IFA Commission

Legacy_user

I think in my previous posts about pensions I've proved that DH and I are complete novices. So if this post sounds crass or stupid please excuse me.

The second IFA we visited has rung to tell us he has got some info on PP's and SHP's for DH to consider (the first hasn't bothered calling us back). I don't know the full details yet but he did say that his commission, should we go ahead, should be £1000 though he will refund £500 to the pension. Now I know he's not running a charity and so has to make money but having read the articles on this site with Cavendish charging only £25 I think this is a bit expensive.

So my question is does £500 sound ok given we would be availing of the IFA's services and knowledge?

Lokolo

How much are you investing?

System

£20000 initially but will contribute monthly too. DH 40% taxpayer this year but not from 2009/2010 onwards as he retires with a company pension and lump sum payoff on 31/03/09 so this is a tax saving exercise in this (08/09) tax year. We know that it won't provide a big pension when he eventually starts drawing it.

System

Update on my query.

DH has come home from IFA with papers for Prudential flexible retirement plan(PP with SIPP options). On that limited information can anyone advise if this is a good product?

TH1878

Pam17 wrote: »

I think in my previous posts about pensions I've proved that DH and I are complete novices. So if this post sounds crass or stupid please excuse me.

The second IFA we visited has rung to tell us he has got some info on PP's and SHP's for DH to consider (the first hasn't bothered calling us back). I don't know the full details yet but he did say that his commission, should we go ahead, should be £1000 though he will refund £500 to the pension. Now I know he's not running a charity and so has to make money but having read the articles on this site with Cavendish charging only £25 I think this is a bit expensive.

So my question is does £500 sound ok given we would be availing of the IFA's services and knowledge?

What would you say was a fair price?

Some things to think about:

1. How do I pick the right contract? Have Cavendish got access to the most appropriate range of pension contracts?
2. How much would I be saving on the AMC by going with Cavendish?
3. How do I select my funds within that contract?
4. How do I ensure my funds remain suitable going forward?

2.5% (which is what the adviser is charging) seems reasonable to me.

Remember, they are likely spending thousands on research tools to be able to offer you the right advice and ensure it remains right for you.

System

TH1878 wrote: »

What would you say was a fair price?

Some things to think about:

1. How do I pick the right contract? Have Cavendish got access to the most appropriate range of pension contracts?
2. How much would I be saving on the AMC by going with Cavendish?
3. How do I select my funds within that contract?
4. How do I ensure my funds remain suitable going forward?

2.5% (which is what the adviser is charging) seems reasonable to me.

Remember, they are likely spending thousands on research tools to be able to offer you the right advice and ensure it remains right for you.

I haven't a clue really that's why I posted here because I know some IFA's are generous enough to share their experience and knowledge on this forum.

BTW the illustration provided by the IFA shows AMC's of 2.05%

dunstonh

I don't know the full details yet but he did say that his commission, should we go ahead, should be £1000 though he will refund £500 to the pension.

Sounds fair enough. He is going on a sort of fee basis but using the pension to pay for it. That makes sense as you effectively get tax relief on the fee.

but having read the articles on this site with Cavendish charging only £25 I think this is a bit expensive.

Cavendish is cheaper as they do nothing. You pick the pension type, provider, the investment funds and you will do the ongoing monitoring and switching. You also get virtually no FOS protection as Cavendish have no liability.

DH has come home from IFA with papers for Prudential flexible retirement plan(PP with SIPP options). On that limited information can anyone advise if this is a good product?

You may possibly find that its cheaper or as cheap as the plans available on Cavendish as they dont tend to offer a lot of the newer versions where advice cost is factored in on the short term and not over the long term (usually makes those types of plans cheaper for advice cases).

BTW the illustration provided by the IFA shows AMC's of 2.05%

That seems very high if its a mono charge contract. Can you check the later pages and look for the reduction in yield figure as that is the overall cost. Many plans are multi charge and can charge more in the first 3-5 years and then very little after that. That can mean its expensive in the early years but cheap in the later. The RIY gives you an effective average. It will say something like the investment return of 7% will have the effect of being reduced to 5.9% due to charges.....

System

dunstonh wrote: »

That seems very high if its a mono charge contract. Can you check the later pages and look for the reduction in yield figure as that is the overall cost. Many plans are multi charge and can charge more in the first 3-5 years and then very little after that. That can mean its expensive in the early years but cheap in the later. The RIY gives you an effective average. It will say something like the investment return of 7% will have the effect of being reduced to 5.9% due to charges.....

The projection is as follows:-

Assuming only £20000 is ever paid into the fund at the start and a growth of 7% per year-

After 5 years the charges will reduce investment growth from 7% to 4.8%

After 10 Years the charges will reduce investment growth from 7% to 4.9%

At end of term ( 16 years until DH reaches age 65) the charges will reduce investment growth from 7% to 5%

This equates to charges of £15300 over 16 years on a single investment of £20000

dunstonh

Hmmm. I wouldnt be happy with those figures peroanlly. Its the 16 year figure that matters. I would be looking for 5.5% with external funds used on a full commission case and closer to 5.7% with the term and charge agreed here.

So, what is it that Pru offer that makes the extra charges over say Scottish Widows, NU, Clerical Medical, AXA etc have to offer who could come in cheaper.

For benchmarking, a 1% stakeholder would be 5.9% on the 16 year figure.

System

dunstonh wrote: »

Hmmm. I wouldnt be happy with those figures peroanlly. Its the 16 year figure that matters. I would be looking for 5.5% with external funds used on a full commission case and closer to 5.7% with the term and charge agreed here.

So, what is it that Pru offer that makes the extra charges over say Scottish Widows, NU, Clerical Medical, AXA etc have to offer who could come in cheaper.

For benchmarking, a 1% stakeholder would be 5.9% on the 16 year figure.

Thanks dunstonh. I don't know the difference but the first IFA was in touch today and he is waiting on quotes from 4 providers including Scottish Widows and Norwich Union so we will be hearing from him on Monday so we will be in a better position to compare products then.