You're quite right to be unhappy. 2% in fees is taking the absolute piss.

She'll make sod all.

PS. rolls Royce is quite low at present. Worth a punt😈👿😃🤔😜

Firstly,all the money into one fund seems to go against the mantra of ” spread the risk”.

Others know more than me, but I think the whole point of [ many] funds is that they are spreading the risk. Ie that's what a fund is (to a degree)
Depends on the fund... If it is the "OPEC & Wider Oil Exploration Incorporated Fund" then perhaps not so much...m

Well, there's a few things here:

1) A fund 'spreads the risk' as it itself will probably be invested across a large number of underlying funds. But, investing in multiple funds does spread it further.
2) A low-risk fund will very likely have low returns, that's the whole risk/reward thing. If she's only (understandably) willing to accept low risk, that's just something she will have to accept.
3) Fees of over 2% pa are ridiculous, there's no way that can be justified (especially in a low risk fund).
4) The exact fee figure will be in the paperwork she's had, and will be prominent (because it has to be nowadays), as will any cooling off period.
5) If she's elderly and widowed she may well be classed as 'vulnerable', where extra advice rules come into play (but I'm really not an expert)
6) Bluntly, how old is she, and how long does she expect to live? With 100k, there's a strong reason to keep it in cash and just spend it. It's £10k pa for 10 years (I know, ignoring inflation)

And...

If she wants a guaranteed income, that's what annuities are for, and of she's pushing on age-wise she should get a decent rate.

https://www.hl.co.uk/retirement/annuities/best-buy-rates

If she's old old just spend it

Michael Burry is the guy who called the credit crunch and the US housing market bubble - and as portrayed in The Big Short - says he has found the next market bubble in index tracking funds.
He has a proven track record and has invested his own money - unlike many who pontificate on the market but don't put their money where their mouth is.

https://www.cnbc.com/2019/09/04/the-big-shorts-michael-burry-says-he-has-found-the-next-market-bubble.html?utm_content=buffer56f1f&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

TL:DR - passive investment funds are the next bubble; when it bursts it will be ugly.

She is in her 70's and wants the £100k to eventually go to her son and daughter.
I don't think the adviser is really spreading the risk. He is putting it into one company whose fund manager may underperform the general market.Even this companies high risk funds only averaged around 5% gross.
I'm with IHN and would be spending it.

We don't have all the facts here but this doesn't on the face of it sound like the right advice for your neighbour given the level of charges

She may be better off sticking it all in an NS&I account (instant access and 100% secure) and getting the monthly interest (Just under 1.2% pa) paid into her current account monthly

Age is a critical factor here as is the ability to access her funds should she need them urgently. The first rule of investing is not to invest what you can't afford to lose. If the fund dropped by significantly in value due to stock market falls (entirely possible given COVID and Brexit uncertainties) she may take years to recoup the losses

Has she anyone in her family that she could talk to - and in the meantime hold off on making the investment?

She spoke to me yesterday but I got the impression that she doesn't really know what she is signing.She wasn't offered any alternative investment options.
I gave my opinion,which some people on here share,but she has no real grasp of anything financial.Her manner is that she doesn't want to talk about it as it's too confusing.Her late husband dealt with absolutely everything and my wife and neighbours had to organise her moving house as she was totally lost with the process.

She is in her 70’s and wants the £100k to eventually go to her son and daughter.

So let's pull our other perennial favourite topic into this thread for completeness....

Is she in a care home
Who pays for it?
Is she likely to go into a care home?

Because if she goes into care then that £100k may we'll get used to pay care costs.

If she wants to give it to the kids then she should consider buying one of those bullshit investment/insurance trust bollocks things with the kids as trustees. Basically gets her out of the Deprivation of Assets conundrum.

Or if she's living with the kids, pay them rent. This should allow her to transfer funds to them without appearing to deliberately reduce her assets, cos if she does go into home, with those assets she will be paying for it.
Have a look at Moneysaving experts forum. It is stuffed full of people who know what they're talking about

She should look at Intelligent Money and have a chat with them.

IFA's take the piss. They have a business model based on Apathy. By that I mean they hope you never notice them or their fees.

She should look at Intelligent Money and have a chat with them.

IFA’s take the piss.

She's old and financially illiterate (by the sounds of it), so the sort of person who has to rely on an IFA as they really don't know anything about money or investments. Which is fair enough as its a whole knowledge area in its own right and full of complexities etc.

I'm not defending her IFA, however for investments under £250k you'd expect the fee to be above 1%, 2% sounds normal. As an IFA you have all sorts of overheads (insurance etc) and have to make a living etc.

I manage most of my investments directly but do have one pension managed by an IFA, but they only touch funds over £250k and charge 1% per year. For that you get a bespoke plan which gets rebalanced every year. Not great value, but the only way I could cash out that pension was via an IFA. I could now transfer it to a SIPP, but I can't really be bothered for 1%.

This every time https://flowchart.ukpersonal.finance/

DavidB - not exactly suitable for a financially illiterate single person in their 70s!!

Intelligent money will assign a private client manager to ensure everything works for her. Part of the (smaller than most all) inclusive fee.

They will also explain to you directly if you prefer.

1. The fee sounds OK.
2. IFAs are decent folk, they're good at advising you on finance
3. As she's a bit older, she can't afford her money to get wiped out by invested in risky funds - as she won't have the time to earn it back in the market. So, investing in a low risk fund means earning just a small amount, but not risking losing it as much
4. Make sure her IFA discusses Inheritance Planning with her

The fee...

The fee sounds high, but that's a bundled fee. Service charge, platform charge, management fee, fund fee and then you've mentioned commission - which it isn't, it's an ongoing charge for the advice. Which will be an annual check for product suitability.

You can't charge a fee for the initial advice anymore either, due to the retail distribution regs, so she would have been charged a fee up front.

So, 2% isn't crazy.

Are IFAs out to get your money?

I've met a decent amount of IFAs, and in general they want to do the right thing for their client. Obviously not all are like this, but it's an industry built on relationships.

The fund

A low-risk income fund, is a group of assets - it'll mainly be held in cash and government bonds, property and a tiny tiny bit on the stock market. It's been created to not have big ups or downs, so while it may not make very much, it also has a low change of loosing loads.

That's the right kind of fund. Don't think of it as what you'd think a fund is, it's not one stock in one company. It's many eggs in many baskets, it's just the baskets have been selected by the one advice firm.

What I'd be asking

I think the question I would be asking to the adviser, as she's got an ongoing service charge you can do this, is ask about inheritance planning. How can her daughter pay the least amount of inheritance tax for the money she intends to leave her?

Michael Burry is the guy who called the credit crunch and the US housing market bubble – and as portrayed in The Big Short – says he has found the next market bubble in index tracking funds.
He has a proven track record and has invested his own money – unlike many who pontificate on the market but don’t put their money where their mouth is.

https://www.cnbc.com/2019/09/04/the-big-shorts-michael-burry-says-he-has-found-the-next-market-bubble.html?utm_content=buffer56f1f&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

TL:DR – passive investment funds are the next bubble; when it bursts it will be ugly.

Burry manages about $340 million at Scion Asset Management.

Active fund manager is scared of passive funds taking his business shocker 😀

Explain to me a scenario in which the 'passive fund bubble' bursts but Burry's active funds (and their associated high fees) remain in the black.

Not my area of expertise, but if I had a hundred grant to invest I'd be getting quotes and ideas from more than one IFA. You'd get three quotes if you were building a patio.

finbar - Burry is applying the same logic now as he has since 2007; look for anomalies and either exploit or avoid.
Ask what are the fundamentals; is this sustainable?
Look at his track record.
You might want to inform yourself further by reading recent comments by Stanley Druckenmiller who made millions billions with George Soros. Take away stock splits and discount 'irrational exuberance' then ask...what's left?
What's your track record like or do you keep your millions hidden under the mattress?

Cougar the problem is IFAs now charge upfront for their advice - so if she asks for three quotes she’ll be paying three times for their professional advice (and likely end up even more confused by three slightly different proposals all of which are as clear as a typical mobile phone contract!). I can’t say I’ve ever enjoyed a meeting with an IFA, so choosing to do it multiple times is unlikely to be a course of action for someone who doesn’t even really have a grasp of what they output.

And I’m not sure everyone gets three quotes for building a patio - I don’t generally do that sort of thing with tradespeople- if their quote seems sensible and dealing with them to get a quote has been positive then picking someone else on price may be a mistake: they might start asking awkward questions about the body I chuck in the hole, or why the lawn is full of frozen sausages. I’m much more likely to base my decision on a recommendation - as this lady seems to have.

the problem is IFAs now charge upfront for their advice

Might be different for investments but mine didn't when I was looking for a mortgage recently. The amount of free shit he was offering I actually asked him, "what's the catch?" He said basically if he provides free advice for five people and four go on to use his service, he can take that hit and is still quids in.

Plus, I suppose, I could then be on a popular mountain forum boasting about their services.

I’m not sure everyone gets three quotes for building a patio

I wasn't being entirely serious in that specific example, my point was that people routinely get second opinions for much lower value outlays. The forum regularly has "builderists, what should a patio cost?" type threads and getting another quote is standard advice.

I would be getting her kids involved in the decision making and walk away. Imagine if your advise ends up being the wrong advise.

Alternatively start looking after this elderly neighbour until they die and you should get her house and £100k. This is what my inlaws did 😳

the problem is IFAs now charge upfront for their advice

Mine didn't, you meet with them, discuss your needs and they provide a plan with a fee stated. You only pay the fee if you chose to execute the plan and transfer your money to them. At that point you can then either pay the fee upfront, which incurs VAT, or have it deducted as a charge from the managed fund (doesn't incur VAT). Or you can walk away and owe nothing.

In my case his plan was so detailed I could have just executed it exactly myself using a SIPP / ISA. However, that would be immoral, so I didn't.

My IFA: https://www.provisio.co.uk/our-team/

finbar – Burry is applying the same logic now as he has since 2007; look for anomalies and either exploit or avoid.
Ask what are the fundamentals; is this sustainable?
Look at his track record.
You might want to inform yourself further by reading recent comments by Stanley Druckenmiller who made millions billions with George Soros. Take away stock splits and discount ‘irrational exuberance’ then ask…what’s left?
What’s your track record like or do you keep your millions hidden under the mattress?

Frankconway - You missed my point I think. I never said the stock market wasn't frothy - I asked what is unique about Burry's active funds that means he's going to miss any upcoming pain? If you can't find a simple answer to that (what are these 'anomalies' he's finding?), I wouldn't be putting any money with him. Up to you though, lots of some active fund managers do beat the market for extended periods and he could well continue to be one of them.

What's my track record like? Bit vulgar, but since you asked the S&S ISA I opened in FY2019-20 is up 13.5%, and this year's is up a paltry 0.71% - but I only started it in June so that's just noise. Got quite a bit in a gold ETF that's done very nicely (up >50%) since 2017. Hardly George Soros, and I've got precisely zero time or interest in being an active investor, but I'm doing well enough that I don't plan on waiting until I'm 68 to retire...

theaccountant
Free Member
DavidB – not exactly suitable for a financially illiterate single person in their 70s!!

You are of course right I meant this as a response to the de-facto "what should I do with £xxx"

Sad that you get to an age in life, have £100K spare and just want to get a couple of % interest out of it. What is the point in having the money, just buy the things you always wanted, do the things you always wanted to do and keep enough back to top up state pension when required.

the problem is IFAs now charge upfront for their advice

No they don't, or rather they shouldn't or the FCA will come knocking.

I think rickon is actually spot on, there's not much there to change bar IHT.
if you want another IFA let us know where you're based and I can suggest one.

It does feel like there is a bubble forming around global stock markets, but it's not something that is specifically going to impact trackers, it'll hit managed funds massively as well.

With covid hitting the economies of all countries, how can markets in a number of countires nearly be back to Feb levels?
I'm sure there is tonnes of money being poured into funds (index or otherwise) as a result of continuing, terrible interest rates.

I agree Kamakazie. But, as you say - with continuing terrible interest rates plus massive quantitative easing - there's also a compelling argument that markets have further to rise. I'm staying invested.

Utterly dismayed that she hasn't got a POA sorted out with children as attorneys. Especially as she wants to give them the money, it's in their direct interest to look after it properly.

Haven't all the elderly parents on here already drawn up POAs with their children as attorneys? Why on earth wouldn't you (other than, not having got round to it, which may be a reasonable excuse for some)?

Explain to me a scenario in which the ‘passive fund bubble’ bursts but Burry’s active funds (and their associated high fees) remain in the black.

+1

Unless he's only invested in unlisted stocks and is doing a Woodford ++

I’d stick it in a life strategy fund with the bond / equity profile to Match tolerance to volatility.

Im yet to be convinced that an IFA can deliver the alpha to outperform a low cost fund of funds over the long term.

0.22% vs 2.6% compounded over an investment lifetime will be significant (I accept in this scenario she’s in her 70’s, but that could still be 20 years +.

My only reservation on lifestratgy is it’s overweight to the FTSE100 and therefore banking, miners and oil.
But as a one stop shot for someone that doesn’t ‘do investments’ it’s hard to beat.

IFA would come into there own to ensure client doesn’t something stupid during a downturn and sell / panic.

IANAIFA etc

Haven’t all the elderly parents on here already drawn up POAs with their children as attorneys? Why on earth wouldn’t you (other than, not having got round to it, which may be a reasonable excuse for some)?

I can think of three reasons:

1. That would be recognising/feel-like you are getting old, potentially no longer able to make decisions for yourself. I can't imagine many people in their 70s who are not struggling in anything in day to day life think they'd like to do anything to accelerating removing themselves from the decision making process.
2. They may not really like the way their children manage their own finances and so prefer them not to have any involvement in their money. If they have multiple children they may have to choose one over the other because of this or other factors.
3. Theres definitely some children who shouldn't be making decisions about how a parent spends/saves/invests their money when they are likely to inherit any of those funds which are left at the end; in your own words "it’s in their [the children's] direct interest to look after it properly." The person with POA should be acting in the best interest of the person they are acting on behalf of not themselves - those two things are not necessarily aligned.

Flip the question round, if you are in your 30s, single and healthy, would you sign a POA in favour of your parents in their 60s, just in case you become incapacitated?

But if you haven't got a POA and then get dementia you are not in a good position.

As for the flipping it round, not worth the effort certainly applies in some cases. Eg I haven't got round to it despite being over 50, it's vanishingly unlikely to be a factor in the near future. However the poor lady under discussion is _already_ struggling with her finances, so it's clearly overdue.

You're right to pull me up on "best interests", I was clumsy there. I meant they were unlikely to choose poor investments with a big fee for the IFA, as per the main thrust of discussion. Note that the law prevents the attorneys from taking money for their own purposes or otherwise acting other than in best interests of the parent. Though TBH I'm not sure how well it works in reality. It is not possible to change the donor's will and also explicitly forbidden to make gifts on their behalf (other than customary/small).

It's possible that some people don't fully understand how a PoA works. It doesn't mean that the attorney just takes over everything. They have an explicit duty to discuss decisions with the donor to the fullest extent possible, and act on their instruction. I've been doing this for my parents for a few years (once my dad started to think it was a bit beyond him, he's now dead from alzheimers but my mother continues, and she never really did the finances much though is very capable...). As the donor's powers wane it may in reality evolve into a complete authority by default (as it did for my dad) but it doesn't have to be that way. Welfare powers generally only come into effect once an assessment of (lack of) capacity has been made but financial powers can be donated at any time.

Of course if you don't trust your children (or anyone else) sufficiently then you're out of options. Doesn't have to be children but it seems the obvious starting point, especially given the stated intention to leave them an inheritance (which suggests some sort of reasonable ongoing relationship).

It seems rather odd to me that a well-meaning neighbour is in the least bit involved in the financial affairs of a elderly and vulnerable lady in the first place. No offence meant, but I have to wonder where the children are in all this?

Back to the advice bit. She said out of the £100k,£20k has been put into 2 kick out ISA's. Those are new to me. The rest is in a low risk fund,but she doesn't know anything else about it. The ongoing charges are about 1.5% ,she thinks.She seems convinced that the investments will gross 3% to 10% per annum.
Not getting into personal details but her son and daughter don't really play much of a part in her life.As she doesn't drive,and we are not on a bus route,it was up to neighbours to take her everywhere after her husband died.

2%! And was it 0.6% for the adviser? Those sound excessive.

I thought from the thread title that you had £100,000 to burn and wanted poor advice of the type that singletrack forums can often propose. ‘Buy 10 nomads’, or ‘get a fully pimped XC60’.

instead it sounds like your neighbour would benefit from not taking up the proposal from the advisor. And should perhaps take a visit to citizen’s advice for some impartial help on what options there are in terms of financial advice and guidance.

if she does want to pass this cash on then financial advice seems inevitable. Though do not overlook the potential for a solicitor to help. I hope she has a will.

edit. I hadn’t realised it was a done-deal. Put it behind you, the time has passed to act unless she has buyer’s remorse and is in the cooling off period. Doing anything after that will be a problem. People make decisions that are bad for them, or other people don’t like, all the time.

.She seems convinced that the investments will gross 3% to 10% per annum.

Extremely unlikely as "All of the money into a low risk income fund run by Old Mutual".

More likely to manage a few % which then get eaten up by the 2% annual fee.

For 3-10% she'd need to be in a high risk Tech fund eg SMT etc.

You might want to inform yourself further by reading recent comments by Stanley Druckenmiller who made millions billions with George Soros. Take away stock splits and discount ‘irrational exuberance’ then ask…what’s left?

[Douglas Adams metaphor mode]

Like a lot of stuff, if someone on STW could actually understand it rather than just fall into the Dunning Kruger trap then surely all those city bankers would have figured it out too. Actually, they probably have, that's why the collapse of Bitcoin had no impact on any actual banks. Maybe there is something in this expert advice ting after all.......

If anyone in a big enough pool of people actually calls an unlikely event, it's more likely that they were the millionth monkey on the millionth typewriter than actually being clever than the rest. Same with a Covid-19 vaccine, in the future some boffin will appear on the news to announce that their research into the alpha-buteric-hexamaspecializedstumpjumper-beta-ktm390 protein has yielded a vaccine, it'll sound incredibly clever yet obvious in retrospect, and they'll probably get a nobel prize for it. The boffin down the road who was focusing on the alpha-buteric-hexamatransitionbandit-beta-zxr400 protein will look like an idiot for not figuring it out and there will probably be a public enquiry/witch hunt as to why he was given millions of pound in grants, was it because his 3rd cousin's hairdresser walks Dominic Cummings dog? Seems obvious in retrospect and the public will feel very clever for spotting such obvious corruption.

They'll also believe the lizzards have taken over as someone who pointed out the dog walking hairdresser link also predicts that.

[/Douglas Adams metaphor mode]

Take away stock splits and discount ‘irrational exuberance’ then ask…what’s left?

Will in the case of FANGs, hugely profitable companies with a near total monopoly over their respective markets. The CV-19 work from home paradigm has also cemented their importance in the world as everyone moves to cloud based Apps etc.

The total commission and ongoing charges are well over 2% per annum but she doesn’t know the exact figure. The adviser is charging 0.6% per annum.

Yikes. At that fund cost the IFA is getting a kickback too....

,all the money into one fund seems to go against the mantra of ” spread the risk”.

If the fund contains thousands of equities and bonds then not necessarily.

Elderly? Vanguard Lifestrategy 60/40. Max into ISA each year obvs. Incredibly low fees, good mix of income and growth. Low risk.

Yikes. At that fund cost the IFA is getting a kickback too….

Banned since 31st Dec 2012 by the FSA.

On face value the more expensive fund makes his return look less and the money doesn't go in his pocket.

There will be a reason a financial advisor chooses a 2% charging fund over a 0.07% one.

The Generalist

Haven’t all the elderly parents on here already drawn up POAs with their children as attorneys? Why on earth wouldn’t you (other than, not having got round to it, which may be a reasonable excuse for some)?

Can you explain what that is in small words? (I don't really mean small ... in a way someone doesn't know anything about finance understands)

Can you explain what that is in small words

POA is Power of Attorney. Example: I went to gov.uk/power-of-attorney and filled in a form for my Mum to sign that gives me and/or my brother & sister the power to manage her money for her. We had to sign it too. I took it to her bank and they gave me online access to her account. I can make payments and set up debits on her behalf. To start with I just kept an eye on the pension going in and the bills going out, but as she's aged (now 93) she's asked me to run it for her. Anything non-routine we talk on the phone and if I think it's important I tell my brother & sister.

She's also signed a similar one that allows us to make health and welfare decisions on her behalf.

Tell her to put the money into our Project!

She'll get it all back, plus interest, there are no fees and she can come and see the mountains whenever she wants to - or send someone from her family in her place 🙂

Thanks Greybeard....
I thought that was a financial acronym .. got it now.

I guess in answer to that question I'd assume the nipper has to be 18?

POA is Power of Attorney. Example:

The point of this is if a relative loses their marbles you can step in. Granting PoA is trivial and costs a couple of hundred quid. Taking PoA after they've gone doolally takes months and cost thousands.

Haven’t all the elderly parents on here already drawn up POAs with their children as attorneys? Why on earth wouldn’t you

I can think of three reasons:

I've got the opposite problem. I want to put it in place for my mum, but it's a hard subject to bring up. My dad went mad and spent the last four years of his life either in hospital or a care home, and the change was like throwing a switch. One minute he was answering questions watching Eggheads, the next I was calling an ambulance. What do I do, "hey mum, can we put PoA in place before you go like your husband?"

I've found an 'in' though. I'm in the process of drawing up wills as part of moving in with my girlfriend and the solicitor advised that we do PoA for each other. So I was giving mum an update on where we were at, told her this then had a 'sudden thought,' "hey shall we do this too?"

Doddering crumblies need to grow the **** up, frankly, rather than dumping a load of shit on their children just through some combination of selfishness, denial and laziness. They've often seen their own parents/relatives getting old and doddery, and dealt with the consequences, why would they want to make it as hard as possible for their children?

Awww, diddums doesn't want to think about getting old. Well, the alternative is available via a number of mechanisms but is generally considered to be less attractive.