Wealth manager or not?

[jon shepherd]

Long story short - I have recently exited my business and have upwards of 7 figures to put to work.

Im reasonably proficient at investing but also limited in terms of my time.

My question is, how many of you use wealth managers and would recommend using them to look after your money?

Do you have any good experiences or bad experiences?

Have you paid a fixed fee for advice or ongoing management fees?

I have a number of meetings set up tomorrow, and a number of questions to ask them, but any assessment questions you recommend asking would also be great.

Any recommendations for good wealth managers would also be great.

Thanks in advance!

 

[MBE2017]

Cannot recommend anyone personally, but I would recommend you sit down and really pin down what you are looking to achieve. It sounds simple, but the true answer will effect your actions.

For instance, for myself, I have always wanted to have a good passive income, plenty of capital growth and as importantly as anything I want generational wealth, I want to pass on my wealth to family and friends etc. This defined how I chose to invest, and something I remind myself about a lot.

As long as I am happy and comfortable, can take a break when I like, I feel I have achieved that aim.

Best of luck and congratulations on your success.

 

[Ozzy]

My question is, how many of you use wealth managers and would recommend using them to look after your money?

Firstly, congratulations that's great news. A wise old man (ex boss) once said a business owner never really makes any money until they sell their business.

Anyway to answer you question yes I'd recommend engaging a wealth manager but before you do take @MBE2017 advice first and work out exactly what you want to achieve. I'll repeat the advice I gave my mother, she was obsessed with leaving something behind for her sons, but we can take care of ourselves and I've told her to go out in style - blow every penny she has in enjoying her latter years with drugs and strippers. You may want to do things differently.

Personally I've used St James Place which I've been happy with, and I've also overseen an investment fund as Chair of Finance for an organisation I sat on the board for which was managed by Cave & Son's based in Northampton. They seemed ok but my SJP fund performed better, but I do have my fund on "High Risk" investments because that's just me and my risk appetite. I could equally lose the lot at that profile.

 

[The Byre]

Any recommendations for good wealth managers would also be great.

There is no such thing!

Asset/wealth managers charge a fee. They just do the old 60:40 thing - 60% stocks, 40% other assets. Much of the stock investment will be in other ETFs that also charge a fee - and on and on! Not a recipe for success! They will look after your money in much the same way that the fox and the cat looked after Pinocchio's five pieces of gold!

Step one should be to talk to a couple of financial planners who should not be charging a fee for that first short discussion. Everybody's situation, needs and desires are different. A 70+ will have different priorities to a 30+.

Two externalities must colour your judgment right now - the coming recession and the current inflation. These two factors are working against one another - the recession will kill share prices and depress house prices. Inflation eats away at the value of your money.

HOWEVER

Cash money gives you what we call (in investment circles) 'optionality', i.e. you have the ability to get greedy when the markets tank and all other investors are huddled in what we call The Valley of Despair! The Valley of Despair is when the bubble bursts and asset prices are at rock bottom.

At the moment we are at the top of the market and the greedy are talking about "A new paradigm and a new normal!" They honestly believe that price-to-earnings (PE) ratios of over 30 is the new normal - it ain't! It's just the bull trap at the top of the market! It is followed by the long slide down into The Valley of Despair!

And that goes for nearly all assets everywhere! Now is the very worst time to be investing in shares, ETFs, funds, bonds, houses - well, pretty much everything and anything!

The one thing to remember is that you should invest in yourself and your family first. That must be your number one priority every time!

Three golden rules of wealth management -

1. Never take advice from a poor person.
2. Never give your money to someone who is charging you for looking after your money!
3. Nobody ever got poor by buying shares in Berkshire Hatheway (so far)!

 

[Gettingthereslowly]

Hope I'm not teaching you to suck eggs:

Be very clear about the different types of advisers: there are essentially only two: Financial Advisors, and Independent Financial Advisors (IFA's).

Either one of these Advisors can add a word 'Wealth'.....although most IFA's wouldn't.

Financial Advisors: can give financial advice only about a range of products/they are tied to a few providers

Independent Financial Advisors: can give financial advice about the whole market/all/any providers

In my humble experience, those that add the word Wealth to their title....just charge more.

Don't rush into anything, drip feed money into the market if you are uncertain (some people believe we are due a big fall.........some investors are already suffering at 10-20% fall since December)

The one area I feel an IFA can add is by looking at you as a whole - maybe investing is not the best way to go......are their any inheritance issues to consider / future tax planning.

Lastly good luck in filling your time now you have exited..........

Mr Green Eyed

 

[MikeJ]

I use Barclays Wealth. With some fantastic timing, they put a chunk of money into the market just before Covid hit (not their fault, not sure anyone could have predicted that...) but they've comfortably beaten the FTSE since then, and I'm about 15% up on Dec 2019.

 

[The Byre]

I use Barclays Wealth. With some fantastic timing, they put a chunk of money into the market just before Covid hit (not their fault, not sure anyone could have predicted that...) but they've comfortably beaten the FTSE since then, and I'm about 15% up on Dec 2019.

Considering that that is below retail price inflation and the S&P 500 went from 2,500 to 4,500 (97 - 1,000) and Berkshire Hathaway went from $300k to $500k a share in that time, that is a truly rotten return. Sorry to be blunt, but we've just had two years of a massive bull run fed by all that crazy QE and Barclay's Wealth seems to have missed it completely! Even boring old gold did better!

 

[Chris Ashdown]

If they are themselves millionaires, then consider them, if not run away

 

[NortonBishop]

If they are themselves millionaires, then consider them, if not run away

What if they've made their millions by persuading people to give them an excessive fee to give investment advice?

 

[NortonBishop]

I find a good question to ask oneself is, "how much would you pay to ensure that for the rest of your life you had all of the money that you currently have?"

 

[WaveJumper]

Considering that that is below retail price inflation and the S&P 500 went from 2,500 to 4,500 (97 - 1,000) and Berkshire Hathaway went from $300k to $500k a share in that time, that is a truly rotten return. Sorry to be blunt, but we've just had two years of a massive bull run fed by all that crazy QE and Barclay's Wealth seems to have missed it completely! Even boring old gold did better!

Have you noticed no body has mentioned the ****** lately

 

[PugwashEQ]

Wealth management can be transformative or a waste of time!

If you just want someone to advise you where to invest your money for the best return then just about any IFA who is genuinely "whole of market" will do a good job.

If you want someone to help plan your life, work out how much money you should spend, and where, when you can afford a house, how you can wrap the money up to protect it for your children then a wealth manager will really help. Unfortunately, you've lost the opportunity to do some really efficient planning- you need to do that around 6-9m before a sale is on the cards (if you used an advisor or accountant then they need their hand slapping!)

Our clients have had good experiences with Tilney and Rathbones (although there are lots that are smaller that are also good). Coutts are surprisingly good value and have many "add on" services that some clients find very useful (particularly in lending- they have genuine humans making decisions based on what they know of you and the assets that they can see).

What they should be talking to you is about a financial panning service (normally a couple of grand) followed by investment advice. You should ask how they charge (the days of a yearly management fee is dying- anyone who says 1% really needs to justify it, most can't- i know courts don't charge anything), you should be asking. Ideally, you want to be working with a Chartered Financial advisor (these guys really do know their stuff- there are in effect 6 levels of qualification. being Chartered is level 6.)

Make sure you are also meeting the people you are working with- we make recommendations to all three wealth managers I've mentioned here, but always suggest that you should go with the person you trust and can work with.

 

[PugwashEQ]

p.s. congrats on selling your business- that's amazing work, well done

 

[The Byre]

What if they've made their millions by persuading people to give them an excessive fee to give investment advice?

Warren Buffett put it this way. “When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. There is an inverse relationship between the fees that you pay an investment advisor and your net returns. The higher the fees, the lower your net returns."

He has 90% of his trust fund wealth in an S&P tracking fund - no management fees!

 

[Mark T Jones]

And the above sums it up, i'm afraid.

Loads of different opinions and all of them valid.

The only thing I would addd here is, if/when you choose someone, look at their performance over the last 20 years, not just the last 10. Because all that the last decade will show you is a benigh or bullish curve with a heavily managed blip.

 

[Mark T Jones]

Have you noticed no body has mentioned the ****** lately

The essence of a crap or naive 'investment adbisor' - shout when the marketis is rising, stay quiet when it falls.

As an aside, I wonder what will happen to the self-styled 'property gurus' when their curve stops rising?

 

[pentel]

Be very mindful of fees. 1% p.a does sound a lot when compared with the size of the investment.

Compared with any returns it is very different. If the FA manages to grow your wealth by 6%p.a that 1% p.a fee means you are paying him 16,6% of that growth. And you will also be paying it when the fund falls.

It can make a huge difference. Be aware that majority of active funds do worse than a tracker,

No one will ever be as interested in managing your money as you should be, see a lot of people, read as much as you can, educate yourself on investments.

 

[Financial-Modeller]

In addition to excellent points already made, I recommend that if you choose to outsource investment decisions to somebody else, pay them either by the hour, or a fee based on outperformance.

There is absolutely no reason anybody should be forced to pay an ongoing management fee based on asset value.

Recall the old adage that a fund manager manages your money until it runs out!

A true story; an 87-yr old friend and neighbour asked me to look at her portfolio to help her understand an invoice that a stockbroker had issued.

It transpired that she had a wide range of funds and stocks, held with various stock brokers and fund managers with no review since the passing of her late husband 6 years prior. Value was c.£1m.

A UK-based broker was charging 3% annually on portfolio value plus loads of other custody fees etc, and dividend income on the portfolio was not sufficient to cover the management fee last year. The broker was literally costing more than any value that was being added.

Whilst originally qualified to advise in this space, I haven't ever practised, so suggested she pay an IFA for a full review to understand her current needs, and then propose how to best deliver those. It went well and she is much happier now.

 

[MikeJ]

It's not just about investment. It's also tax planning, making sure you're making the most of allowances and using the most appropriate vehicle for your money.

 

[Ozzy]

As an aside, I wonder what will happen to the self-styled 'property gurus' when their curve stops rising?

We're working on some advice around this to share, especially as we're found many people are getting into debt off the back of a bunch of "influencer" advice around Airbnb and committing to long term property rents. No such thing as a sustainable get rich quick scheme.

 

[Mark T Jones]

We're working on some advice around this to share, especially as we're found many people are getting into debt off the back of a bunch of "influencer" advice around Airbnb and committing to long term property rents. No such thing as a sustainable get rich quick scheme.

Way back in the early '90s we identified the phenomenon of 'top slice millionaires'.

That is people who had borrowed and consistently re-mortgaged to build BTL empires - legitimately valued to give them net worth well in the millions.

As soon as the market fell by 10%, they went from millionaires to insolvent. As soon as tenants stopped paying (as many did), they were bankrupt.

 

[Paul Norman]

I am not sure about the term 'wealth manager' as these are beasts that come in a range of sizes and shapes. But if they come in a very old Nissan Micra, be concearned. If them come in a Bugatti Veyron, also be concerned.

But a more serious response is this. I do use a financial advisor to explain to me what is going on, and to help with my investment placements, and to provide me with sufficient capital growth to mean I could manage with no further 'earned' income if the need arose. I am content with the outcomes, and am not certain I have the time or the knowledge to do this alone.

Oh. He drives a Jaguar.

 

[Lisa Thomas]

I can recommend Helen West:

Home - West Financial Management

Our aim is to help individuals and businesses to achieve their financial goals. Tell us about your financial objectives and when you want to achieve them.

westfm.biz

 

[MBE2017]

I think from the huge range of differing opinions the OP can see how different people view investments differently.

When you are young, you are likely to have a high tolerance towards risk, since you have many more years to recover any losses, whilst when you get older, you probably are looking for low to zero risk with investments.

End of the day there is no right or wrong advice, most importantly decide what you want as an individual and do what is right for yourself.

****** currency high risk IMO, I wouldn’t put more than 5% into ******, personally I don’t have any ******, but that is speaking as a 59 year old. Some youngsters if investing in ****** might become millionaires from those investments, or they could lose everything.

Gold and Silver are safe havens and perform so so, not so good as you would expect atm IMO, property, at least in the UK is still doing well, but is beginning to top out, but demand is so far above supply it will IMO still do well.

Everyone has different ideas, take your time, plan your tax and inheritance strategy inline with your investments because no point making good returns to lose most of it in taxes. I would recommend talking to a tax planner as important as a financial adviser.

 

[The Byre]

Recall the old adage that a fund manager manages your money until it runs out!

This!

No such thing as a sustainable get rich quick scheme.

Once again, Warren Buffett - "No matter how great your talent of efforts may be, some things take time. You cannot produce a baby in one month by getting nine women pregnant!"

Be aware that majority of active funds do worse than a tracker.

Any S&P 500 tracker will have done far better in the past and almost certainly into the future than almost any managed fund. But I would wait for the coming economic storms to pass first.

 

[WaveJumper]

Very interesting thread and I would be interested to hear how our OP got on with his meetings my guess is he may of had a bit of a shock at some of the fees being banded around by these wealth managers however ill reserve judgement until we hear more

 

[jon shepherd]

Thanks for the advice folks
Much appreciated.
Not a huge amount to report to be honest. I have had a chat with a few wealth managers and haven't really been hugely impressed. None of them have told me anything that I didn't already know and the fees are exorbitant. I haven't really seen any value other than them picking funds for me and providing a financial plan (which I don't really need).
If any of them were able to give me some magical advice on how I can somehow reduce the huge capital gains tax coming my way, then we would be talking!

I'm also not hugely confident in investing funds of this scale myself having invested much less previously.

So it looks like I need to do a little more research to find the best option

I'm kind of leaning towards appointing an advisor on a fixed fee basis rather than ongoing management and giving them a smaller portion of the funds and seeing how they do

Cheers

 

[pentel]

I have used both a wealth manager and an ifa each time over a number of years. On both occasions I ran a parallel investment account where I chose my own investments. I now manage all my own investments.

 

[The Byre]

I have had a chat with a few wealth managers and haven't really been hugely impressed. None of them have told me anything that I didn't already know and the fees are exorbitant. I haven't really seen any value other than them picking funds for me and providing a financial plan (which I don't really need).

You noticed the obvious!

If any of them were able to give me some magical advice on how I can somehow reduce the huge capital gains tax coming my way, then we would be talking!

I know the feeling! Talking to a good accountancy partnership with tax lawyers on the payroll helped me avoid about half the amount payable, but it still hurt! (But what the hell - be honest! It's a nice problem to have!)

I shall now explain why wealth managers and fund managers are no longer of any use -

A long time ago, after the war, 85% of share trading was done by wealthy private individuals. They mostly picked 'safe' stocks from companies they knew. Here they went for companies like ICI, Tesco and BP. In the US they bought Dupont, IBM and Exon. They bought those because they had heard of them. i.e. they were basically clueless!

So 15% was done by fund managers - was it easy to beat the 85%? You bet it was! The fund managers could take the bosses out to lunch, pump them full of wine and pump them for information. They had knowledge that the 85% clueless could never have. They had analysts and economists on tap that no armchair investor could even dream of! They made oodles of money for themselves and sometimes even for their clients.

Today, 85% of share trading is done by fund managers. They all have Bloomberg terminals, subscribe to analysis websites and services, and watch specialist funds to see what they are buying. Big problem - so do the punters! Everybody is extremely well-informed! I can look at the books of any listed company worldwide and get a detailed analysis of the P&L, inventory, cash flow, owners, all insider trades, pay scales, receivables, accounts payable, you name it - and I am better informed today than any fund manager was just 20 years ago! Everybody is! The same applies to property, commodity and bond markets.

In other words, nobody can beat anybody anymore!

The only difference between the winners and losers today is temperament. Being greedy when others are fearful and fearful when others are greedy.

Become Warren Buffett - buy value companies that have low debt, good IP, market share, future growth and above all, actual profits. Add to that a tracker fund that tracks the top companies in any sector - an S&P-500 tracker springs to mind and that too is good enough for Warren Buffett, so it'll be good enough for the rest of us. It is, after all, a list of the 500 best-managed companies in the US!

But now is definitely not the time to buy anything other than commodity-based companies or funds.

 

[jon shepherd]

But now is definitely not the time to buy anything other than commodity-based companies or funds.

was thinking the exact same thing actually! Can you recommend any good commodity based ETFs?

 

[WaveJumper]

Use this website:

ETF Screener | justETF

Find, compare and analyze exchange traded funds (ETFs). Simple and fast.

www.justetf.com

 

[The Byre]

was thinking the exact same thing actually! Can you recommend any good commodity based ETFs?

I started writing down some obvious names, but everybody has different priorities and needs - for example, I am an OF (old fart) and I enjoy a bit of risk and analysing companies, so I manage my own portfolio of high-risk commodities penny stocks. It may keep me off the streets and out of trouble, but that sort of thing ain't for everyone! So @WaveJumper's list link is a good place to start. (I'll add to that - the Sprott Physical Gold & Silver Trust is trading at a discount to the physical metals they own and is more than worth a second look.)

BUT

Here's what someone I was talking to did in almost the same situation as yours - most of the money went into machinery and other investments in his company. About one-third into gold coins. Why gold coins you may ask.

Two answers - (1) If you came from Mars and saw the central banks everywhere powerless in the face of inflation that is obviously worldwide and baked into the system and they are setting interest rates at well below inflation and only jaw-boning about 'fighting inflation', you would rapidly come to the conclusion that platinum, gold and silver should be two or three times the prices they have today.

(2) Taxes - In the UK, when gold coins issued by the Royal Mint increase in value, that increase is tax-free.

Other safe investments with tax advantages - French farmland, German domestic housing, UK forestry. In fact, everywhere I look, I see tax havens specifically designed to keep the rich rich and make the poor much poorer.

Or as commodities trader Rick Rule put it recently, "The coming months and even years are going to be a terrible time for the poor and the middle classes, but it going to be a great time for Rick Rule!"

 

[MBE2017]

I would add UK property too the list. There will, inevitably be a correction, as with the stock markets, but no one knows by how much. Terms like crash are used in the media, the last one was an average 5/10%, compare that to stock markets down 20/30% in the last year in some areas. If holding long term, with no plans to sell in the near future, it is likely to be as safe as anything else, and provide not only capital growth but monthly income as well.

Property is generally doubling in value each decade in the UK due to huge demand and shortage in supply. That does not guarantee the future, but that applies too every other investment, but people will always need somewhere to live, own or rent. With the UK having received 8 million new people from abroad in the last decade, the chances of demand reducing in the future appear very low atm.

This is just my non expert opinion, make your own mind up. Many will disagree.

 

[The Byre]

I would add UK property too the list. There will, inevitably be a correction, as with the stock markets, but no one knows by how much.

In 1997 average house prices were 4 times the median wage. Today the average is 9 times the median wage. That suggests a reduction of 50% over the coming years for mid-priced houses.

BUT - house prices are sticky, thanks to the dampening effect of people being in negative equity as we saw in the UK in the 80s and into the 90s, so that 50% will be taken up over a long time and mostly by inflation. In other words, the prices will not move by much, but inflation will effectively destroy half the sticker price of houses in real terms. That may take 10 to 15 years.

When investing, you should NEVER price things up in pounds, dollars, or Euros, but in wages, objects and commodities. Currency numbers is just that - numbers. Fairy dust!

From 2008 to today NOMINAL average house prices went from £180k to £290k but if we adjust for inflation, they fell by 20%.

Property is generally doubling in value each decade in the UK due to huge demand and shortage in supply.

In 1997, so 25 years ago, an average house cost 277 ounces of gold, today it will cost 193 ounces of gold. So the average house has lost about 30% in real terms. But not because you get less house, but because the BoE has been making the poor poorer by printing more fairy dust to cover for governmental largesse and waste!

Measured in gold, house prices are usually about 200 ounces. In 1950 it was 155 ounces.

 

[MBE2017]

In 1997 average house prices were 4 times the median wage. Today the average is 9 times the median wage. That suggests a reduction of 50% over the coming years .........


In 1997, so 25 years ago, an average house cost 277 ounces of gold, today it will cost 193 ounces of gold. So the average house has lost about 30% in real terms. But not because you get less house, but because the BoE has been making the poor poorer by printing more fairy dust to cover for governmental largesse and waste!

Measured in gold, house prices are usually about 200 ounces. In 1950 it was 155 ounces.

As I said, everyone has an opinion and who is to say who is correct.

The “experts” have been predicting a property crash for the last 5/10 years, they will eventually see a correction, but it’s not happening just yet.

I was talking as a property investor, property does not just give you capital gains but monthly rent as well, something you chose to ignore. As I mentioned just my opinion, everyone has to do their own research and decide what suits their circumstances, but I would rather have a property providing monthly income rather than gold just sitting in a safe, which only makes you money once, when you come to sell it.

You also need to take into account leverage on property, you can in effect get three to four rentals for one lot of the same value in gold, but still make all the various rents and capital gains on all of them.

Anyway, all interesting stuff.

 

[The Byre]

I was talking as a property investor, property does not just give you capital gains but monthly rent as well, something you chose to ignore.

I didn't ignore it - I forgot it! Particularly silly as I own rental properties in Germany! I bought them ages ago when they were cheap - fix up and rent out. Germany has the advantage that if you sit on them for over ten years, any gains on a sale are tax-free. That was all part of the great post-war scheme to encourage the building of affordable rental properties as about 20m people were homeless and living in the ruins of bombed-out buildings.

So yes, you are quite right - but one must never forget that property prices do go down and can go down substantially in real terms, even though the sticker price may reflect the opposite!

 

[Gyumri]

I find a good question to ask oneself is, "how much would you pay to ensure that for the rest of your life you had all of the money that you currently have?"

Another question might be how much would you pay to ensure that you or your children had good health for the rest of their lives?

The future unfortunately is not going to be wholly dependent on one's bank balance- although it certainly helps to have something in the bank.

 

[NortonBishop]

Another question might be how much would you pay to ensure that you or your children had good health for the rest of their lives?

Yes, absolutely - a fine further question although how that influences investment decisions is less obvious I think.

 

[BigDreamer]

In 1997 average house prices were 4 times the median wage. Today the average is 9 times the median wage. That suggests a reduction of 50% over the coming years for mid-priced houses.

BUT - house prices are sticky, thanks to the dampening effect of people being in negative equity as we saw in the UK in the 80s and into the 90s, so that 50% will be taken up over a long time and mostly by inflation. In other words, the prices will not move by much, but inflation will effectively destroy half the sticker price of houses in real terms. That may take 10 to 15 years.

When investing, you should NEVER price things up in pounds, dollars, or Euros, but in wages, objects and commodities. Currency numbers is just that - numbers. Fairy dust!

From 2008 to today NOMINAL average house prices went from £180k to £290k but if we adjust for inflation, they fell by 20%.


In 1997, so 25 years ago, an average house cost 277 ounces of gold, today it will cost 193 ounces of gold. So the average house has lost about 30% in real terms. But not because you get less house, but because the BoE has been making the poor poorer by printing more fairy dust to cover for governmental largesse and waste!

Measured in gold, house prices are usually about 200 ounces. In 1950 it was 155 ounces.

Correct me if I'm wrong, but surely house prices should go down in money terms especially if interest rates continue to rise.

From an investment perspective, for example, if someone bought a 500k house with 150k down payment at 3% interest rates over 35 years and intended to rent it out at 2k/month, he would expect to make about £650/month in profit which is around 5% a year return on his 150k (in theory).

If interest rates went up to 6% (and I think they will go up even more), that same house would have to be bought at 380k with the 150k down payment and rented out at 2k a month to get the similar 5% return. If bought at 500k with the 6% rates, that would put him at a loss if renting it out at 2k. That and the fact that you would probably prefer to put your 150k in the bank and get the higher savings interest rate (even if slightly lower than 5% but with less hassle).

Won't that mean that either:

a). People will buy cheaper houses if prices don't go down as they won't be able to afford them anymore.

b). Prices will have to come down as no one will want to buy any of the current houses at current prices.

c). Rents will have to increase (even though peoples buying power and disposable income is getting eaten up and wage growth is in negative territory real terms) making even less people able to afford anything.

 

[DontAsk]

From 2008 to today NOMINAL average house prices went from £180k to £290k but if we adjust for inflation, they fell by 20%.

Not according to CPI or CPIH.

Whose/which inflation measure are you referring to?