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

dunstonh

What I want is to find an IFa who will search the best option for the annuity I want, maybe make the odd suggestion/advice, and having made the decision, conclude the transaction.

Any IFA can do this. Its a bread and butter transaction for an IFA.

want to know how much this will cost, ie the fee. I do not want a complete financial makeover, I just want the best value for a one-off insurance product.

Probably best on commission rather than fees as annuity commission is typically 1 to 1.5%. Some annuity providers insist on commission taken and will not allow adjustments. If it is a large annuity (say over £100k after tax free cash) then you should have scope for some discounting on commission but HMRC rules prevent you getting it as cashback. You will get an extra pound a month or similar.

made contact with one of the "big three" IFAs referred to on moneysaving expert.

I assume you use the term big three to reflect their high charges. The site does not mention the biggest three IFAs in turnover. The discount IFAs mentioned on MSE are for non advice services. Their advice arms are typically more expensive than most local firms.

I was told that if they went ahead and made a recommendation, which I didn't accept, they would charge £350/450 - that's acceptable.
However if I accept the recommendation they charge 1.5 - 2/5% of the capital sum over £40,000, say £1,000 or "2500 for a large sum.QUOTE]

You are misreading what they have told you. They are charging you and keeping commission. This is not unexpected when you go to discount online IFAs that also have an advice arm. They can afford to charge a lot more because they can get away with it.

You will find a local IFA that wont charge a penny and will just keep the commission (which is not an explicit cost in the case of annuities).

I was told that many companies would not deal with me if I did not use an IFA.

That is correct. Many of the top payers will only transact through an IFA. If you are a smoker or can qualify for enhanced annuities then you must see an IFA as it will cost you a lot of money if you dont.

don't like this part - my only previous experience with an independent advisor was recommending my transfer out of a salary based scheme to a private pension in 1991. I have persued mis-selling all the way to the FSA, but was turned down because the firm did not have the "right" protection.

Which has nothing to do with the 30,000 or so other advisers that are authorised and regulated to give advice today. Over the years I have seen poor teachers, poor doctors, electricians etc. That doesnt mean you stop using them when needed. You just find a another one instead.

It sounds like you had a FIMBRA adviser who ceased trading before 1994. That would be the only time you would not be covered for a 1991 case. Also, 1991 is before regulation had really started to kick in fully.

dgbshifnal

Thanks Dunstonh

I appreciate the prompt and explicit reply. In essence you are giving me, gratis, exactly the advice I need. An IFA one can just have a little chat with to clear up misunderstandings. Thank you for that.
The big three I referred to were Annuity Direct, Annuity Bureau and William Burrows, referred to on Martin's site, and I went to the first.

I think that what I now understand is that going for commission will not reduce my pot by the % commission, but that the IFA will take that from the provider (who would just keep it in house otherwise).
I will be looking for an enhanced option, and at the moment am leaning towards a with profits option; some research with Prudential shows that these are not mutually exclusive.

without being too long winded. Previous adviser was J... H... Financial Services Ltd - a company in default under FSCS.
They accepted claim, then went into liquidation, parent company having been taken over.
I was told by Ombudsman that I had in fact transacted with J... H... Partners and would have to find and pursue individual partners - all long gone.

dunstonh

They accepted claim, then went into liquidation, parent company having been taken over.
I was told by Ombudsman that I had in fact transacted with J... H... Partners and would have to find and pursue individual partners - all long gone.

Thats a pain. I can understand that. However, that shouldnt reflect badly on current advisers. Whilst things are still not perfect, they are a lot better and this particular transaction isnt high risk. Unlike a final salary pension transfer.

The big three I referred to were Annuity Direct, Annuity Bureau and William Burrows, referred to on Martin's site, and I went to the first.

A few of the IFAs on the board, myself included, have done comparisons and have found that we were able at worst to match the terms they got but also improve upon them. This is because none of those three are network members and they dont get the best terms. They also dont discount so there is no reason to use them unless you really really want a postal based application and process.

With enhanced rates it really is worth getting a local contact. This may sound old fashioned but with the enhanced annuity providers it is possible to haggle with them and get them to pay a bit more. Last week we got Just Retirement (one of the biggest players in this field) to increase their rate three times over their standard published figure. If that client had gone postal they would not have got those increases.

Some things are priced better if you DIY but in the case of the open market option, the local IFA is still the ideal distribution channel for these.

With Profits annuities are largely on decline and I would only consider one provider as being viable and that is the one you mentioned. I wouldnt risk my retirement income on anyone else if that was the option you wanted. Although I probably wouldnt pick a WP annuity personally either unless it was a low Anticipated bonus rate and the terms looked good against an increasing lifetime annuity.

dgbshifnal

Just my personal opinion (and I am biased) - if more IFAs were prepared to offer a little clear, common sense advice, without trying to draw you in lock, stock etc. as soon as you look at their sites, then the IFA profession would be viewed with far less suspicion!

Thank you, advice appreciated.

njay

Hello,

I am hoping someone could give me advice. I am 25 and in my first job after Uni. I want to start a pension but I have no idea about them! I dont want to risk my monwey or anything like shares, I just want to save so that I am comfortable in retirement. I have read some posts on here regarding IFAs, but to me £300 + is a lot of money to spend on advice when I dont even know if I will buy the product or take the advice!
I have no idea what I need or what will be suitable for me so I am feeling vulnerable to being ripped off! Can anyone offer advice on what I should do or who I should see?

Aegis

njay wrote: »

Hello,

I am hoping someone could give me advice. I am 25 and in my first job after Uni. I want to start a pension but I have no idea about them! I dont want to risk my monwey or anything like shares, I just want to save so that I am comfortable in retirement. I have read some posts on here regarding IFAs, but to me £300 + is a lot of money to spend on advice when I dont even know if I will buy the product or take the advice!
I have no idea what I need or what will be suitable for me so I am feeling vulnerable to being ripped off! Can anyone offer advice on what I should do or who I should see?

Does your company offer a pension plan? Often that's the best way to get started because the company will add contributions in addition to your own, straight from your gross salary.

Admittedly these schemes are rarely the best, but they're usually cheap, and if your employer matches your contributions then you're effectively getting several years worth of growth immediately.

dunstonh

I want to start a pension but I have no idea about them! I dont want to risk my monwey or anything like shares

That is a good reason to get advice. You seem to have got it into your head that 43 years of investing in stocks and shares is a risk greater than investing in cash.

I just want to save so that I am comfortable in retirement.

If you intend to use cash based funds then you need to be prepared to increase your contributions to possibly as much as double someone that is using stocks and shares.

I have read some posts on here regarding IFAs, but to me £300 + is a lot of money to spend on advice

£300 is not a lot and you only pay VAT if you dont take the advice. If the fee is collected via the pension (rather than you writing a cheque out) then the fee also gets tax relief on it.

Can anyone offer advice on what I should do or who I should see?

You need an IFA.

njay

hello,

thanks for the replies, I will def speak to an advisor!

ccmuirhead

I've moved IFA as my old one was receiving considerable commission on products as well as increasing their fees, with no value being added.

My new IFA offered a flat annual fee, but I now find that there is a transfer cost of 0.6% (on fund value) to move funds across from Cofunds to Transact. In addition, my new IFA advises they will receive an initial 3.5% commission, and a further 0.5% annual return on the complete investment. As I am paying for a fee-based service, should I expect this commission to be passed on? (although I do not you state HMRC rules prevent you getting it as cashback)

Thanks.

dunstonh

My new IFA offered a flat annual fee, but I now find that there is a transfer cost of 0.6% (on fund value) to move funds across from Cofunds to Transact.

Cofunds are great. One of the better fund supermarkets. Transact are not a fund supermarket but a platform so there is a difference here. Transact sell investments with factory gate pricing. They add a bit for themselves and then allow the adviser to add their charges. An explicit fee based adviser with a client with a large portfolio can make a lot of savings with Transact. I seem to recall its over £500k or something around that.

In addition, my new IFA advises they will receive an initial 3.5% commission, and a further 0.5% annual return on the complete investment. As I am paying for a fee-based service, should I expect this commission to be passed on? (although I do not you state HMRC rules prevent you getting it as cashback)

I think there is either a misunderstanding here or you are not getting what you think. With transact the adviser sets the initial charge. So, if it says 3.5% commission is being received then that is what the adviser is getting. If the adviser was taking no initial commission then it would say zero. The 0.5% is the natural trail commission.

So, if the adviser is taking 3.5% and charging you a fee then not only are they taking more than the normal maximum commission option (typically 3%) they are charging you on top. That is either an error of understanding or you are being ripped off.

I would also suggest that unless you have many hundreds of thousands of pounds in your portfolio, that you get them to fully justify the reason for using Transact over Cofunds. I have transferred a lot of out Transact set up by others and put them into Cofunds (and Selestia) as they are both usually cheaper options.