Having A Financial Advisors - any point?

wibbler

I have recently signed up a financial advisor from Perfect Day, a subsidiary of 20Twenty. But I don't seem to have had much advice that I couldn't have found from here/Motley Fool etc. Is there any point in having a financial advisor if you're not very well off?!

dunstonh

Yes there is. However, if you are not going to be profitable to the advisor, you may find some will not offer the same level of service or even refuse to give you advice.

This really depends on the individual and the company set up. An advisor who only gets to keep 30% of the earnings from business isnt going to be interested in seeing people who would earn them say £250. They would only keep £75 of that and its just not worth it for them. A sole trader/partner/director IFA would not have that issue as it's all theirs.

A lot of basic requirements require very little knowledge and you could do things yourself. The main gain, if independent, is that the provider recommended would be best for you. e.g. Who is the best pension provider for your circumstances? Chances are you don't know.

I mostly deal with wealthy clients but I have 5 introducers who are all ex Pearl salesman. Pearl clients generally tend to be the average person. So, I get to deal with a number of these and they are amazed at the different standards in advice and reporting (written reports both pre-sale and ongoing at various periods). They never got anything like that before.

The term financial advisor covers a massive range of experience and ability. You could have seen someone with 6 months experience or someone with 10 years. You could have seen a lazy git or someone that puts in a lot of effort. You could have seen someone that identified there was little in it for them spending time with you and gave you very little time.

I would possibly suggest that the company you used to give you advice wasnt the best one for your circumstances. A small local firm would probably have been better.

I would give one warning about using sites like this one or motley fool. You get an a number of responses to information which are incorrect or, in part, potentially correct but based on incomplete information which if known in full, could lead to a different response. There are an awful lot of financial advice areas were 90% of the time you go down one route but 10% you go down a different route. On this site, there are some here who ignore that and treat those as 100% down one route. If you happen to fall into the 10% that should do something different, then you would have got it wrong.

[Deleted User]

We have had an IFA since may 2005. My spouse needed to move his pension pot. We had excellent advice and a refund of part of his commision. The pot is growing fine in a stakeholder and he was quick to get us signed up whilst the charge was topped at 1%. I believe that the total cost to us is approx 0.67%. I am talking about a substantial pot and most people don`t know about the advantages of a stakeholder. So yes I believe that at that point the advice was very good

I do think that, however, that he is looking to wrap things up in a sipp come april. I am financially savvy, I actually trade stocks and trade my own sipp. I think april may be when his advice will come a bit askew. I am going to suggest that we withdraw the 25% and reinvest in the two pensions and stock ISAs. I am even contemplating an annuity with part of the pot and this will leave a much smaller amount on which he is going to base his future commisions. I don`t think he is going to be too happy at having 1/4 of the pot to work with re his commissions

At the end of the day FSAs have a vested financial interest. There is also a limit to the amount of compensation paid out by the financial services authority hence putting the eggs in several baskets is a good idea. I would never ever be a blind follower of any financial advisor

dunstonh

I am going to suggest that we withdraw the 25% and reinvest in the two pensions and stock ISAs. I am even contemplating an annuity with part of the pot and this will leave a much smaller amount on which he is going to base his future commisions. I don`t think he is going to be too happy at having 1/4 of the pot to work with re his commissions

Depending on your age, that could be a very poor move or quite a sensible move (older the better if past intended retirement age).

I think it is very unfair to comment on commission. Especially when you realise that there is almost certainly no commission being paid to him on an ongoing basis.

At the end of the day FSAs have a vested financial interest.

IFAs, not FSA

There is also a limit to the amount of compensation paid out by the financial services authority hence putting the eggs in several baskets is a good idea.

The FSA does not pay out any compensation. The IFA or the IFA's employer pays any compensation due. There is no limit to the amount that is paid out whilst the IFA is still trading. My PI cover has a limit of £1mill on any one claim. Its only if the FSCS comes into play that there are limits.

EdInvestor

kittie wrote:

I do think that, however, that he is looking to wrap things up in a sipp come april.

There is no need to wait until April if you want to move a pension to a SIPP - you'll only have to wait until April if you want to invest the pension in a residential property.You seem to be talking about taking benefits , so will you be moving to the SIPP so as to take income drawdown with the 75% of the money left after you take the tax free cash?

If you plan to invest the money yourself in the SIPP, be sure to choose a low cost online one with no annual fee.

dunstonh

EdInvestor wrote:

There is no need to wait until April if you want to move a pension to a SIPP - you'll only have to wait until April if you want to invest the pension in a residential property.You seem to be talking about taking benefits , so will you be moving to the SIPP so as to take income drawdown with the 75% of the money left after you take the tax free cash?

If you plan to invest the money yourself in the SIPP, be sure to choose a low cost online one with no annual fee.

Ed thinks everyone should be in a SIPP now.

However, your IFA is almost certainly correct by saying you should wait. We are going to see a bunch of new SIPPs launched in the next 6 months. This also includes hybrid/insured SIPPs which are likely to suit the average person better than a full SIPP.

Going in now could result in costs which would not have been incurred had you waited. I too have a number of clients "on hold" until the SIPPs I want are launched. I have one particular one in mind too and have been told that wont be due until Feb until after the "A" day rules are fully published.

EdInvestor

However, your IFA is almost certainly correct by saying you should wait. We are going to see a bunch of new SIPPs launched in the next 6 months. This also includes hybrid/insured SIPPs which are likely to suit the average person better than a full SIPP.

May I inquire in what way a "hybrid SIPP" will differ from a standard personal pension?

dunstonh

May I inquire in what way a "hybrid SIPP" will differ from a standard personal pension?

It will use the personal pension trustee arrangement. However, it will allow investment into unit trusts/OEICs. Something that a personal pension does not allow.

This is about the third time I have answered that for you Ed.

Think fund supermarket with ISAs which invest in unit trusts/OEICs within the ISA wrapper. Then think pension that does exactly the same on exactly the same charge/cost basis.

EdInvestor

Oh I get it now.Basically the same as the current PP arrangements allowing external funds, which you can already do.

To remind everyone, SIPP stands for Self Invested Personal Pension. IMHO if you can't invest at least in shares (as well as funds), and preferably both shares and property, it's not a genuine SIPP.

Of course it might be a good opportunity for providers and IFAs to pick up fees and commissions by transferring people from a PP to a "hypbrid SIPP", since SIPPs are clearly the flavour of the month.But there wouldn't be much point, would there as you'd be investing in the same things you already have available now? The difference would only be a technical one.

So I'll say again to the OP: If you want to move to a SIPP, absolutely no need to wait, as these "hybrids" are not SIPPs at all.

I would also be very cautious about moving from a stakeholder to a non-low cost "hybrid SIPP" at a life company.Charges wise, you could be right back where you were before stakeholder.

dunstonh

Oh I get it now.Basically the same as the current PP arrangements allowing external funds, which you can already do.

No you cant. External funds are not unit trusts. They are pension funds which are either re-invested into the unit trust funds or a fund which mirrors the unit trust fund. They are not the unit trusts themselves. Mirror funds do not usually follow the unit trust exactly due to delays and sometimes an admin charge (albeit very small). Income distributions within the fund are handled differently as well. Although the end result is much the same, although not exactly the same.

To remind everyone, SIPP stands for Self Invested Personal Pension. IMHO if you can't invest at least in shares (as well as funds), and preferably both shares and property, it's not a genuine SIPP.

and to remind you that not everyone, indeed, the majority, will not want to invest in shares. So why pay the charges of a full SIPP when a hybrid/insured SIPP will be cheaper but give you the fund range that you want.

Of course it might be a good opportunity for providers and IFAs to pick up fees and commissions by transferring people from a PP to a "hypbrid SIPP", since SIPPs are clearly the flavour of the month.But there wouldn't be much point, would there as you'd be investing in the same things you already have available now? The difference would only be a technical one.

Wrong.

So I'll say again to the OP: If you want to move to a SIPP, absolutely no need to wait, as these "hybrids" are not SIPPs at all.

Wrong.

I would also be very cautious about moving from a stakeholder to a non-low cost "hybrid SIPP" at a life company.Charges wise, you could be right back where you were before stakeholder.

That goes for any SIPP from anyone. SIPPs are generally more expensive than stakeholders and some personal pensions can be cheaper than stakeholders.

EdInvestor

Well I must say demand for SIPPs must be rocketing if the insurers have to go to all this trouble to provide a competitive product that is a) almost the same as one they've got already and b) lacks the features of the one they're trying to copy. :D

Must say I find that quite encouraging.

SIPPs are generally more expensive than stakeholders.

Not for larger funds because normally they have flat rate, not percentage based charges, and often no annual charge at all, while fund charges will be rebated.

For shares/property well worth checking the charges at https://www.sippdeal.co.uk and for funds, have a look at https://www.hargreaveslansdown.co.uk.