Many IFAs are coming to the conclusion that they are not investment managers themselves. They can help a client define what their aims for their investment are. They help them decide how much risk or volatility they can accept. They can offer informed views of how the different funds and managers perform, how much they charge and how good their service is. The day job does not allow them to construct the portfolio of individual shares, bonds or even funds, and manage it day to day. It is often best to leave that to firms and people who do that all the time.
This has led to a big increase in the fund supermarket or platform approach. The IFA is still the principal adviser to his or her client. The IFA is much needed to help the client decide what they want. He or she can advise on the tax and legal implications of what they are doing. They can tell them how various types of investment have worked out in the past. They can put them into funds or management systems which can provide the range of assets they want and need.
Quite often IFAs follow so called lifestyle investing. It is a useful rule of thumb which says that an individual should have the same percentage in lower risk bonds in their portfolio as the number of years they have been alive. A 25 year old would have mainly riskier assets, wishing to grow their capital. They have time to accept losses along the way, expecting a better return over all over the many years they have left. An 80 year old would in contrast have 80 per cent of his or her fund in bonds. Their capacity to earn more has usually been replaced by living off their savings and pension investments as they grow older. They need more stability of value and a better gurantee on the income.
