IFA - pay fees or commission?

Nine_Lives

Zelazny wrote: »

Looking at the figures provided by the OP, that is £100 pm going into the pension, lump sum of £10k and simply increasing monthly payments to get the lump sum into the pension, assuming investment returns at 7%, bank interest at 1% (for lump sum prior to investment), you'd need to increase the monthly amount to nearly £1,000 per month before you were better off that way than simply paying the 3% fee.

In fact, bank interest should probably be considered negative as it is below inflation at present.

Is there a charge to change your monthly payment amount?

Either you've misunderstood my question, or i've misunderstood your reply.

There is no 10k being put in as a lump sum. It was a "what if" question - as i said "lets paint the picture". It could be 10k in the example, it could be 20k and so on. The figure could be anything.

As for is there a charge, i don't know - the meeting with the IFA is next week.

Zelazny

K_P83 wrote: »

Either you've misunderstood my question, or i've misunderstood your reply.

There is no 10k being put in as a lump sum. It was a "what if" question - as i said "lets paint the picture". It could be 10k in the example, it could be 20k and so on. The figure could be anything.

As for is there a charge, i don't know - the meeting with the IFA is next week.

Sorry - I was being lazy with my quotes. The bit I was looking at was more :

K_P83 wrote: »

A thought on lump sum investing....

This chap says there's a 3% fee on investing as a lump sum. Let's paint the picture that i'm paying £xyz-per month, and all of a sudden i have a large lump sum to invest (£10k-£20k). If i invest in one go, i lose 3% instantly.
Now the instant way around this that i can think of, is to increase my monthly payments considerably, until this lump sum is fully paid in and then reduce the monthly payments back to what they were.

I am assuming IFAs are crafty & have dealt with this approach before & there's methods in place to stop this happening...??

The main method to stop this happening it seems is that the interest you'd get for having the lump sum sitting in your bank account is naff all compared to what you'd get with it invested.

Nine_Lives

Zelazny wrote: »

The main method to stop this happening it seems is that the interest you'd get for having the lump sum sitting in your bank account is naff all compared to what you'd get with it invested.

I suspected as much, but tbh, i wasn't really after that sort of comparison.

What i was looking at was there would be 2 options (at a guess - i've admitted i don't know how the system works, so there may be more options)

1) Invest [a sum - let's take a figure of 10k] & pay a 3% charge on it to the IFA.

2) Increase the monthly payments [again sticking with £10k]. Let's say by £500pm which would make a monthly contribution of £600. This 10k would then get contributed in 20 months (i picked £500 at random for simple maths. I could've gone for £1000 to cut the months down to 10).

Would method 2 avoid the fee, or is the IFA a crafty so-&-so who has measures in place to stop this?

It's all what ifs, but it was just curiosity.

Hopefully come next week, i will have my meeting and feel informed & confident by the end of it.

Zelazny

K_P83 wrote: »

I suspected as much, but tbh, i wasn't really after that sort of comparison.

What i was looking at was there would be 2 options (at a guess - i've admitted i don't know how the system works, so there may be more options)

1) Invest [a sum - let's take a figure of 10k] & pay a 3% charge on it to the IFA.

2) Increase the monthly payments [again sticking with £10k]. Let's say by £500pm which would make a monthly contribution of £600. This 10k would then get contributed in 20 months (i picked £500 at random for simple maths. I could've gone for £1000 to cut the months down to 10).

Would method 2 avoid the fee, or is the IFA a crafty so-&-so who has measures in place to stop this?

It's all what ifs, but it was just curiosity.

Hopefully come next week, i will have my meeting and feel informed & confident by the end of it.

Ahh - I see what you're getting at. I suppose the answer might vary from IFA to IFA - tbh I'd be surprised if you could vary the payments without at least a little extra work being generated, so that might be chargeable.

darkpool

K_P83 wrote: »

As a result, i thought it best to see an IFA. I have 2 options with which to pay. Fees or commission.

Or the third option...neither.

you seem a smart enough person, why not get a book or something?

even if you buy a book and take a weeks holiday to read it you could be in a better position than forking out 600 pounds

Nine_Lives

darkpool wrote: »

Or the third option...neither.

you seem a smart enough person, why not get a book or something?

even if you buy a book and take a weeks holiday to read it you could be in a better position than forking out 600 pounds

Yes, that is/was an option & was something i was looking at towards the beginning when the MSE-massive suggested as much, but then when we got into it, the bamboozling began & i thought "sod this for a carry on!!" & decided to opt for an IFA.

I guess i'll be one of those smart people who get told "y'know, for a smart person, you're pretty dumb" :rotfl: - I can have my moments. I also like to dither which i freely admit. ATEOTD, i could read all the books in the world & still not know where would be best to stick my money - but while i'm reading these books, i'm wasting time & at 28, i've already wasted a LOT of time.

I reserved a book at the library, but it's not arrived, even after week, so i got sick of waiting & i just ordered it on Amazon earlier: http://www.amazon.co.uk/Pensions-Explained-Complete-Retirement-Essential/dp/1844901106/ref=sr_1_1?ie=UTF8&qid=1323884578&sr=8-1

I have a meeting next week, so hopefully that'll come in good time for me to get some knowledge.

Still, i'd feel much more comfortable with an IFA advising me. Bank accounts i can manage, investment is something new.

Nine_Lives

K_P83 wrote: »

2) As said, i have £30k in savings & my partner has £10k making a combined £40k. We have already decided to use the vast majority of this on a deposit for a house, with an amount put to one side for bills/decorating/emergencies etc, so the decision has already been made irrespective of what anyone else says (that's your cue to not being scared to commit your opinion )
So my question is, would you advise this yourselves? Or would you advise lumping some of it into a retirement fund, or other alternative?

I know i said the decision has already been made, but i'd like to know what others, more experienced in life, think on the topic.

Would love a wise old (i use the term old very loosely ) heads opinion on this one as it is hot topic between my partner & I at the moment.

I'm not shut off to advice, although i say it is going to be used as a deposit. I welcome any positive advice. I'm just starting out, so appreciate any tales from those who've been there & done it before me.

gadgetmind

K_P83 wrote: »

I'm not shut off to advice, although i say it is going to be used as a deposit. I welcome any positive advice. I'm just starting out, so appreciate any tales from those who've been there & done it before me.

Using it for a deposit makes a lot of sense.

What will make the most difference to your life outcome is *always* living well within your means and saving the rest. Ideally save it in ways where it can grow free from taxes and high fees, in balanced long-term investments, and as far from your own sticky fingers as you can get it!

Nine_Lives

gadgetmind wrote: »

Using it for a deposit makes a lot of sense.

What will make the most difference to your life outcome is *always* living well within your means and saving the rest. Ideally save it in ways where it can grow free from taxes and high fees, in balanced long-term investments, and as far from your own sticky fingers as you can get it!

Thanks. I figured that using it as a deposit would be the better idea as that's no doubt the biggest piece of debt i'll ever have so can only make it easier (i hope).

My view is a deposit at the moment of around 40k would enable to get us a reasonably cheap house for the area (100k is the cheapest here, but that's in a really poor area which i wouldn't like or feel safe staying in) & therefore "OWN" it much sooner. My gf's view on the matter is £40k enables us to get a more expensive/better house (which would essentially be the same as buying the poor located £100k house with a lesser deposit in my eyes.

Going her method (to me) puts us back at square 1 - working forever to "own" a house.
My viewpoint has us owning the house sooner, hopefully.


Which brings me nicely onto the next topic .... you mention living well within our means. This isn't really a problem for me as i'm a self-confessed "tight-ar$£". I could get by on the basics. I may want to spend a bit here & there, but i could get by.
My gf on the other hand thinks basics include beauty products EVERY WEEKEND, enough shoes to last a lifetime and magazines EVERY WEEKEND.

Oh but it only costs £3.50 for the magazine! YEah, and that one costs £3, and that one costs £2.60, so you've just spent £9.10 on something that could be read online for free!!!!! Before you know it you've just blown £36.40 of your monthly wage on NOTHING!!

GRRRRRRRRRRRRRRRRRRRRRRRRRR!!!!!!!!!!!!!!


2 things that i guess would totally change the situation though, well 3 things actually...

1. Buying a house - but we've already mentioned this
2. A child (no plans yet, but you never know)
3. As said, i get £18k per year with no view of a pay rise, no job satisfaction, and i'm not treated the best. She's now on slightly less, maybe £15-£17k. I was loosely considering re-training to be an auto-electrician ... which i'd need to leave my job to do. So there's a slash in income in the short term straight away. IF it ever happened.

gadgetmind

K_P83 wrote: »

My viewpoint has us owning the house sooner, hopefully.

The usual advice is to go for an area that's currently shabby but improving, and going for a shabby house and improving it.

My gf on the other hand thinks basics include beauty products EVERY WEEKEND, enough shoes to last a lifetime and magazines EVERY WEEKEND.

It'll end in tears, and it's not just women. I know blokes with gadget habits that mean they need to hide most of them in the car boot and intercept the credit card bills. Madness!