IFA charges-

tsherar

I am considering getting advice from an IFA, on investing the £400K pension fund i have
Can anyone tell me how they should charge, do they take a percentage from the invested funds, or is it an annual fee based on work done x hourly rate.
Are there any questions that I should ask etc.
Thanks
terry

dunstonh

IFA is a term that covers a wide range of abilities from a General practioner to those that specialise in certain areas. You need an investment specialist with that amount (no point seeing one that does mostly mortgages).

Charges will vary as they do with any retail business. The amount you have, you should be able to negotiate a very good deal. One also assumes you would be using a full or hybrid SIPP with that.

You would expect fee basis rather than commission as that is the cheapest option. Although the fee can be taken from the pension fund. A New Model IFA would be around 1% charge with old model closer to 3-4%. Majority will be somewhere in between. £400k could easily get the initial charge waived as well as the natural commission that is paid by having funds under management is £2000 a year. Many NMA IFAs would want that and would waive initial charge to get it.

This money is an investment. It should be treated as such. You would expect a proper analysis of your risk profile, a portfolio recommendation with a very wide spread of funds chosen and a written explanation of how the portfolio is built and why. Less experienced or non specialist advisers will typically not spend much time in those areas and that is a tell tale sign that they are not good enough for you.

You should also look for enquire about ongoing servicing. You dont want an adviser that changes company every couple of years. Ideally get in with a partner/owner/director IFA as you know they are going to be there for the long term. Avoid the salesforces (larger regional/national companies) as they have heavy turnover and tend to work to old model basis and that wouldnt be in your best interest. Make sure the person is actually an IFA. Over 70% of people seeing tied agents think they are really seeing an IFA (recent stats published). A number of companies are multi-tied or use their mortgage independence to suggest they are indpendent in all areas. You dont want a multi-tied adviser or tied adviser.

EdInvestor

Where is the money located now and what is it invested in?

tsherar

Hi,
WHat is "full or hybrid SIPP" please
The money is in a bank account, where it has been for the last 10 years.
thanks for the replies
terry

tsherar

Hi,
WHat is "full or hybrid SIPP" please
The money is in a bank account, where it has been for the last 10 years.

dunstonh

Sipp (hybrid or full) are types of pension. There are others.

If the money is sitting in a bank account then it isnt a pension fund. You cannot pay £400k into a pension in this tax year and get tax relief on the full amount. It would need to be done in stages over the tax years. You would be looking at a range of other investments as well as pension.

EdInvestor

Why on earth would you want to put this money in a pension where you will lose control of the capital forever and pay tax on the income?

Is any of the money in ISAs?

Do you pay higher rate or basic rate tax?

tsherar

re: dunstonh
It is a small self administered pension scheme. The money was paid tax free over 5 years, from 1990-95, and has been in a current bank account until last year.
It is now in a deposit account earning 5%.
I was spurred to ask about investments, and to whether it can earn more than 5% without putting it at severe risk.
I distrust investment companies, I have had dealings on 3 occasions, and lost £24K, £25K and £14K, at least 5% pa is better than a loss.

dunstonh

I distrust investment companies, I have had dealings on 3 occasions, and lost £24K, £25K and £14K, at least 5% pa is better than a loss.

If you had invested in 2001 before the stockmarket crash you would now have in excess of 62% growth if you had only achieved sector average returns. If you had invested after, you would have doubled your money.

Short term fluctuations are normal on investments but over the long term they would be expected to grow at a rate higher than savings accounts.

Losing money like you have would indicate you removing the investments after a drop and not seeing through it to come out the other side.

For example, if you had invested in April this year you could have seen around 10-15% drop in May/June. However, by October things had recovered and would now be in up around 5-10% again.

EdInvestor

Background on the OP's query here.

http://forums.moneysavingexpert.com/showthread.html?t=336697

Still not really clear where this money is held.

What SSAS/SIPP/ pension pays 5% on its cash fund?

tsherar

Re Edinvestor:
The money is presently in a deposit account of a private bank. Our actuary is part of the bank.
As a trustee of the PEnsion Trust, and within limits, I can do what I want with the money, in terms of investment.
I have a financial adviser coming tomorrow morning.
The problem I have is that as I am getting 5% pa,so I only need £3K out of the £400K pot to pay my £23K pension.
TAking £3K out each year is not going to diminish the pot very much, and it should last quite a few years.
I will also have another £350K available as a cash lump sum in 2008, and if I get 5% pa on that and take an annual sum of £20K, then that pot will last at least 30 years.
So with an income of £43K pa, do i need to take a risk of investing money.