Do You Need Financial Advice? When To Get It, When Not To Get It Discussion Area

cliveboy

My wife and I are both 70 and are consulting an IFA with the intention of reducing our estate's large inheritance tax liability. The IFA's recommendation is that we set up a Discounted Gift Trust with the majority of our non-property assets (approx £500k).

The IFA has quoted his charges of 3% of the lump sum for the set up of the trust plus 0.5% per annum for management, annual reviews etc.

Both these charges seem extremely expensive to us, particularly given that we are financially savvy. Do others have a view on whether these charges are typical or high?

Thanks in advance

bigadaj

If you are setting up a trust then is there also a solicitor involved, I'd expect so with their costs as well.

Annual management charge look average, though it is a large pot, so the actual sums are fairly significant, set up charge looks high and I'd be speaking to other. IFAs and haggling.

Great care needs to be taken in these structures as if they are specifically to avoid iht then they can be challenged.

cliveboy

Yes, the solicitor who holds our wills is involved as well. My view was that the 3% set up cost seems very high if you look up on it from an hourly rate perspective.

Presumably most of the set-up costs to the IFA are fixed and not proportional to the pot?

6022tivo

There are many places that will give the same "advice" for free on forums like this.

A bit like libraries and video shops, they together with paid financial advisers are becoming redundant and obsolete.

jem16

cliveboy wrote: »

My view was that the 3% set up cost seems very high if you look up on it from an hourly rate perspective.

I would say that 3% on £500k is excessive. Speak to a few more IFAs who will give you a fixed fee for the work done.

6022tivo wrote: »

There are many places that will give the same "advice" for free on forums like this.

I would certainly not trust a stranger on an internet forum to give suitable advice on £500k.

A bit like libraries and video shops, they together with paid financial advisers are becoming redundant and obsolete.

I highly doubt that. You read a lot of rubbish on the internet.

gadgetmind

£15k for setting up a trust? Nice work if you can get it.

cliveboy

Hence my question Gadgetmind.

Clearly we're prepared to pay a fair price for expert advice but were wondering if anyone here had experience of similar arrangements and could comment from a cost perspective?

Aegis

cliveboy wrote: »

My wife and I are both 70 and are consulting an IFA with the intention of reducing our estate's large inheritance tax liability. The IFA's recommendation is that we set up a Discounted Gift Trust with the majority of our non-property assets (approx £500k).

The IFA has quoted his charges of 3% of the lump sum for the set up of the trust plus 0.5% per annum for management, annual reviews etc.

Both these charges seem extremely expensive to us, particularly given that we are financially savvy. Do others have a view on whether these charges are typical or high?

Thanks in advance

Far too high, in my view... DGTs can be relatively complex to arrange, however there's no way that £15,000 is a justified fee for the amount of work involved.

cliveboy

Far too high, in my view... DGTs can be relatively complex to arrange, however there's no way that £15,000 is a justified fee for the amount of work involved.

Thanks for your view. How much work is typically involved and what would be a typical fee? Is a fee proportionate to the pot justified or normal or are the set up costs mainly fixed?

Daniel_Elkington

If you consider the average hourly rate for an IFA is about £200 per hour, this means that you are getting 65 hourse out of said IFA.

Additionally the 0.5% on-going is the most worrying as this amounts to £2,500 per annum. You best be getting some pretty good service for this.

For contrast our Wealth Management package involves 2 annual meetings, quarterly valuations, daily fund reviews, annual tax statement, annual tax planning, rebalancing when necessary, 24 hour turnaround on enquiries and costs £100 per month.

Unfortunately - a lot of advisers are still not quite up to speed with things and haven't realised that charging % based fees are out-dated and unfair.