SIPP, Hargreaves Lansdown and Funds

jenney

Thanks, Brasso. I have not technically signed up to anything. In the first meeting the advisor asked if I had read the keyfacts. Actually I hadn't and said so, mainly because they had been hidden in about 50 pages of bumf sent through about the Vantage SIPP. We went through the charges at the meeting and I seem to have completely misunderstood what he claims we agreed, which he now seems to be able to articulate very clearly! My understanding had been that there was a tariff for entry into the Portfolio Management Service and a 1,500 charge for advice. Now I am being told it is 5,000 for advice whether I take it or not.
So you are right - a misunderstanding, but a big one. I wanted to find out, basically, whether the charges upfront and ongoing seem reasonable.

brasso

jenney wrote:

Thanks, Brasso. I have not technically signed up to anything. In the first meeting the advisor asked if I had read the keyfacts. Actually I hadn't and said so, mainly because they had been hidden in about 50 pages of bumf sent through about the Vantage SIPP. We went through the charges at the meeting and I seem to have completely misunderstood what he claims we agreed, which he now seems to be able to articulate very clearly! My understanding had been that there was a tariff for entry into the Portfolio Management Service and a 1,500 charge for advice. Now I am being told it is 5,000 for advice whether I take it or not.
So you are right - a misunderstanding, but a big one. I wanted to find out, basically, whether the charges upfront and ongoing seem reasonable.

This is something you really do have to discuss with them. I seem to recall that when I asked about paying for advice, HL quoted me something like £500, so this must have been a different service from the one you've got.

Not sure what you mean by not having signed up to anything. Surely if they're charging you thousands of pounds, you must have signed some document agreeing to this?

The other point to bear in mind is that the charges, whatever they are and whatever they are for, may turn out to be well worth paying. Perhaps they will end up saving you money in the long run, if the advice turns out to be good.

brasso

margaretclare wrote:

I think the whole idea of a SIPP is that you don't get 'advice'. Self-invested personal pension means you do it yourself. 'Advice' means going to an adviser and paying for the advice. You still have to make the decision yourself as to whether to go with the advice given, or not.
Margaret

Not quite sure what point you're making, Margaret.

Unless you choose your funds and stocks by sticking a pin in the FT, we all get advice and information from a variety of sources. Yes, we make the final investment ourselves but how do we choose the investments to make? We can read the financial pages for tips, talk to knowledgeable friends, read books on technical analysis, and yes, we can pay someone to advise us. This could be an external, independent source but also, almost any fund/share-dealing service will have a chargeable, customised advice service available should you wish to take advantage of it.

Of course, you're under no obligation to act on the advice, you're right.

dunstonh

It sounds more like discretionary manangement which would incur an "on top" charge potentially. If you want discretionary management, then its probably better doing it through a source that doesnt sell their own products and would utilise investment trusts and shares as well as unit trusts. Chrismaths is the person on the forums to add comment there as that is what he does.

An IFA can provide on going servicing, updates and recommendations but will not switch anything (apart from rebalancing) without your authority and telling you first. You would not expect an IFA to charge on top of the natural commission which is what we are seeing here which suggests it isnt the same service brasso looked at.

EdInvestor

brasso wrote:

Not quite sure what point you're making, Margaret.

]

I'd have thought her point is quite clear. A SIPP is a Self Invested personal pension.It's meant to be a DIY product. You are not meant to pay for advice to use it.You can if you like, but that's not what a SIPP is designed for.

Unless you choose your funds and stocks by sticking a pin in the FT, we all get advice and information from a variety of sources.

We get information yes.But "advice" is a specific paid-for product, which it looks like jenney has got involved with - although it's not clear to me either exactly what kind of advice she has had :huh:

She seems to be being charged for 2 things:

a) normal advice on what to do about her financial affairs ( which should have involved a fairly complicated fact find about her personal circs etc).

b)"The HL Portfolio Management Service", which seems to be an investment advisory service.

The facts probably lie in that small print she hasn't yet inspected in detail.

Of course H-L is better known for its execution-only (no advice) discount broking service, which rebates commission and charges.You may not get this cheap arrangement with their advice service.

I don't believe I've ever heard any comments about the quality of the advice service. Has anyone ever used it?

dunstonh

I'd have thought her point is quite clear. A SIPP is a Self Invested personal pension.It's meant to be a DIY product. You are not meant to pay for advice to use it.You can if you like, but that's not what a SIPP is designed for.

The SIPP was being sold with advice long before it was available through DIY.

Of course H-L is better known for its execution-only (no advice) discount broking service, which rebates commission and charges.You may not get this cheap arrangement with their advice service.

They amount of discounting on their pension though isnt that significant. They dont take initial commission but keep the natural commission. Their advice service appears to come in quite expensive compared to normal IFA terms.

brasso

EdInvestor wrote:

I'd have thought her point is quite clear. A SIPP is a Self Invested personal pension.It's meant to be a DIY product. You are not meant to pay for advice to use it.You can if you like, but that's not what a SIPP is designed for.

I'm splitting hairs, but I disagree. No one told me I wasn't supposed to pay for advice before making my investment selections in my SIPP. As it happens, I've not paid for any advice but it's surely not a precondition either way.

EdInvestor wrote:

We get information yes.But "advice" is a specific paid-for product...

Not necessarily. It can be paid for, or it can be free.

We're being academic perhaps. I can open a HL SIPP, then pay them for some advice on investment which I can choose to accept or not. I agree that Jenney's position seems to be that she's bought some sort of actively managed service which isn't the usual SIPP arrangement.

jenney

What I have been offered is essentially a managed portfolio wrapped in a SIPP. I don't mind that concept as long as I am not being overcharged for it. My question is whether 2-3% up-front fees plus 1,000 for regular contributions plus 2.22% per annum AMC (including underlying fund charges) is reasonable. An indication was that it would cost about 1.56% to invest directly in the underlying funds though a non-managed SIPP so the portfolio management is costing an extra 0.62% per annum. It is not entirely clear whether VAT inclusive or exclusive figures are being used.

If no one has heard of HL's portfolio management service it sounds as if only HL would recommend it. That does not sound very independent. HL compared the 2.22% TER with 2.81% for New Star Active Portfolio, 2.63% for Credit Suisse Multi-Manager Equity Managed Portfolio and 2.76% for Jupiter Merlin Growth Portfolio which are multi-manager funds.

I am concluding that 4,000 is too much to ask for advice and I need to think whether a 2-3% charge is reasonable for entry into a portfolio managed service with 2.22% AMC but no particular reputation. The 1000 for the regular contributions into Scottish Widows is too high.

I can see an argument brewing with HL about what was agreed on fees. One thing I am clear on is that I wanted to move to a SIPP for flexibility and transparent costs and I am dismayed to find that HL's own charges are opaque.

dunstonh

I don't mind that concept as long as I am not being overcharged for it.

Concept is good but you are paying more than you need to do if the portfolio is going to be made up with unit trusts.

My question is whether 2-3% up-front fees plus 1,000 for regular contributions plus 2.22% per annum AMC (including underlying fund charges) is reasonable.

NMA IFA basis (which is generally the cheapest IFA advice model) is 1% initial charge with the 0.5% annual commission from the funds being retained.

HL are charging you 2-3% up front. 3% is the usual maximum an IFA would take on unit trust based investments. The FSA currently have the market average at 1.5% for IFAs on UTs.

HL are also charging you £1000 on top which is very expensive. Compare that to the 1% NMA IFA basis for each contribution (or 0% as is often the case on larger portfolios).

And finally, on top of the 0.5% they will earn in natural commission from the funds, they are charging you 0.62% on top (ignoring VAT). So, they will make 1.12% p.a. on average.

If the portfolio management is shares and investment trusts then the charges are not as bad as they are taking on the rule of investment fund manager effectively. If the portfolio is unit trusts/OEICs/SICAVs etc, then its very expensive.

McGhie

Hi

I've been using Martin Lewis' site for some time but I've only been looking at the forums for a few days and I've read the whole of this thread with some interest and this is my first post.

I'm 34 and I have 2 PPPs - one with Equitable Life worth around £40K, including a few years of protected rights (thankfully less than 10% of this is in with-profits) and one with Clerical Medical worth around £60K (no protected rights).

I'm looking for a new home for these plans for a number of reasons - mainly that I'm not happy with either of these provider's quality of service or selection of funds. So I'll be transferring about £100K into the new plan.

I will also be putting around £1000 per month (gross) into the new plan.

I was looking for a cheap SIPP that gave me access to a wide selection of funds but I'm not tied to the idea of a SIPP if there are alternatives that are just as cheap and offer a similar range of funds.

From what I've read and researched:

HL offers a cheap SIPP with a good range of funds and reasonably transparent costs, which include no transfer fees, no compulsion to pay an IFA to be involved in the transfers, no initial fees. The main costs that I can see are heavily discounted initial charges on purchasing funds (most are no more than 0.5%), non-discounted annual charges on the funds, and an annual fee (0.5% but capped at £235) for funds that don't pay HL trail commission (though it's not obvious to me which funds these are so I may have to assume an additional £235pa).

Selestia also offers a good range of funds but I can't see the charging structure so I'm not sure if there are any charges for transferring pensions in, paying an IFA to transfer the other plans in, initial fees or annual fees. The initial charges on fund purchases seem low (0-0.5%) and in line with the HL charges. So, it could be cheap but the charge structure is not clear and I can't tell if I would be better off with HL or Selestia.

To muddy the water further, I've also looked at the Fidelity Fundsnetwork SIPP as I have getting on for £100K in PEPs & ISAs with Fidelity and it would be of some benefit to see all of my long-term savings plans in one place. The Fidelity SIPP has an initial fee that would be waived and an annual fee that would be waived for the first year, after which there would be a flat £250pa annual fee. There are NO initial charges on fund purchases (i.e. 0% on all) and all transfers are also free. So this would be cheaper than HL if I had to pay HL £235pa, which I can't work out. The catch here is that Fidelity requires me to use an IFA to arrange the transfers and I don't know what cost might be associated with this.

On the PEP/ISA front I could always leave keep that apart from the pension plan or I could transfer them all to HL Vantage or Selestia if I wanted them in one place, but neither of these options is as simple as just setting up the Fidelity SIPP (though I could reduce my initial charges on purchasing funds in my ISAs by moving away from FNW).

Can anyone shed any light on some of the murkier bits of this or have any helpful ideas/opinions/advice?

Thanks
Ian