. The GIA is annually drained of 40k into each of my and my husbands ISAs. The SIPPS are minor compared to our work pensions but get supplemented when it makes sense tax wise. I literally have one hour conversation with the guy a year and he’s just put it in globally diversified funds which, as far as I can tell are equivalent to my own experiments and left it there, but I may be very wrong and naive. I don’t know how much I don’t know. The platform is Parmenion. I find voyant helpful but it’s not going to change anything during the accumulation phase, so it’s a nice to have. If there were red all over the place during draw down I might change my lifestyle but I haven’t invested a single new penny with him and I’m blue to age 100 already so I can’t see it as a benefit other than peace of mind. It’s probably not worth upwards of 8k a year in fees.

I have around 40k in my solo investments and they are 100% equity - I didn’t get a fit of the vapours when Putin did his thing and obviously the bond market went very strange for a while and I accidentally wasn’t exposed to that so I’ve done rather well out of it, but I’m aware that was good luck rather than good management. I still very much see it as my Grandparents money that I am a custodian of and owe it to them to treat it with utmost respect and feel like paying someone to definitely do the right thing rather than probably doing the right thing might be the best course of action. On the other hand they’d be cross if I’m paying a guy in a stripey shirt a small fortune to do zero work. 🤷‍♀️

@ElizaMulvil thanks - that’s really helped a lot.

I chose Vanguard because it’s fees are really low and it holds the fund I really wanted after months of investigation
sickness protection is in place
forever home mortgage free
Work place pensions all organised and sorted
Wills in place
6 months emergency fund

so, yeah, you’re right I probably only need an IFA once I get nearer to retirement. The compounding on the fees in the next 10 years is the only thing left to consider now. I don’t think he’s earning his fees at all.

Oh, and obviously I’m not considering for one moment 100% equity on the retirement pot - only my little experiments!