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What fees should an IFA charge?
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anothernumber
Posts: 3 Newbie


I have just received advice from an IFA, who has created a pack with his recommendations about pension planning and what fund to invest in. For this advice he will be paid £1800 (ie half of my first years contributions) which will be paid by the pension company and taken from my fund in the form of charges over the first 5 years. Is this normal and is it a sensible fee?
Thanks
Thanks
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Comments
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There is no such thing as what an IFA "should" charge. Like any business, they can charge for their services what they feel is appropriate. The FSA do expect it to be reasonable though. Some will be cheaper than that, some will be more expensive.
£1800 could be cheap or expensive depending on the amount of work and recommendation involved. Also, you need to put the fee in context. For example, it sounds like you have a factory gate priced pension being recommended. These can work out cheaper than a stakeholder pension being done on nil commission. e.g. £100pm for a 30 year old until retirement can get around £2500 in adviser fee and still beat a nil commission arranged stakeholder. The option that pays nothing is the more expensive option to you.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thanks for the reply, the pension being recommended is a Personal Pension with Clerical Medical and Newton Balanced. Fees are based on £300 gross/m at 3.919% for 5 years. The managment rate is 1% reducing to 0.6% after 5 years. Does this sound a good deal. I am 35 and non working.
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0.6% after 5 years is a low management charge. Many have charges of 1% per year throughout the term. After 5 years you would expect around £20,000 in your pot. Your annual fee will be £120 per year rather than the industry norm of £200 per year. This £80 per year saving will get greater each year as the pot grows.0
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Clerical Medicals Personal pension is quite popular. I have used it quite a lot this year. Its priced to attract younger people rather than those closer to retirement. It has an average fund range for a personal pension with an emphasis more on lower risk funds than higher risk.
Take a look at the illustration near the back page for the reduction in yield. It will say something like "putting it another way, the effect of charges will reduce a 7% p.a. return to 5.9%.
5.9% is the level you get with a standard 1% p.a. stakeholder. Anything between 6.0% and 6.5% indicates a discount. I would expect to see the CM around the 6.3/6.4% mark. Very similar to a stakeholder pension arranged on zero commission terms.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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