IFA - pay fees or commission?

Padsaver

dunstonh wrote: »

If you dont ask, you dont get. However, £1200 doesnt leave much room for reduction.

Sorry don't understand 'reduction'

My IFA quote, because of the 50% of my contribution + 2% brings his fees to just over £1900 but as mentioned the client agreement states that the initial review is usually £1200 should I be negotiating
for £1200?

Please don't give up on me!

dunstonh

Padsaver wrote: »

Sorry don't understand 'reduction'

My IFA quote, because of the 50% of my contribution + 2% brings his fees to just over £1900 but as mentioned the client agreement states that the initial review is usually £1200 should I be negotiating
for £1200?

Please don't give up on me!

I meant that if it was £1200, then it doesnt leave much room for them to reduce it and still be able to offer terms profitably to them. If it was £1900, it probably does allow them to reduce it. Especially if their fee terms are £1200.

Padsaver

Thanks Dunstonh. Thought that's probably what you meant but it could have been some IFA jargon that went over my head.

Anyway I bucked up the courage to contact my IFA today and broached the the subject about the £700 difference and he believes that he can do me a much better deal. Lets wait and see!

Padsaver

IFA came yesterday. Felt on my guard throughout. I felt that I was being sold to rather than helped financially.

This is what he presented me with.

Provider___________Ret Age____Total Cost %_______5yr return_____Net Gain______Fee Base___________5yrs__________10yrs

Standard Life________70__________1%______________2.02%________1.02%_______He had no figures here because this was my old one

Scottish Life Gov_____70__________.7%______________2.32%________2.32_______3% + £25% fa_____£1537.38______£1537.38

This is a comparison between my old Standard Life Pension and the new one I’ve now signed up to.
My monthly contributions will be £200 and my Pot is £27,000
Does this look like a better deal?

My reckoning is that this is only a better deal if I don't do anything for 5 years but he did mention 3 years as being a possible moving date into a wrap. If this happens surely I would have been better staying as I was. I could be hit with another £1,500 fee then as well.

Please tell me I've got this all wrong!!

Couldn't scan my Figures in so I hope they appear as intended over the web.

dunstonh

Does this look like a better deal?

It is a better deal as the reduction in yield is 0.7% compared to 1%. Cost comparisons must include the cost of advice in them (i.e. bottom line).

My reckoning is that this is only a better deal if I don't do anything for 5 years but he did mention 3 years as being a possible moving date into a wrap. If this happens surely I would have been better staying as I was. I could be hit with another £1,500 fee then as well.

What makes you think there will be another charge? If he is a servicing adviser then part of the servicing will be checking ongoing suitability of contracts and moving them if something better comes along at no cost. If he is transactional, then you would pay each time as you are paying by the transaction.

Scottish life is a good contract. They are actually the UK's biggest pension provider provider of plans in drawdown. They are often at the top end on cost. So, no issues there. However, a wrap offering is a different beast. It is generally aimed at larger investors wanting greater investment choice and consolidating ISAs and unwrapped investments into one administration platform. Your pot at £27k probably isnt really geared for a wrap right not. Costs on wraps have been coming down over the years and that is expected to continue. So, delaying until you have more in your pot and costs have come down more is a logical move.

Padsaver

Thank you Dunstonh. I just needed re-assurance.

I will sleep better tonight.

property.advert

Meeper wrote: »

..Don't forget that the difference in the payments of £100 per month or £200 per month may not be any extra work per se, but it requires the adviser to take on more liability and exposure, which is a reason for higher costs being involved with higher transactional values.

£100 to £2000 a month then perhaps but utter tosh for £100 to £200.

Flicking a penny into an investment or tuppence makes no difference. If you are not qualified to do the latter then you are not capable of doing the former.

Smoke and mirrors to justify spurious charges.

£1900 or so to cast an eye over a very small pension pot and add an extra hundred quid a month to the direct debit is highway robbery, no matter how well dressed up it is.

property.advert

Padsaver wrote: »

Thanks Dunstonh. Thought that's probably what you meant but it could have been some IFA jargon that went over my head.

Anyway I bucked up the courage to contact my IFA today and broached the the subject about the £700 difference and he believes that he can do me a much better deal. Lets wait and see!

Don't let him baffle you with waffle and extract an amount from you which is huge in comparison to the amount you invest and probably what you earn.

Don't fall for the "it is to cover his costs of doing business" argument either. He does have expenses but you are supposed to contribute only very marginally to his fixed costs and he ain't earning £500 or £1000 an hour from anyone else so why from you ?

dunstonh

So property.advert would prefer you to stay in a pension that is costing you more than the one the IFA is recommending all because and IFA will earn from it. Isnt that cutting off your nose to spite your face?