Cheapest Sipp: build yourself a low cost DIY pension article

dunstonh

Well, you do keep telling me that IFAs can get cheaper products but I've yet to see anyone posting here who's gone to an IFA and come away with anything that I'd regard as being cheap.

What makes you think cheapest is best? Why would someone post here saying that?

At least one should save on the charge for a GAD calculation. Thereafter it'll all depend on how competitive the marketplace is.

The GAD calculation is largely automated. The new projection method using assumptions (which will look largely similar to the GAD calculation) will also be automated. It is replacing one thing with another. Given how few actually charge for GAD calculations, it will be interesting to see where they put that charge. Whilst it may go, bet you that a new charge for people wanting full fund withdrawal will pop up in its place.

gadgetmind

dunstonh wrote: »

What makes you think cheapest is best?

Extensive research! Saddling a multi-asset portfolio with fees that are 2x or even 3x of another really will leave it struggling to complete. Yes, you can argue about asset allocation, rebalancing, etc., but all of this can be achieved for fees of well sub 0.5% so why are we still seeing fees of double or triple this?

The GAD calculation is largely automated. The new projection method using assumptions (which will look largely similar to the GAD calculation) will also be automated.

As it's such a simple calculation, I'm not sure why platforms have the cheek to charge for it.

Hopefully, having drawdown go mainstream will eliminate this fee, but you're right, something else will pop up in its place.

dunstonh

As it's such a simple calculation, I'm not sure why platforms have the cheek to charge for it.

Most dont. Its seems to be a small number of DIY platforms. (the same ones that seem to have pages of charges for everything they do).

gadgetmind

I prefer simpler charging as much as the next man.

However, my DIY platform lets me achieve a balanced multi-asset portfolio of ETFs and ITs with a TER of 0.35% all in (OK, so slightly higher when eventually in drawdown), whereas accessing a "simpler" advised platform would cost me perhaps 3% up front and 1%-1.5% pa in ongoing fees.

And yes, you keep assuring me that IFAs can access lower fee platforms that a DIYer can't, but we see a stream of people here saying "Been to see and IFA and he quoted ..." where the fees are nowhere close to what DIY can achieve.

I will accept that I still need to fully backup my "cheaper is better" position (which is a simplification, but hey ho.) However, I think you need to realise that in the vast majority of cases, IFAs push people onto platforms where the fees far exceed what a DIYer such as myself (with an engineering rather than financial background) can achieve.

Can someone really not get a low-fee multi-asset portfolio when going via an IFA? If not, why not, and if they can, then why do they get steered in a different direction?

dunstonh

However, my DIY platform lets me achieve a balanced multi-asset portfolio of ETFs and ITs with a TER of 0.35% all in (OK, so slightly higher when eventually in drawdown), whereas accessing a "simpler" advised platform would cost me perhaps 3% up front and 1%-1.5% pa in ongoing fees.

Why would it cost that much? The ones IFAs have access to dont.

gadgetmind

dunstonh wrote: »

Why would it cost that much? The ones IFAs have access to dont.

Why indeed, in fact that's the crux of the issue.

I paid that in the past when young and foolish enough to trust people with gold watches and pinstripe suits.

Pretty much everyone we see asking "Is this a good deal?" questions on these forums are being asked to pay these fees by IFAs.

OK, let's have some counter examples. If IFAs *really* can provide access to cost effective investments, then let's canvass people on MSE to give real-world examples of this actually happening. I accept that IFAs can do this, and agree they should do this, but what I see over and over and over again is that they really *don't* do this.

Why not?

dunstonh

Pretty much everyone we see asking "Is this a good deal?" questions on these forums are being asked to pay these fees by IFAs.

I'm not seeing posts on the forum like that. You see the advice fees but the product fees are nothing of the sort. The product charges on advised do appear to be lower than DIY. The cost of advice may make them more (but not always) but there is a difference in pricing at product level.

gadgetmind

dunstonh wrote: »

I'm not seeing posts on the forum like that.

OK, here is a recent one pulled out at random.

https://forums.moneysavingexpert.com/discussion/5031199

Nearly 2% pa comprising 1% pa for the advice and 0.9% pa for the product. Above I said 2x to 3x the fees you can achieve with DIY, but this is over 4x.

Paying a professional to get a better result is fine and dandy with me, but paying someone a slug of money to be dumped into something mainstream that's then crippled with *massive* fees really doesn't sound great service.

If you have any links to people popping up here who've been asked to pay up front fees but are then delivered a multi-asset portfolio for sub 0.5% pa than I'd love to see them.

dunstonh

Nearly 2% pa comprising 1% pa for the advice and 0.9% pa for the product. Above I said 2x to 3x the fees you can achieve with DIY, but this is over 4x.

So, in this case, the product charge is 0.9% (fund and provider/platform). How do you know if that is 3x more than DIY? The funds are not mentioned. So you cant compare.

malc_b

dunstonh wrote: »

Its just you
Like malc_b, your problem is associating all providers with a minority.

Hmm, not sure about the minority. I don't have access to IFA rates which have been said to be simpler but most DIY sipp providers seem to have a a lot of charges. HL, ATS, AJBell, II, Charles Stanley, all have annual charges and charge for extras.

Fidelity is a notable exception which charges 0 for all "extras" but does have a 0.35% rate. Still better than HL which has 0.45% and also charges too.

iWeb also seems to be simple but flat rate, £180 (inc VAT) before retirement, then £360 in retirement (<75, >75 £480). Which is more cost effective depends on the fund value and how many trades you make a year. For small funds, fidelity looks good, for larger ones, iWeb or ATS or II with their flat rate look cheaper.

I think the interesting figure is how much they charge to exit rather than the retirement costs. They way things have been shook up I'm sure charges will change over time so moving your sipp will happen a lot. Plus it sort of makes sense to say save £12 pa for the next 10yrs then pay £120 to move to the provider with the cheapest retirement costs rather than trying to get both now.

Am I missing a good diy provider?