Financial Advisor

w5moss

Ok - Tell me if I'm being unreasonable. I have a Pension fund of 134K and portfolio of funds worth around 40K . My advisor is recommending to swap from Jupiter Merlin Growth Portfolio, to IFDS Omnis Threadneedle Advanced Acc, purely on the basis of Annual Management ~Charge. He says it is 2.57%, I checked with Jupiter, and they say it is 1.5%. He put me into Jupiter 3 years ago, so what has changed in such a short period that I should change. Also, he wants to charge me on either an hourly rate of £300 per hour (estimate of 6 hrs per year) or 1% of funds. I would be ok with this, if it werent that the bulk of my money is in the pension, so surely that means little work for him, yet he cops 1%. Is this normal?

dunstonh

He says it is 2.57%, I checked with Jupiter, and they say it is 1.5%.

Jupiter Merlin funds are quite expensive. Your fund is 2.57% as published 1/11/2011. Jupiter are giving you the AMC and not the TER. The total expense ratio.

He put me into Jupiter 3 years ago, so what has changed in such a short period that I should change.

A lot has changed. There is a trend towards lower charged funds but also availability of funds to the retail market which were previously only available to large investors or on fee based platforms. You also have the retail distribution review which kicks in on 1st Jan 2013 and the platform review about a year later (date not yet fixed but 2014 is expected).

The IFD Omnis Threadneedle advanced fund has a TER of 1.53%.

Also, he wants to charge me on either an hourly rate of £300 per hour (estimate of 6 hrs per year) or 1% of funds. I would be ok with this, if it werent that the bulk of my money is in the pension, so surely that means little work for him, yet he cops 1%. Is this normal?

The tax wrapper does not change the level of work. It doesnt matter if its unwrapped, pension or ISA. The investment research and due diligence is the same.

If the adviser is doing work for you then the adviser should be paid for it. If the adviser isnt doing work then you dont need to pay it and the adviser would not expect it. Although they would no longer check ongoing suitability or any due diligence on what you have and you would also be charged explicitly on any work you ask them to do.

w5moss

I guess what I'm saying is, in terms of value for money (around 2k year!!) is a portfolio of 40K in 2 funds worth having an advisor? I guess I dont include the pension, because I'm not able, and not interested, in influencing the decision making in terms of investment criteria. I'm not illiterate finance wise - I run a successful portfolio of £35K worth of shares myself.

dunstonh

I guess what I'm saying is, in terms of value for money (around 2k year!!) is a portfolio of 40K in 2 funds worth having an advisor?

Not unless the adviser is doing a range of things for you which make it worthwhile.

I guess I dont include the pension, because I'm not able, and not interested, in influencing the decision making in terms of investment criteria. I'm not illiterate finance wise - I run a successful portfolio of £35K worth of shares myself.

A pension is just a tax wrapper for a portfolio of investments of your choosing or those of the adviser. The investment strategy and knowledge required is no different to your share portfolio, which I assume you hold in an ISA. You can do identical inside a pension. Dont think of pensions as a product. That is obsolete thinking. They are just a container in the same way an ISA is. You have near identical investment options. So, if you want to DIY then DIY. If you dont want to then someone will normally need to be paid for the work by some means. A simple investment option which is cheaper than your current adviser may be more suitable.

w5moss

I'm happy to pay for a service - and I expect people to earn a living - but I'd like to be confident knowing i'm not having the truth massaged to me, and i'm paying a fair price for work being done. I seemed to have been given the TER figure, whilst being told it was a 'AMC' figure. A 1% difference.

dunstonh

w5moss wrote: »

I'm happy to pay for a service - and I expect people to earn a living - but I'd like to be confident knowing i'm not having the truth massaged to me, and i'm paying a fair price for work being done. I seemed to have been given the TER figure, whilst being told it was a 'AMC' figure. A 1% difference.

Yes. Jupiter were a bit naughty in giving you the lower figure whilst the IFA gave the higher. Their own KIID would have the higher figure. Nice to see the IFA using the TER as the annual charge; Or ongoing charge as it is starting to be referred to in literature.

Personally, I think you are paying over the odds. 0.5% for the IFA is closer the mark on a fund that size unless city based or prestige firm. Go back to the IFA and tell him that and see if he reduces it.

w5moss

Should I be concerned that the IFA has written, by hand, "2.57% AMC" next to the Jupiter fund, and "1.51% AMC" next to the Omnis threadneedle fund. Also, the Pension is an AEGON product as opposed to any for of SIPP - Does that make a difference in evaluating the work involved?

dunstonh

Should I be concerned that the IFA has written, by hand, "2.57% AMC" next to the Jupiter fund, and "1.51% AMC" next to the Omnis threadneedle fund.

The figures are correct but he should have referred to them as TER or ongoing charge. However, he may have just used AMC for convenience rather than jargon.

Also, the Pension is an AEGON product as opposed to any for of SIPP - Does that make a difference in evaluating the work involved?

If it is Aegon's flexible pension plan then it is a hybrid SIPP. It's very good as a personal pension using pension funds (and can be very cheap). However, it is not a good SIPP and a proper SIPP or platform pension is usually better.

Does that make a difference in evaluating the work involved?

No

racing_blue

£300 per hour is indeed a fine wage! One indicator that you are getting value would be if your portfolio, during its time under their steer, has outperformed a low cost index tracking fund such as Vanguard life strategy (accumulator / total return)?

MarcoM

racing_blue wrote: »

£300 per hour is indeed a fine wage! One indicator that you are getting value would be if your portfolio, during its time under their steer, has outperformed a low cost index tracking fund such as Vanguard life strategy (accumulator / total return)?

I was told that it would be foolish for an investor to invest say 200k in a vanguard 80 20 fund as I would definetly get a better return via an IFA :doh:
The advice was given on here.

dunstonh

£300 per hour is indeed a fine wage!

Its not a wage though is it. Although £300 is at the high end of expectation. £100-£150 is more typical.