Cheap "guaranteed" pension

dunstonh

On pensions, the IFA has a choice of either totally trail with no initial commission. Usually at 0.3-0.4% p.a. Or initial commission with no trail. Or level commission (on monthly payments of £64.10pm that would be £2.88pm).

If the IFA takes trail, the average pension fund would take 10-15 years to cover the initial costs. So generally, you will find that with start up pensions or those with low values, the trail option would be ignored as its not feasable.

I would be quite happy for pension business to match investment business as far as remuneration is concerned but at this time, pensions is generally a low earnings sector unless the fund is a decent size.

Personally, I do report and recommend with a number of pension funds which are big enough. However, I wouldnt dream of doing it for anyone paying less than say £250pm and doenst have a sizable fund. Being in Norfolk, we dont get too many sizable funds

cheerfulcat

dunstonh wrote:

Personally, I do report and recommend with a number of pension funds which are big enough. However, I wouldnt dream of doing it for anyone paying less than say £250pm and doenst have a sizable fund. Being in Norfolk, we dont get too many sizable funds

Which suggests to me that, as I've always thought, the small investor shouldn't go anywhere near an IFA ( nothing personal, dh :-) ).

dunstonh

Which suggests to me that, as I've always thought, the small investor shouldn't go anywhere near an IFA ( nothing personal, dh :-) ).

Not true. They can get set up with a decent plan and they can arrange appointments for check ups if they want. However, if they want automatic ongoing reviews, then someone has to pay for the time, regulatory requirements and liability that goes with those.

Many IFAs though will not see people if its not profitable to do so. An IFA local to me only takes on business where the client is willing to pay a monthly retainer.

oceanblue_3

cheerfulcat wrote:

Which suggests to me that, as I've always thought, the small investor shouldn't go anywhere near an IFA ( nothing personal, dh :-) ).

Hi Cheerfulcat

What should they do then if they need advice?

This is a serious question, since I do some simple pro bona work for friends and families of clients, expecting to be paid at some point in the future. This has always worked for me but I'm aware of the fact that some people who really need help and education don't know where to turn since they don't know an IFA, or aren't introduced to one.

Equally, I couldn't afford to do this for everybody since I have to make a living to support my family; nevertheless, it worries me that so many people seem to end up in such a mess simply because of lack of knowledge, lack of confidence, inaccurate information provided on consumer websites, susceptibility to the wiles of consumption-driven media, etc. (Don't get me started....)

MSE itself gets hold of the wrong end of the stick: I think that consumer revenge is less useful than consumer education.

(By the way, how's the SIPP portfolio going?)

whiteflag_3

Werent stakeholder pensions were meant to be the answer to this?

A low cost product with a government kite mark to offer the consumer the comfort of some sort of guarantee on cost , access and terms.

Oceanblue , you 100% correct . The reason stakeholders have not been a success is down to the the lack of consumer education not the cost of advice.

EdInvestor

The reason stakeholders have not been a success is down to the the lack of consumer education not the cost of advice.

I'd put their failure down to two reasons

1.Commissions on them are too low to make it worth IFAs' while to sell them ( see above) and they are not very profitable for alternative distributors either

2.Unfortunate timing on their introduction which coincided with the collapse of the stockmarket and the appearance of the crisis affecting With profits and final salary pensions, which has severely impacted confidence in the product

cheerfulcat

Hello, oceanblue,

What should they do then if they need advice?

Education is part of it (though it seems that even those who govern us have at best a shaky grasp on the finer points of finance, so what hope is there for Joe and Josephine Bloggs?)

There are a couple of very good financial websites - specifically The Motley Fool and Incademy
( http://incademy.com/pages/home.htm?ginPtrCode=10002 ) which are useful starting places. There are also literally hundreds of excellent books about finance and investing.The problem is that so many people just aren't interested - I'm sure everyone here is familiar with the glazed look which appears as soon as investment is mentioned to most people!

Equally, I couldn't afford to do this for everybody since I have to make a living to support my family; nevertheless, it worries me that so many people seem to end up in such a mess simply because of lack of knowledge, lack of confidence, inaccurate information provided on consumer websites, susceptibility to the wiles of consumption-driven media, etc. (Don't get me started....)

MSE itself gets hold of the wrong end of the stick: I think that consumer revenge is less useful than consumer education.

The resources are there for anyone who is interested - the trick is in getting those people interested in the first place.

I wholeheartedly agree with you regarding the revenge tack on MSE; it's all wrong. It perpetuates the myth of "them" and "us".

(By the way, how's the SIPP portfolio going?)

Splendidly! Thank you for asking :-).

whiteflag, you said

Oceanblue , you 100% correct . The reason stakeholders have not been a success is down to the the lack of consumer education not the cost of advice.

I think it's even simpler; it's a lack of promotion. The government insisted on these bloomin' stakeholder jobbies but because there's no money in it, no one wants to advertise them. It's up to the government to persuade people to provide for their old age.

whiteflag_3

Hi Cheerfulcat

So are we not in a chicken and egg situation? Most of the public need to be "sold" pensions/investment/protection, yet the very people who need to be sold to are no longer in the mix because the products cant pay the adviser!

I have lots of clients that were "missold" nasty savings plans by that nasty man from the Pru, Abbey lIfe etc 20years ago , who now have cash to pay for home improvements go on cruises etc or even dare I say it help their retirement. While these plans might not have been the best performing cheapest etc they have proved alot more usefull than a few extra pints every week.

Isnt great to have some decent chat for once!

cheerfulcat

whiteflag wrote:

Hi Cheerfulcat

So are we not in a chicken and egg situation? Most of the public need to be "sold" pensions/investment/protection, yet the very people who need to be sold to are no longer in the mix because the products cant pay the adviser!

Yep. And the government has painted itself into a corner with all its meddling and regulating because now *they* can't even advise people to take out a stakeholder pension - it really should be the government, not the industry, which encourages investment but I reckon they're afraid of being sued for misselling :-)

I have lots of clients that were "missold" nasty savings plans by that nasty man from the Pru, Abbey lIfe etc 20years ago , who now have cash to pay for home improvements go on cruises etc or even dare I say it help their retirement. While these plans might not have been the best performing cheapest etc they have proved alot more usefull than a few extra pints every week.

I am certain that there are many people who only have investments because they were sold them. But I think that there should be some way of advising those who *badly* need advice without running into possible conflicts of interest. And it has to be said that the financial professions ( not just IFAs ) have more than their fair share of bad 'uns...so people have become quite wary.

Isnt great to have some decent chat for once!

Yes, it's a real pleasure!

dunstonh

I have to say that I agree that whilst the products offered by the home service insurance companies (Pearl, Pru, Co-op) etc were generally average at best, they did at least provide something. The products could still have been modernised, reduced in cost and still sold profitably. However, the compliance requirements that go with any advice/sale of a product make it unviable. Hence the shut downs we see. Many of which were actually due to legacy issues rather than current issues (although it was "new" issues on the legacy business that was the main problem).

Is it better for someone to have no retirement planning because they couldnt get access to advice or is it better to have an average product that at least gave them something that represented value for money over the term? Even if it wasnt the cheapest or best performing?

And it has to be said that the financial professions ( not just IFAs ) have more than their fair share of bad 'uns...so people have become quite wary.

I don't know. I think the medical profession is an absolute disaster. When you sit down and think about various professions, is there really one that could be considered whiter than white all the time? Although the financial services industry has a lot of blame rightfully, the regulator, and therefore the Government has just as much. Indeed, its now got to the point where MPs (on both sides), including Tony Blair, attack the FSA over its stance on various issues. How can a Govt department (which is basically what the FSA is) start arguing with the Govt that put it there?