Financial Planner - Typical Charges?

jem16

dunstonh wrote: »

Or it may be that the adviser is recommending mostly bond funds (as in corporate bonds, high yield bonds etc) and its a terminology mix up

Possibly but this statement by the OP makes it sound like an Investment Bond.

Toki wrote: »

this is including advice on current pension including putting a lump sum ithen put nto a £20k bond and taking 5% (£1k) out each year as this is tax free.

Toki;

Do you have the Reduction in Yield figure for the Investment Bond? It will be found in the illustration under the section headed "Effect of Charges" and will say something like - "this has the effect of reducing your investment from 7% to ??.

What is that last figure?

dunstonh

jem16 wrote: »

Possibly but this statement by the OP makes it sound like an Investment Bond.



Toki;

Do you have the Reduction in Yield figure for the Investment Bond? It will be found in the illustration under the section headed "Effect of Charges" and will say something like - "this has the effect of reducing your investment from 7% to ??.

What is that last figure?

erm. Yes. You are right. I was hoping it wasnt as you like to think that this sort of thing doesnt happen any more. Roll on RDR.

Ironically, if it was bond funds in an ISA and taking 5% from them then it would be tax free! Yet its probably misrepresentation of the an investment bond in that the is no personal taxation on the income as the bond has paid the tax of 20% (with relief) within the fund. It should never be referred to as tax free but as tax paid.

Toki

I don't have the report here with me anymore, my dad has it round at his. I'll get him to have a look at it again. However I did ask the question via email, here is my question, and her response in blue. She is also charging 3% on this £20k. There is also advice on investing £10,860 into an ISA separate to this advice.

Regarding the £20,000 bond you advised, is this a wrapped product? Is this cost beneficial over an unwrapped OEICs/UTs? The bond is a tax wrapper and as such costs more, it can be a great advantage as it is used in long term care planning, tax planning, can be written under trust or assigned.

The bond does have an initial fee of 3% and the ISA has no initial fee as per the reports supplied.

She took quite an agressive response to my email, as stated below, leaving my dad with little choice but to go ahead due to the IMO excessive charges for not going ahead. With hindsight my dad should have got me involved at the start, not after the report was given to him. I fully appreciate that she deserves something for the work she has done, but feel now he is railroaded into it.

Your dad was provided with a cost of our services at our 1st meeting, copy attached.
You are incorrect when you say my charges are Above average. I am a Chartered Financial Planner and am qualified, authorized and Regulated to carry our work in areas of expertise that most Financial advisers including IFA’s cannot.

In providing occupational pension advice my charges start from £750 for basic advice, your dad has two, I am sure you did not think that those are advised on for free? Also I provided tax advice to your dad to enable him to reclaim about £500. Then the question of the existing Winterthur pension to pay him an income in a flexible, tax efficient manner rather than an immediate annuity. Please note that this is a drip feed drawdown and requires managing and administration it is also highly regulated, if a cheaper plan is required then immediate drawdown or an annuity should be sought.

I could charge on an hourly rate 2 meetings at £250, plus two reports, plus paraplanner and admin costs, travel costs etc, I also made a special trip last Monday as your dad could not fit in with my planned trip yesterday, this took me out of my office for about 3.5 hours. On that basis the charges would be much higher than quoted.

dunstonh

You are incorrect when you say my charges are Above average. I am a Chartered Financial Planner and am qualified, authorized and Regulated to carry our work in areas of expertise that most Financial advisers including IFA’s cannot.

She spelt authorised wrong.

Is she saying she is not an IFA? Most CFPs are IFAs with the qualification to [STRIKE]charge more for doing the same thing[/STRIKE] provide advice in the rarer more specialised areas.

I am not going to query her fees. Just the fact that a tax wrapper that is only best advice in a minority of cases has been used on a small investment of just £20k. Within 2 years, that could be bed&ISA into an ISA if it was held unwrapped. Instead, it will taxed at a rate that is around 1%-2% higher a year than ISAs (actual amount will depend on assets).

If it is of great advantage for tax planning, what is it that is suitable or your dad over ISA & UT?

jem16

Toki wrote: »

The bond is a tax wrapper and as such costs more, it can be a great advantage as it is used in long term care planning, tax planning, can be written under trust or assigned.

Long term care planning - yes a good idea although I have to wonder how far £20k will go for that. Basically it's to take an amount out of the reach of the local authority if ever care home fees were needed to be paid.

Tax planning - yes used for higher rate taxpayers or avoiding Inheritance Tax. Do either of these apply to Dad?

Written under trust - is it being written under trust?

In other words she has taken great care to tell you what it "can" be used for but hasn't actually answered your question of why it is being used and if it would be more cost efficient not to use it.

The bond does have an initial fee of 3% and the ISA has no initial fee as per the reports supplied.

I wonder if UTs/OEICs have an initial fee?

Toki

dunstonh wrote: »

She spelt authorised wrong.

Is she saying she is not an IFA? Most CFPs are IFAs with the qualification to [STRIKE]charge more for doing the same thing[/STRIKE] provide advice in the rarer more specialised areas.

I am not going to query her fees. Just the fact that a tax wrapper that is only best advice in a minority of cases has been used on a small investment of just £20k. Within 2 years, that could be bed&ISA into an ISA if it was held unwrapped. Instead, it will taxed at a rate that is around 1%-2% higher a year than ISAs (actual amount will depend on assets).

If it is of great advantage for tax planning, what is it that is suitable or your dad over ISA & UT?

Thanks again, my dad will certainly not be paying a lot of tax, earnings of around £1k per month so will certainly query her and ask for comparison with ISA / UT, again. What does she mean re bond "long term care planning, tax planning, can be written under trust or assigned." Is this a benefit over ISA / UT? Want to sound as knowledgable as I can when I talk to her.

jem16

Toki wrote: »

What does she mean re bond "long term care planning, tax planning, can be written under trust or assigned." Is this a benefit over ISA / UT? Want to sound as knowledgable as I can when I talk to her.

I've answered that in my post just above yours but you may not have seen it.

A trust is usally used if you want to assign the amount straight to another person - ie. like you - so that it falls outside the estate after a person dies. However writing it into trust means that it is no longer in your father's control but in the control of the trustees.

It's useful for Inheritance Tax purposes where your father's estate would be above £325,000 or double that if his spouse dies before him and leaves everything to her husband.

Toki

jem16 wrote: »

Long term care planning - yes a good idea although I have to wonder how far £20k will go for that. Basically it's to take an amount out of the reach of the local authority if ever care home fees were needed to be paid.

Tax planning - yes used for higher rate taxpayers or avoiding Inheritance Tax. Do either of these apply to Dad?

Written under trust - is it being written under trust?

In other words she has taken great care to tell you what it "can" be used for but hasn't actually answered your question of why it is being used and if it would be more cost efficient not to use it.



I wonder if UTs/OEICs have an initial fee?

Sorry, missed this post, you are right, my dad currently has 2 houses, looking to sell one soon, so his estate would be (just!) over inheritance tax threshold so may be the reason she advised the investment bond. However, like you say, I am sceptical its more to do with her taking the 3% than being the best advice. I suppose it does illustrate that I can't / haven't given every detail of my dads position so very hard to advise with 100% confidence. I really appreciate both your and dunstonh help though and will be raising questions to her this weekend when I have more time.

dunstonh

his estate would be (just!) over inheritance tax threshold so may be the reason she advised the investment bond.

Is he married? (IHT allowance doubles up then). Was the bond being placed in trust? (if not, then it doesnt benefit from this).

Toki

dunstonh wrote: »

Is he married? (IHT allowance doubles up then). Was the bond being placed in trust? (if not, then it doesnt benefit from this).

No he is divorced. I really don't know to be honest. I'll have another read of it at the weekend and let you know.