Paying IFA to recommend funds inside a DC scheme?

gz33zg

Hi all,

Hoping for some help. :beer:

I have a DC pension through work (Aegon), to which my employer will match my contributions up to 10% so, having been a long time lurker on here, I know to take up the full offer of "free money" and 20% of my basic salary goes into my company scheme. This equates to ~£8k a year,.

Currently (18 months in) that is sitting in the Default mix of funds which is balanced by years left to retirement, I am 35 and haven't thought too much about retirement age but would hope/expect it to be around 60-65.

So... my questions are:

1) Could an IFA provide any value by looking at the range of funds within the Aegon vehicle and advising on a better spread? By value, I guess I mean would it be reasonable to expect the cost of advice to be exceeded by any potential investment gains made by moving away from Default?
2) How much would I expect to pay for the advice?
3) How often would I look to review (rebalance?) it?

My gut instinct is that at this point in time (about £30k in total in my pot) "Default" will serve me adequately until my pot grows some more, but I'm happy to hear any other opinions.

Thanks in advance,

Tim

dunstonh

1) Could an IFA provide any value by looking at the range of funds within the Aegon vehicle and advising on a better spread? By value, I guess I mean would it be reasonable to expect the cost of advice to be exceeded by any potential investment gains made by moving away from Default?

On larger values yes. On smaller values no. Typically until you get to around 30k plus, there is little point playing too much with fund choice and until you get to around £50k plus, there isnt much value in using an IFA unless you happen to have family one already (in which case they may well do something like this at no cost)

2) How much would I expect to pay for the advice?

If you have a family IFA then probably little or nothing. If you have no IFA and want a formal recommendation then around £500 (the full process would have to be gone through - there is no shortcut available if done compliantly)

3) How often would I look to review (rebalance?) it?

On 50k I would say once every year or two years. Higher than that and say annually.

gz33zg

Perfect, thanks dunstonh - will keep it in mind

sandsy

Another consideration is the number of funds on offer within the scheme. We have a DC scheme at work and the fund choice is not only poor but rather conservative.

Unless you have a particularly large number of funds to choose from, I find it hard to believe that it would be worth paying £500 over and above doing a bit of simple research yourself.

Meeper

Why would you find it hard to believe? If an IFA can undertake a more successful stock selection and asset allocation appropriate for your attitude to risk and is able to achieve just 1% more growth per year than the default funds, how much benefit do you think that extra 1% works out at, compounded over 30 years? The answer = A LOT.

Lokolo

Meeper wrote: »

Why would you find it hard to believe? If an IFA can undertake a more successful stock selection and asset allocation appropriate for your attitude to risk and is able to achieve just 1% more growth per year than the default funds, how much benefit do you think that extra 1% works out at, compounded over 30 years? The answer = A LOT.

I think sansy's point is that if they only offer a choice of say 5 funds to choose from, there would be no point paying £500 when the OP could just take an educated guess at which one they should invest in.