Are People Scared of Mortgage and Financial Advisers?

dunstonh

Here's an example:Let's say you invest 200 quid a month into a pension over 25 years and it grows at an annual average of 7%.If you paid no charges, at the end your fund would be worth 157,594.

If you didnt pay the charges you wouldnt have got the 7%.

AMO

dunstonh wrote:

If they have moved you out of the stakeholder and utilised a decent fund spread and I have to assume they have done a SIPP for you and charged you full whack based on what you have said, then its still a good option. You could have got it cheaper (a lot cheaper) and you could have got it explained to you better as its clear its left you confused. No fault of yours but the benefits and the costs should be disclosed to help you make an informed choice.

However, I think you have highlighted what most of us here have said a number of times before. Never use a salesforce. They are the root of all evil (in any profession) but especially financial services.

They moved me from Sun Life of Canada which I believe was a good choice in to Standard Life stakeholder friendly (supposedly the charges are the same but you get a wider range of choices for investment).

Another advisor within the company then recommended that because my pot was getting larger to move to another pension:
http://www.buckles-holdings.co.uk/news_08-09-06.asp
http://www.premierfunds.co.uk/thesnowdoniafund/thesnowdoniafund1.htm

Transact and Advisor's Charges:
Commission Basis: Standard
Investments Cash
Initial Commission to Advisor: 4% 0%
Initial Commission to Transact 0.5% 0%
Annual Commission to Advisor 1% 4%
Annual Commission to Transact 0.6% 0.45%

To implement the fund they were going to get me, they were originally going to go with Wolanski (not sure if the link is right):
http://www.wolanski.co.uk/app/about_team.asp

The only reason why they moved from Wolanski is because Wolanski's charges were higher than Transact's and it would make the above figure's higher.

Anyway, maybe I'm making a big fuss over this, but from what I understood of things and asking around:
1) The Annual Commission to Advisor should be no more than 3%.
2) I do lose money if I move my pension as a part of it has to go into reinvestment charges.
3) If I did not enquire about charges, the costs of running the pension would have been even higher.

I am no expert, but do the above seem reasonable?

The pension advisor was from Buckles and this is virtually the only pension they recommend. I don't think its a bad pension - it sounds great, but I think the charges are high and the fact that they weren't mentioned at all was concerning.

AMO

dunstonh

Moving out of SLoC is a good choice (although some SLoC plans did have guaranteed annuity rates). Standard Life have only operated a stakeholder, personal pension or SIPP. You werent in the SIPP and I would guess you were in the personal pension from your extended fund range comment.

The SL PPP is a good plan.

Transact is a wrap designed for people who are not concerned about costs and want access to institutional funds and investments that are not typically available on the fund supermarkets or personal pensions. You could call it the Ferrari of providers. However, it comes with similar running costs. It does get cheaper with the more money you have (typically need at least £250k to get best from it).

Anyway, maybe I'm making a big fuss over this, but from what I understood of things and asking around:
1) The Annual Commission to Advisor should be no more than 3%.
2) I do lose money if I move my pension as a part of it has to go into reinvestment charges.
3) If I did not enquire about charges, the costs of running the pension would have been even higher.

I am no expert, but do the above seem reasonable?

You are not making a fuss and my first response would be sack the advising firm.

1 - The annual commission to the adviser should be no more than 0.5%
2 - Not necessarily. It depends on where it goes.

The pension advisor was from Buckles and this is virtually the only pension they recommend. I don't think its a bad pension - it sounds great, but I think the charges are high and the fact that they weren't mentioned at all was concerning.

I think the Ferrari comment sits well with it. It is a good option but do you want and need all those things that come with it?

I have not got one client in Transact as I feel it is too expensive for what it offers and decent IFA back office software can the do the job of transact without adding another layer of charges.

toonfish

EdInvestor wrote:

Here's an example:Let's say you invest 200 quid a month into a pension over 25 years and it grows at an annual average of 7%.If you paid no charges, at the end your fund would be worth 157,594.

If you pay an annual charge of 1.5%, your fund would only be worth 126,394 after the 25 years, 25% less.The effect of the charges is that you lose 31,100 quid.:eek:

That's 31,100 quid,it's a lot isn't it? Paying a few hundred quid to a mortgage broker pales into insignificance by comparison.I don't mind people getting paid for their work but do you think really think these people are worth that much?

OK - here's my example - you invest £100,000 and the fee is 3%. That's it, no other costs ever. How much is the cost of the advice?

AMO

dunstonh wrote:

The SL PPP is a good plan.

Transact does get cheaper with the more money you have (typically need at least £250k to get best from it).

You are not making a fuss and my first response would be sack the advising firm.

1 - The annual commission to the adviser should be no more than 0.5%
2 - Not necessarily. It depends on where it goes.

I have not got one client in Transact as I feel it is too expensive for what it offers and decent IFA back office software can the do the job of transact without adding another layer of charges.

Thanx for the input. I figured that 1% Investments plus 4% Cash annual commission to advisor is reasonable to assume to be somewhat high then.

Because there is an investment charge which comes out of my pot of 5%, I would lose 5% of my 30K as far as I am aware.

I don't have anywhere near 250K. I have about 30K in my Standard Life so I assume it will be expensive. It's not time for me to get a Ferrari!

Nevertheless, I was unhappy at the time by not being told everything. Even more unhappy to be moving pensions a second time round.

I think I will keep this pension where it is for the time being.

Thanx for the input.

AMO

EdInvestor

dunstonh wrote:

If you didnt pay the charges you wouldnt have got the 7%.

Err,but you don't get 7%, that's the trouble.The charges reduce your return to more like 5%. You can get that in the bank.You're being asked to take a risk for a negligible return over a risk-free investment - the industry is pocketing your risk premium.

More and more people are now figuring this out.They have noted that they could have got more in the bank than what their endowment is paying.And they are walking away.

Sorry, but the industry is too greedy.People are fed up with paying Ferrari fees for Trabant performance. Better to try DIY,after all it's not rocket science is it? You don't even need a degree to be an advisor....

EdInvestor

Hello AMO

This SL PP that you've got, what funds is the money invested in?That is the important thing.There is a very good selection of external and internal funds to choose from, which ones have you picked?

toonfish

any chance of answering my question above Ed - I'm genuinely interested to see what you think

dunstonh

Err,but you don't get 7%, that's the trouble.The charges reduce your return to more like 5%. You can get that in the bank.You're being asked to take a risk for a negligible return over a risk-free investment - the industry is pocketing your risk premium.

I wonder where all these 10-15% p.a. returns are coming from then?

defender_of_the_weak

As with all things, if it costs you money you should receive a benefit. If I take dunstons figure above, nobody would begrudge paying 4/5/6% of their investment return if they receive 15% growth nett on their money. It is when they see the charges going out and returns being low that they inevitably feel upset, and in some cases complain.

I don't use an accountant because my adding up is pretty good and I certainly don't need the financial advice regarding pensions they all want to push for 'tax saving benefits'. There used to be an old adage somewhere that if you use an accountant he should save you more than the fee charged, same goes for financial advisers.

Historically advisers have had a bad name, accepting that most transgressions were with a limited number of companies, but the mis-selling was so widespead that it has tainted the entire industry. Even now we are seeing PPI mis-sales cases, overcharging by bank, failure to pay out on critical illness policies, question marks over SERPs all fuel this uncertain feeling.

A small reality check to some of the other posters in here. The FSA identified that 25% of adults have 'very low' numeracy, being unable to perform the simplest of calculations. Somebody has to advise these people and it is only fair that they get paid for that advice. Most of the people who come to us only know that the policy is not what they thought they bought when they took the advice. I'm just at the other end of the chain