Financial Advisors

[IR35 Avoider]

Seems I am in the minority who disagree.

Why do we all use an accountant? Because they are specialists, have greater and focused knowledge and (as often argued here) will cost less than they save you. My view is that a good IFA will be the same

See my comment earlier in the thread. There are useful things an IFA can do, though none I would personally pay for. For example they could advise on asset allocation, or help you work out how much you need to save to meet your objectives, or give you the benefit of their general knowledge of investing.

The one thing you must not pay them to do is pick investments for you. The idea that one should pay an expert for help with this is a perfectly common-sense view adopted by many people approaching this issue, but there are solid reasons from economic theory why that view is wrong. (Well as solid as economic theory ever gets.)

Economic theory says that ever pound you pay a fund manager to manage your fund or an IFA to choose the fund in the first place simply reduces the risk-adjusted return you can expect by the amount you've paid. The fact that you might otherwise have ended up invested in different things is irrelevant; the different things would, with average luck, have given you the same risk-adjusted returns. Of course no-one has exactly average luck, you would have actually done better or worse with the "different things", but the difference would be entirely random and not predictable in advance.

[oraclesmith]

Agreed. I found that out for myself after a while. If you can get a risk profile form (a la FSA) from somewhere you can do it yourself. Then join a funds supermarket and pick funds based on your attitude to risk - eg. corp bonds, special sits etc. Mix in some property funds and you've cooked your opportunities.

[lukemg]

How much are you looking to save anyway - my policy when I had spare cash for ISA's was
Year1 - tracker - good foundation.
Year2 - General UK fund eg Fidelity special sits (slightly more aggresive than some because I am happy to risk)
Year3 - General European Fund - Gartmore (it's done sh1te 2%/year but it was my decision)
Year 4 - US + South East Asia funds - Jupiter.
Year 5 - A global fund.
Etc Etc.
After 10 years of this, you will have quite a stash, which if necessary can generate income (you can choose to reinvest this or have it paid to you)
Note - mix of fund managers, general funds chosen, fire and forget, DONT chase the market/bubble/latest BIG thing.
Note - always use a broker who can negotiate discounts etc (e.g. Hargreaves Lansdowne)
Note - These are 5 year minimum investments, if you will need the cash keep it liquid.
Of course, this presumes you have a property which counts as another investment and bunging some in a pension would be a good choice also (of course this will go in the market too). Spreads it around.
Yes you can choose bonds + cash ISA's which are safe, fixed interest investments, which could be a shorter term no-risk choice. History has shown that the market outperforms these, over longer terms.
P.S. My tracker has just gone up 8.5% in 6 months (ok it has just dropped a couple % in the last 2 days !) Still feels good when the statement comes through !