What do you make of this IFA cautious portfolio?

[Aminatidi]

I had a similar experience with my mum.

Nice "cheap" IFA she trusted who went from a couple of visits a year to a phone call a year and whilst I don't have the exact number to hand as it was a couple of years ago she was paying somewhere around 2% just to be parked in a multi-asset fund.

Got that down to 0.22% plus Vanguard's platform fee with no effort at all other than some discussions about the benefits the IFA was adding in her situation.

[dingdong]

The full fees are:

Initial advice: 2% on first 100k, 1% on next 200k, 0.5% above that

Ongoing charge: 1.5% per annum

Fund charges: 0.337% (estimated) per annum

Stamp duty: 0.132% (estimated) per annum

VAT then charged on all fees (so the ongoing charge is actually 1.8% not 1.5%)!

[Aminatidi]

2.2% jesus wept.

And that's excluding stamp as you won't pay that on OEICs so it's difficult to know how much of the portfolio stamp may apply to.

That's one hell of a headwind to overcome with a cautious investment portfolio IMO.

That's just brutal.

[EthicsGradient]

2.2% jesus wept.

And that's excluding stamp as you won't pay that on OEICs so it's difficult to know how much of the portfolio stamp may apply to.

That's one hell of a headwind to overcome with a cautious investment portfolio IMO.

That's just brutal.

I think the stamp duty would only be payable on the FTSE shares in the first column - so, excluding the ETF, about 27.5%. If that 0.132% figure really is "per annum", then that means they expect to more or less turn over the entire share holding each year.

[brightncheerful]

Have you estimated the commission and stamp duty cost of buying the shares individually?

[Spet0789]

Thanks all. I think I'll suggest she can get the same sort of portfolio much cheaper with a vanguard lifestrategy on a low-cost platform and then leave the rest to her.

It does seem odd that a huge NHS trust would be introducing all its staff to an IFA firm with such high charges. I get the point about needing to understand the multiple NHS pension schemes that you are a member of and the rules around payouts/returning to work etc. but that feels like something the NHS should be explaining themselves rather than outsourcing that discussion to a company that then combines it with a pitch for ongoing managed investment services.

I imagine its very lucrative for the firm involved though if they are frequently dealing with investment novices!!

I wouldn’t be shocked if the IFA firm were taking the HR department of the trust to sports events or similar.

[hiriskpaul]

Not what I would call cautious, but agree with others that a Vanguard Life Strategy 60/40 would likely outperform the advised portfolio.

Have they mentioned working the lump sum back into a SIPP and/or ISA? If not, walk away.

Buying NHS Additional Pension well worth looking at as well. Absolute bargain when my sister in law worked for the NHS and super cautious.

HL's advice charges look cheap in comparison: https://www.hl.co.uk/financial-advice/c ... ial-advice and initial consultation is free, so go for a second opinion at least.

[dealtn]

They have recommended their cautious portfolio below with a 2% upfront fee and 1.5% ongoing. I'm keen to see what people make of their portfolio and also what lower cost/simpler alternatives people would recommend. I was surprised to see individual stock choices in there!!

As humans we are instinctively biased to see things like this as "small".

However look at this another way. The average long run real return on equities might be 6-7%. A cautious portfolio likely lower still.

In what other field would you accept giving 25% of your income or reward to others? How much work do you really think goes into "earning" this? Would you consider it fair that an IFA with just 3 customers would be earning the same from such pots as you do from yours?

Again, intuitively, most will struggle with the maths, but if you are able to then look at the compounding difference between a a portfolio growing at 6% and say 4.5%. A mathematical progression multiplying at 1.06 diverges very quickly and very significantly to one multiplying at 1.045, indeed scarily so. If that doesn't bring immediate concerns, outrage even, I would be surprised.

[GoSeigen]

2.2% jesus wept.

2.2%? what about the additional 0.4%pa up-front charge which will have been incurred over a five-year holding (the minimum period required to discover that the returns are crap and move the funds elsewhere)?

So that takes it up to 2.6%.

GS

[airbus330]

This is typical 'all fur coat and no knickers' and I've lost count of colleagues who were dazzled by the seemingly sophisticated offerings from IFA's. Loads of diverse investments seem to dazzle people and they were singularly unimpressed when I said the vast majority of my pension was in a single tracker fund, and, oblivious to the fact that the IFA arrived in a Porsche while they drove a BMW. I'm even less surprised that this scheme is promoted by NHS management.

[CliffEdge]

I worked for the NHS. Most of the senior managers I came across were stupid and uneducated. It's a self selecting group terrified of competent people finding them out.
This "arrangement" doesn't surprise me for multiple reasons.