Financial advisors

[karen1]

Has anyone had dealings with a financial advisor? Have they proved their worth? I've met with two,

they charged between ?2800-3000 for advice and implementation of advice,then it was up to 1.8%

Of the total funds each year to actively manage it.I was wondering if anyone has used one and

found it beneficial.

[MrBen]

The mechanism by which IFA's are now paid by has changed. They can no longer hide their costs within product fees and get payment from fund providers and must now be transparent. As a result they now charge you fee's (which you were paying before anyway less transparently).

I don't use them but thats because I don't see the value they offer vs what I can do myself with a bit of research. And unless you have a lot of cash to invest, you're best looking at ISA's etc as first port of call then perhaps some additional funds that match your risk appetite (Greek bonds may not, a FTSE tracker might).

N

[Mick Mac]

What Mr Ben said.

It pays to do your own research, ask around, establish your own appetite to risk etc. Read the money sections of the papers, "Google" how to bulid a balance protfolio.

Pensions/Investments websites and funds supermarkets will give summaries of funds to invest in, reflecting past performance, risk of the investment etc. Fund supermarkets allow you to buy into these investments with no fees, as you gave not taken advice, so don't assume you need to pay to access certain investments.

Personally I wouldn't use one because investment is a very personal thing and if I was going to make a mistake I'd rather get it wrong on my own to be honest.

Advice would be invaluable if you risking your money on derivitive investments/ETFs etc. but thats generally for aggressive investors.

[edcam]

I'd shop around if I were you. That sounds like an awful lot of money unless what they were doing for you was fairly complex.

[LondonMix]

It really depends on how much money you have and how complex your financial arrangements are. If they are setting up trusts for you or doing estate planning etc then fair enough. If you don't have a really significant sum to invest, I would say you are almost certainly better off figuring out your own risk profile and how much you'll need to live off in retirement and then allocating accordingly. Advice is valuable but if it eats into your returns too much, its likely not to be worth it unless you are really uncomfortable about having a go at these things yourself.

1. For your pension, the mix of bonds and shares will depend on your risk appetite and how long you have until you plan to retire- closer you get to retirement the safer your investment portfolio should become. How much you need to save will depend on the rate of return you expect on your investments (post inflation and fees) and what you think the annuity rate will be. Annuity rates have several variables but the age at which you intend to retire is the most significant. The FT has an annuity rates table to help you see what current rates are (which are at all time historical lows). There are caps to what you can put into your pension tax free (50k a year) and a lifetime limit of its value (1.25m) but beyond that there isn't too much to trip you up. State pension for must of us in our 30s will be a flat rate of 144 per week based on the new rules so when figure out how much you need to live on, you can take that into account. Also, once you hit retirement age, even though you still have to pay taxes on your income (including pension income) you don't have to pay national insurance any more which is a big savings. If you have paid off your mortgage by the time you intend to retire, you'll need a great deal less than what you currently live off of.

2. Most people put additional savings beyond their pension in an ISA up to the annual limit (cash and / or shares). Most advice is you should have a rainy day fund worth at least 6 months of expenses. Again though, each persons situation is different-- if you know your company will have to pay a certain amount of redundancy, your partner works etc, your industry is doing well etc, you might need more or less.

3. If you are on the conservative side and you are a higher rate income tax payer, you are usually better off using cash in excess of what can be invested in an ISA to pay down your mortgage as the post-tax return you'll make after transaction costs and management fees is likely to be less than the interest rate on your mortgage for most investments besides equities (maybe not now though given how low interest rates are at the moment!). If liquidity is a big concern, certain banks -- Chelsea Building Society-- offer off-set mortgages that keep funds accessible while providing the benefits of paying down your mortgage debt.

4. If you are happy to take higher levels of investment risk, you are better off making investments for which the return is largely in the form of a capital gain rather than income as we each have a significant annual capital gain allowance (10.9k) below which no tax is due. This may not sound that much, but you could make a 10% capital gain on an investment of 109k each year tax free.

If you can do all of this and still have a significant amount of funds you need to invest, or you need to set up trusts, do some estate planning etc, that's probably when getting some formal advice would be most valuable.

None of this is any specific advice but just some basics if you don't have any background yet :)

Good luck!

[karen1]

Thanks for the feedback, especially the advice on googling 'how to build a balanced portfolio ' it led me to

all sorts of useful sites which gave me the same info as an advisor but for free.I feel more confident now to

make some informed decisions.

[????]

Well done. Money's not that complicated and the internet makes understanding it even easier. I despair at people's financial ignorance. As an eg. People who (rightly) care about things like the food they eat often know absolutely SFA about ;money' and almost wear it as a badge of pride.

The only reasons I can think of using an IFA is if you need a mortgage and have very unique finance/income situation or for complicated tax arrangements. Investments, savings, basic tax stuff, pensions, all pretty understandable after an hour or twos research and then a skill for life if you keep up with tax changes budgets etc