IFA Fees

Dave_Gorman

Hi,

I am 25 and I'm currently in the process of trying to organise a Personal Pension. My company doesn't offer a pension scheme and therefore I've visited two IFA's for a free initial consultation (I wanted to try and give myself as broad a perspective as possible).

I was just wondering what a reasonable initial set up fee for an pension would be?

Company A has quoted me £500, with yearly reviews based on a timecharge of £150-200/hr.

Company B has quoted me £750, with a free review by phone for the first two years and then a more formal review after 3 years.

I have agreed with companies that the fee will be taken from my first years contributions rather than as an inital up front cost.

I was more impressed with Company B (They seemed to explain things more clearly, answered my questions more thoroughly) and also they're more convenient for me to get to (Probably not so much of an issue as I don't anticipate visiting very often!)

Many thanks in advance for your help.

Dave

Cautious_Investor_3

Hi

How much are you contributing? Either as a monthly amount, lump sum, or transfer?

This is important information as a £750 fee for a £20 pm contribution would be excessive, but cheap for a £1m transfer!

The Cautious Investor

dunstonh

Fees from the pension is common sense as you are effectively getting tax relief on the fee.

If you are starting from a nil balance and making relatively small contributions then reviews are a bit pointless until the value is of a level that makes it more worthwhile.

Dave_Gorman

Thanks for the replies.

I'm starting from nil balance and looking to make initial contributions of £100pcm into the pension.

dunstonh

With a small contribution of £100pm, I wouldnt personally bother with reviews. Get a decent self balancing portfolio fund and wait until the fund value is £25k or so before worrying about that. Go automatic increasing on the regular as well. One of the biggest complaints about pensions is that people dont get back an income that they expected. When you dig further for information you find out that they started paying £30pm in 1988 but never increased it. £30pm may have been good in 1988 but you could get three tanks of petrol for £30 back then. Computer games were £10 compared to the comparable £40 now. You could buy houses for £20k back then. The problem was not with the pension but with inflation and them never increasing it to take inflation into account.

Dave_Gorman

That's really useful advice, I'll certainly take note.

Is a £750 fee a reasonable charge based on my intended monthly contributions?

Lokolo

I think it's quite expensive. £100 a month will be around 2-4 funds. Choosing the funds, writing the report and setting up the pension, I would be thinking £500 max.

Dave_Gorman

Lokolo wrote: »

I think it's quite expensive. £100 a month will be around 2-4 funds. Choosing the funds, writing the report and setting up the pension, I would be thinking £500 max.

When I increase my monthly contributions will I have to pay additional fees to review pension or am I able to simply increase the contributions?

dunstonh

When I increase my monthly contributions will I have to pay additional fees to review pension or am I able to simply increase the contributions?

If you go with automatic increases then no review is taking place and you wont incur new fees. If you go for a manual review and increase then expect to pay for it.

Is a £750 fee a reasonable charge based on my intended monthly contributions?

Depends on location. I think £500 is reasonable. £750 maybe for a firm that is higher profile or city based or if you have gone for a higher qualified IFA than you really need. At the end of the day £250 will be tiny compared to the diferrence the advice will make.

Lokolo

OP has the IFA said how much the charge would be for the formal review in the 3rd year?

Dave_Gorman

dunstonh wrote: »

If you go with automatic increases then no review is taking place and you wont incur new fees. If you go for a manual review and increase then expect to pay for it.



Depends on location. I think £500 is reasonable. £750 maybe for a firm that is higher profile or city based or if you have gone for a higher qualified IFA than you really need. At the end of the day £250 will be tiny compared to the diferrence the advice will make.

Thanks very much. It's a central London firm so I guess that may be the reason for the slightly higher fee. I just wanted to make sure I wasn't spending silly money.

I'll make sure to get automatic increases on the pension as well.