Opinion of these suggested IFA fees

Fuocco

I would appreciate your opinion of the following suggested IFA fees.

My partner has been contacted by her IFA to review her pension and old PEP.

Specified objective: Review funds invested in line with attitude to risk.

A separate option for a full financial review is not selected in the agreement.

Commission: minimum fee £1500 + VAT. Any initial commissions exceeding the minimum fee are retained by the IFA.

Alternatively pay a fee of £3250 + VAT. Any initial commissions exceeding the maximum fee can be used to offset the fee or used to enhance the investment.

My partner has used this IFA firm since the mid 1990s but hasn’t had regular reviews or possibly no reviews.

Currently £45k in AVC and £64K in an old PEP. Also they will be looking at a previous Occupational Pension of approximately £25k.

Subsequent Annual Reviews are offered for an additional 1% of funds under management.

Trailing commissions and how they are used are not specified.

I am just new to learning about this area so would appreciate any opinions or advice.

Thank you.

dunstonh

VAT is not chargeable on advice where the intention is to purchase a product. This has been the case for years and was recently verified by HMRC after some concerns over forthcoming changes. So, first question to the adviser is why are they charging VAT when there is no reason to do so.

This is not real fee basis. It is commission basis. I suspect there is the potential for a TCF breach there as fees should not be used to match the commission basis (although in some cases it is inevitable and unavoidable).

1% p.a. is quite common for small value holdings where you employ the adviser on servicing basis. I have seen the £100k band frequently being used by IFA firms to reflect the switch from 1% to 0.5%. If you are not employing them on servicing basis, then 1% is bad.

Also, if the investments are already under the control of the IFA then any amount up front other than perhaps a small admin fee really shouldnt be charged. That is just greedy (if its no serving in the past and moving to servicing then fair enough a small fee but not the full 3% commission figure).

I would shop around with a few other local IFAs and see what their fee option is. I reckon you can get that down to around £1000 initial, no VAT and possibly 0.5% to 0.75% p.a. if you want servicing (lower if you do not)

Dketfp

I agree with dunstonh if its simply a case of reviewing your existing funds inline with your attitude to risk then this shouldn't cost much. I had a pension review from my ifa on a one off basis at a cost of £350 + vat. If I wanted a regular yearly review it was 1% of my pension value with a minimum sum of £700 I think.

Fuocco

Thank you for your replies. Much appreciated.