Cavendish Online / AMC question

EdInvestor

It may be better to approach it in a different way. Say you want to invest 200 pounds a month. First pick 4 funds that you want to put the money in ( choose from mainstream fund managers which all the providers are likely to use). Then find out how much it will cost to invest in these funds via a pension wrapper through

-H-L SIPP (ex only)
-Scottish Widows personal pension (has a big fund range) (direct/via Cavendish)
-Scot Widows as above but via IFA
-another choice made by the IFA

That way you may be able to compare prices properly as the funds are a fixed nomination.Otherwise you are usually not comparing like with like.

(The HL site has lists of popular funds).

dunstonh

Another way to approach it is that faffing around trying to squeeze an extra 0.1% out of the contribution means you can end up losing more just by delaying and the markets have moved up 10% (of course they could go down 10% as well and then you are laughing).

Cavendish have a factory line and retail mono charged pensions on the cheap and make a pittance out of each one but if one member of staff can turnround one of those every 10 minutes, then the money soon adds up. It isnt worth a local IFA doing that because they wont have the systems in place to run off an execution only transaction as quickly. It can take 10-15 minutes just to knock up an execution only letter. You also have the illustration and key features, then check the application, do the cover letter and send in. Then place copies of the paperwork on file, add it to the new business register and trace its progress through to it being issued. If you paying an office clerk £6 an hour and getting lots, it makes sense. Otherwise it doesnt.

sidneycarton

Thanks for the information, Dunston. I can easily say I'm more confused now than when I began! But I appreciate the effort to clear things up nonetheless.

happyhappydays

I too find the whole charging thing confusing and far from clear. I have obtained figures from various sources similar to how EdInvestor has suggested and buying a pension via the IFA came out more expensive by a significant margin. However posts by Dunstonh and others suggest that an IFA could be very competitive and I would be only too willing to pay for 'good' advice but my IFA has just suggested I invest in a single middle of the road fund and I therefore feel he hasn't justified charging a premium. I now have to decide whether to go DIY or to try and find a more proactive IFA. Any tips on how to get the best out of an IFA would be appreciated.

dunstonh

but my IFA has just suggested I invest in a single middle of the road fund and I therefore feel he hasn't justified charging a premium.

IFAs are there to add value. If yours doesnt then it either means that the IFA isnt very good or that you have moved to a point where you dont need the IFA in that particular transaction.

Any tips on how to get the best out of an IFA would be appreciated.

first thing to do is make sure its an IFA. Over half those seeing tied agents actually thought they were seeing an IFA. Next thing is to get an IFA that fits your requirements. Do you want servicing, ad hoc advice when required, full financial planning etc? No point employing a transactional IFA to do a servicing role.

Avoid all salesforces (tend to have a high turnover in staff, the advisers only get a small proportion of the commission/fee so cant discount or may even include explicit extra charges and sales doesnt fit with good advice).

Next thing is to discuss clearly what you want. The more info you give, the better the advice. If you play your cards close to your chest a give the impression you dont know the subjec the IFA is more likely to recommend a basic option. MIFID rules require that.

Last thing to remember is that advice does cost. If you end up with a stakeholder under advice then it will be around 0.3-0.5% p.a. more expensive than DIY through Cavendish. IFAs can come out better priced with younger people and when you start looking at personal pensions.

happyhappydays

Very useful advice, as usual, thanks dunstonh.
My IFA has suggested a Scot Widows PPP but without any discount on the funds. Do IFA's negotiate on these or do I need to go to Cavendish to get a good deal?

dunstonh

My IFA has suggested a Scot Widows PPP but without any discount on the funds.

SW PPP is a good product as you can get a good spread of internal funds and external funds to get the best of both worlds.

Do IFA's negotiate on these

Yes. However, fund value has a lot to do with it. SW PPP at say £100pm is only going to pay the IFA a tiddly amount. Around £100. So, a transaction of that size gives little scope for discounting. However, a fund value to transfer or single premium and regular starts giving more scope for discounting. The other option is to go fee basis but that favours medium to larger transactions. Smaller ones can favour commission (although not always).

do I need to go to Cavendish to get a good deal?

Depends on what you are buying. Are you buying the advice or are you buying the product? Cavendish is just the product. Its for those that dont want advice.