IFA recommends switch to Metlife

gadgetmind

Blue_Parrot wrote: »

This looks like a rock + a hard place. Even if we play Scarlett O'Hara the IFA is going to want paying for this very long report, somehow.

What agreement have you signed?

Does the IFA explain why the fee structure and underlying investments of the new provider are better than the old?

IME, if you just choose different funds within the Friends Provident/Life pension, which is usually FREE, then you can adjust your investments to suit your goals and appetite for risk as you feel is apt without paying a fee to anyone.

Churn, churn churn, will this industry never learn?

dunstonh

You reckon we're going to get a bill of a THOUSAND POUNDS for this huge long report?

Quantity doesnt mean quality. I have seen binders like you mention. Typically made up of about 15 pages of useful information with the rest being a complete and utter waste of time or often just the output of some cashflow forecast software.

However, what I meant was that you should be aiming to pay £1000-£1500 with commission rebated (or commission taken to the value of £1000-£1500). Not on top of the £5000.

So, "...Pension funds do not pay natural trail commission..." who is paying that?

It will be explictly charged. Only unit trusts/OEICs have natural trail commission (and only for another 14 months). Everything else is explicitly charged.

Even if we play Scarlett O'Hara the IFA is going to want paying for this very long report, somehow.

No. The choice is fee or commission. If the IFA has pushed you done the commission route and you dont proceed then you are not liable for a penny. If you went down the fee route and pulled out then you would be (usually) for work done up to that point.

gadgetmind

Blue_Parrot wrote: »

Masterly inactivity has yielded 13% growth on my pension this year, believe it or not. And all without paying thousands to an IFA.

Cut out the middleman, cut out the thrashing around in an attempt at short-term gain, cut out the doomed attempts to foresee the future, cut out the huge fees, invest in the market rather than trying to beat the market, and your investments will out perform. It's not rocket science.

OK, I'll admit I do use p/e ratios and bond yields to weight my investments, but at least I admit that it hasn't always worked as planned!

Blue_Parrot

gadgetmind wrote: »

What agreement have you signed?

Does the IFA explain why the fee structure and underlying investments of the new provider are better than the old?

IME, if you just choose different funds within the Friends Provident/Life pension, which is usually FREE, then you can adjust your investments to suit your goals and appetite for risk as you feel is apt without paying a fee to anyone.

Churn, churn churn, will this industry never learn?

What agreement has been signed? Crickey gadget, this pension plan goes back over 20 years!


Does the IFA explain? Yes, at length, over ~85 pages. It's enough to make you lose the will to live. I like short, brief, concise, explanations of anything. Two pages of A4 at most.

Maybe that's because we run our own business and don't make commission on any sales. A new customer wants a contract? It's all on one sheet of paper. It's headed "invoice". When they pay, they get the product, but I digress, I'm not in the financial services industry which is why I'm here, seeking advice on this commission thing.

Blue_Parrot

dunstonh wrote: »

No. The choice is fee or commission. If the IFA has pushed you done the commission route and you dont proceed then you are not liable for a penny. If you went down the fee route and pulled out then you would be (usually) for work done up to that point.

That's good news. I have earlier today sent an email asking what they'd charge for these hefty reports, on a fee basis.

This is because I did not ask for these hefty reports, already part-filled in, with stickers showing where to sign and commit. As I've already posted, we didn't ask for these multi-page heavy binders, just a summary (minutes, if you like) of the meeting.

I was wondering what they'd do next, should they send a thousand-pound bill, and we refuse to pay it.

jem16

Blue_Parrot wrote: »

What agreement has been signed? Crickey gadget, this pension plan goes back over 20 years!

I imagine gadgetmind meant what agreement have you signed, if any, for accepting the new recommendation to change to Metlife.

Blue_Parrot wrote: »

That's good news. I have earlier today sent an email asking what they'd charge for these hefty reports, on a fee basis.

It's not the report that's being charged for. It's the recommendation and implementing of the switch to Metlife that's being charged for.

I was wondering what they'd do next, should they send a thousand-pound bill, and we refuse to pay it.

Unless you have signed an agreement with the IFA to pay a fee, you cannot be charged a fee.

dunstonh

I like short, brief, concise, explanations of anything. Two pages of A4 at most.

So would I but a mixture of regulation and protecting your own backside make that impossible. I have just spent the last few hours writing a report on a couple of pension transfers and a £50k single premium increment. Ignoring the cover letter and report cover, it is 13 pages.

1 page contains the advice. 2 pages contain key research data (comparisons), 2 pages give a summary of the investment strategy. The other 8 pages mostly contain risk warnings and protect my backside paragraphs.

I would love to be able to do 2 pages but its impossible.

Maybe that's because we run our own business and don't make commission on any sales. A new customer wants a contract? It's all on one sheet of paper. It's headed "invoice". When they pay, they get the product, but I digress, I'm not in the financial services industry which is why I'm here, seeking advice on this commission thing.

If you went fee basis then you can have that. Commission basis does not.

You have to look at the history of retail financial services. It is a retail business. Providers are referred to within the industry as manufacturers. Then you have the distribution channels who are the retailers. When you buy a tin of beans you dont ask how much the fee is going to be and you dont look at how much Tesco will earn from it. You pay the price on the tin (or shelf as it is nowadays). That is how financial services used to be and still is for some.

Increasingly, the retail side is making way with the products being offered where only the manufacturer profit is factored into the product charges. The distributor will add their charge on top and disclose it independently from the manufacturer charge. If you use an adviser, then the charge for advice will no longer be dependent on the product provider/manufacturer. It will be disclosed apart from the product (although it can be taken via the product). Many advisers will also double up as distributors and that can, like any retail business, mean that economies of scale come into play and the advisers will be able to get charges reduced. This has been happening for years but it is not always obvious.

I was wondering what they'd do next, should they send a thousand-pound bill, and we refuse to pay it.

If you were on fee basis, then there wouldnt be a £5000 commission. Its fee or commission. Not both.

I would still be interested to know why metlife. I am not particularly attracted to it. They have been doing a bit of marketing recently and I have been called a number of times but it isnt the sort of contract I like for most people. However, it would fit a niche.

So, whilst you are focusing on the commission, you also need to look at the recommendation.

What if this £5000 commission case with Metlife saves £25,000 in product charges compared with AXA? Again, not saying you should go with £5000 commission as you can do better. Just trying to make the point that the recommendation has to be done with justification. It cannot be willy nilly transfers between providers.

gadgetmind

dunstonh wrote: »

It cannot be willy nilly transfers between providers.

But usually is.

Blue_Parrot

"I would still be interested to know why metlife. I am not particularly attracted to it. They have been doing a bit of marketing recently and I have been called a number of times but it isnt the sort of contract I like for most people. However, it would fit a niche."

She says it's the only company which guarantees 3% growth p.a.

(sorry if I've already posted this, but I note that the first year's growth would be wiped out by the commission, therefore no growth would accrue until year 2.)

I understand about fee OR commission, thank you for reverifying that.

She also states that, were we on Fee, we would by now by into £2,500 plus "a fee each year for valuations and reviews". My reaction to that is that the pension company send fully-detailed valuations to the customer - AXA do, automatically.

With the markets so volatile (her phrase) I'm wondering if this is the best time to switch pension provider anyway!

CannySaver_2

Hi

A few thoughts:

1. Are you looking for guaranteed growth?

2. With £175k you could go into a SIPP, pay no set up fee, £100 per year (Using a European Pensions Management SIPP) and get 4.25% per year guaranteed by using a Scottish Widows deposit account and I reckon the IFA fees would be circa £1k for that with nothing ongoing as there is no ongoing advice needed! Not saying this is the best course of action, just saying it is cheaper than Met Life and pays more than their guarantee (of course the Met Life plan may indeed end up growing by more than 3%)

Couple of sources:

European Pensions Management http://www.!!!!!!.uk/sipp-zone/sipps/european-pensions-management/

Deposit accounts for SIPPs:

http://www.!!!!!!.uk/free-services/best-buy-savings-accounts/accounts-for-pensions/

3. I would have thought a fair hourly rate for the advice being given to you is £125 - £150, that's around 18 - 20 hours work she has done, can you see that amount of work in the report she has produced?

4. Ask her how much the fee would be if she didn't take commission

5. Ask her what alternatives she has considered e.g. the SIPP idea, competitors to Met Life

6. Are you happy with the performance of the AXA pension, how has it done to date?

Personally, I would seek a 2nd opinion, pay a fee for it (hourly rate or fixed fee) and see how the advice compares.

The Canny Saver