Nucleus Wrap Account Fees - advice please !

inclement

Hi,

I've had advice from an IFA I have started dealing with (in the absence of having an IFA for a number of years) and have moved my pensions into a Nucleus Wrap Account.

I agreed to a 2% initial fee to transfer pensions into the account and a 1% management fee plus fund charges. The fund charges were going to be :

Nucleus fee - 0.35%
Fund charge - 0.37%

So the total would be 1.72% pa - I wasn't too thrilled at this as it seemed a big chunk of any increase in value would be taken up in fees but thought I'd go with it.

I've just had a letter saying that I am now advised to go for a different fund which is more expensive so the total cost will be 2.12% pa. If we take an average growth of 7% as a ballpark figure, this means the net growth will be 4.5%. I don't think this is reasonable as it works out as a 36% reduction.

Can anyone give any advice as to the charges that I should be expecting ?

Also, do I have to invest in one of the funds - is it possible to just pay the management fee plus the basic nucleus 0.35% fee ?

I feel somewhat ignorant of the facts and would like to know the deals that anyone else has negotiated as it seems that the Nucleus charges depend upon haggling.

Thank you for any information,

Inclement

dunstonh

I've just had a letter saying that I am now advised to go for a different fund which is more expensive so the total cost will be 2.12% pa. If we take an average growth of 7% as a ballpark figure, this means the net growth will be 4.5%. I don't think this is reasonable as it works out as a 36% reduction.

Personally, i prefer to avoid funds with TERs above 2% but sometimes it isnt possible. However, in those cases you tend to be looking at funds with return potential well into double digits after charges.

Can anyone give any advice as to the charges that I should be expecting ?

TERs between 0.75% and 2.5% typically depending on the type of investment area.

Also, do I have to invest in one of the funds - is it possible to just pay the management fee plus the basic nucleus 0.35% fee ?

Nucleus in an unbundled platform. So, the charges are split (compared to a bundled platform where the charges are given as a bottom line but you dont know who is getting what). So, you cant avoid one bit of a charge.

I feel somewhat ignorant of the facts and would like to know the deals that anyone else has negotiated as it seems that the Nucleus charges depend upon haggling.

Nucleus won't haggle with you. The "haggling" is what you agree with the IFA. However, even then many of the charges are cast in stone based on the fund in question. The IFA or the platform won't haggle on those as there is no room to haggle. It's mainly the platform charge (by using a different platform) and the IFA charge (which does seem a bit high in your case - it appears to be priced for a smallish investment rather than a larger one) which you have scope to improve upon.

inclement

Hi,

Firstly, thanks for both replies, they've more or less confirmed what I was thinking.

The fund is around 130k and I'm looking to put it into a balanced fund so I don't think there would be much need for day-to-day management.

The 2% initial fee was agreed after I negotiated him down from 3% but now I see that even that is over the odds. The 1% pa is over the whole fund and I now question the fact that I need the pension in a wrap account at all. As a result, I've taken advice from another IFA who is a friend of a friend and he has advised that I can move my pension to a fund of his with the same expected performance for an annual fee of 0.75%. It's a no-brainer.

Fortunately I think I am still within the 30 day cooling-off period so I can cancel the agreement and take time to make the right decision.

I think this is the best course of action (even if it upsets my current IFA) as I don't think he has my best interests at heart.

Thanks again,

Inclement

dunstonh

The fund is around 130k and I'm looking to put it into a balanced fund so I don't think there would be much need for day-to-day management.

Alternatively, instead of using a balanced fund with a TER of 2.33% (or thereabouts), consider using index trackers built to match the sector allocation of a balanced managed fund and at 0.2x% for index trackers and 0.5% for the IFA managing the rebalancing, that comes in with a TER of 0.7x%. Or go with a non-platform based option and use a balanced managed fund from an insurer at around 0.7%

I think this is the best course of action (even if it upsets my current IFA) as I don't think he has my best interests at heart.

Everyone has to work for living but at those charges, you are almost certainly right. Using an IFA is about getting something you cant or dont want to do yourself and making sure its done right (or consumer protection if not) and getting it for value for money. If the IFA is greedy then the benefit of using them is often lost.

jimjames

inclement wrote: »

Hi,

I think this is the best course of action (even if it upsets my current IFA) as I don't think he has my best interests at heart.

In reality the only person who truly has your interests at heart is you. An IFA should get you the best deal they can (and many do) but others will only be trying to make as much from you as they can which this one appears to be doing.

I think you are making the right move by ditching them.

inclement

Just a quick thank you to all who took the time to comment.

I've now sent a letter to Nucleus to cancel the pension accounts within the cooling off period and will be setting up a pension outside of a wrap account. The IFA I've been dealing with won't be too happy but I already paid him £750 on engagement to analyse my financial position so he hasn't done badly out of it. I'm kicking myself that I didn't do enough research prior to agreeing to the wrap account but at least I can walk away without losing any initial fees. As part of my research I also found out that the IFAs who deal with Nucleus own shares in the company so have a vested interest in moving clients onto their platform - I can't see now how IFAs in that position can truly claim to be independent.

At least I can now properly look into where to move my pension and have a better perspective on what is being advised - thanks again for the advice,

Inclement