IFA`s Commission

dunstonh

bilbo51 wrote: »

Is that irrespective of the size of the pot?

For fixed fee basis yes and one scheme yes.

magpiecottage

bilbo51 wrote: »

Is that irrespective of the size of the pot?

It is not unreasonable that it should be.

The work involved for the adviser will be the same. The commercial risk will be slightly lower, but not much.

bigmatt1174

One questions that doesn't appear to have been raised here is - "Is this your only pension provision" - have you got anything anywhere else - if you only have this pot of money (no work pensions or other personal pensions) and the figure was £18,000 you could have looked at Triviality - if you have £18,000 or less as the total amount of your pension pots then you have taken it all out as a lump sum - so £4500 tax free cash and the remained added to your yearly income.

If you were over £18,000 or you have other pots of money available then this isn't an option.

Personally £900 is very high for an enhanced annuity - 5% of the pot is a bit steep - wouldn't expect more than 3% to be taken for an annuity - enhanced or not - one common quotation form with medical details sent off to various companies and they all return quotes - not to difficult!

dunstonh

Personally £900 is very high for an enhanced annuity - 5% of the pot is a bit steep - wouldn't expect more than 3% to be taken for an annuity - enhanced or not - one common quotation form with medical details sent off to various companies and they all return quotes - not to difficult!

3% is unrealistic. I do think £900 is high but £405 is getting to the point where it is not going to be commercially realistic for a firm to do it. Ok, £500 is not much more but a simple case with no issues just about does it.

one common quotation form with medical details sent off to various companies and they all return quotes - not to difficult!

what about the cost of advice? most firms run with around 35% of their income going in explicit costs. You then have implicit costs such as CPD, knowledge and liability. Take your tax and NI off it and you will be lucky to make much out of it with £405 gross.

bigmatt1174

dunstonh wrote: »

3% is unrealistic. I do think £900 is high but £405 is getting to the point where it is not going to be commercially realistic for a firm to do it. Ok, £500 is not much more but a simple case with no issues just about does it.

I don't like it when IFA's state it's not commercially viable for me to do this piece of business - what about the £100,000 investment that 4% initial plus 0.5% trail is taken - that helps the smaller client.

dunstonh wrote: »

what about the cost of advice? most firms run with around 35% of their income going in explicit costs. You then have implicit costs such as CPD, knowledge and liability. Take your tax and NI off it and you will be lucky to make much out of it with £405 gross.

Break down the explicit costs then - where is the 35% of income going? Please don't try and say you have to pass your CPD cost onto the consumer - that is not good!

dunstonh

I don't like it when IFA's state it's not commercially viable for me to do this piece of business - what about the £100,000 investment that 4% initial plus 0.5% trail is taken - that helps the smaller client.

And I dont like it when IFAs take 4% from a client on £100k on the basis that it helps to pay for the smaller ones. How do you explain that to the client with £100k? Dear client, I want you to pay more so Joe Bloggs down the road can get it cheaper than you. Yes, there will always be an element of cross subsidy but charging someone £4000 on £100k so a £10k investor can pay £400 is old school and the sort of thing RDR is meant to get rid of.

If you want to do open market options £405 then that is your business. If you want to charge another person with say £100k pot after 25% taken a figure of £3000 then that is your choice. However, how would you explain that one person gets charged £405 and another gets charged £3000 for doing identical work? The liability cost is greater on the larger pot but not to the level of £2600 difference.

Break down the explicit costs then - where is the 35% of income going? Please don't try and say you have to pass your CPD cost onto the consumer - that is not good!

Office
Staff
PI
FSA, FSCS, FOS levies
compliance (in house or bought externally)
software
etc

And yes, the consumer has to pay for CPD costs. Knowledge is a cost. Time taken to achieve that knowledge is a cost. Its not always the time taken to complete a transaction but the time taken to learn how to complete that transaction and all the issues relating to that transaction that need to be known.

Please dont tell you you charge 4% on £100k investments. that is not good!

Linton

bigmatt1174 wrote: »

I don't like it when IFA's state it's not commercially viable for me to do this piece of business - what about the £100,000 investment that 4% initial plus 0.5% trail is taken - that helps the smaller client.





Break down the explicit costs then - where is the 35% of income going? Please don't try and say you have to pass your CPD cost onto the consumer - that is not good!

Surely in any business all costs have to be passed to the customer. The customer is the only source of money. Keeping abreast of legislation changes and education to be able to offer new services or to improve the skills for current services are a clear need for any business in any field.

All good employers pay for the Personal Development of their staff - its in their business interest to do so. This applies equally to both say Tesco and a one-man IFA business.

Monobloc

bigmatt1174 wrote: »

One questions that doesn't appear to have been raised here is - "Is this your only pension provision" - have you got anything anywhere else - if you only have this pot of money (no work pensions or other personal pensions) and the figure was £18,000 you could have looked at Triviality - if you have £18,000 or less as the total amount of your pension pots then you have taken it all out as a lump sum - so £4500 tax free cash and the remained added to your yearly income.

If you were over £18,000 or you have other pots of money available then this isn't an option.

Personally £900 is very high for an enhanced annuity - 5% of the pot is a bit steep - wouldn't expect more than 3% to be taken for an annuity - enhanced or not - one common quotation form with medical details sent off to various companies and they all return quotes - not to difficult!

18k is residual after tax free lump sum.

Monobloc

bigmatt1174 wrote: »

One questions that doesn't appear to have been raised here is - "Is this your only pension provision" - have you got anything anywhere else - if you only have this pot of money (no work pensions or other personal pensions) and the figure was £18,000 you could have looked at Triviality - if you have £18,000 or less as the total amount of your pension pots then you have taken it all out as a lump sum - so £4500 tax free cash and the remained added to your yearly income.

If you were over £18,000 or you have other pots of money available then this isn't an option.

Personally £900 is very high for an enhanced annuity - 5% of the pot is a bit steep - wouldn't expect more than 3% to be taken for an annuity - enhanced or not - one common quotation form with medical details sent off to various companies and they all return quotes - not to difficult!

Have not signed Service and Payment agreement yet.Only signed authurising IFA to act on my behalf and only had 1st. [only]meeting a few days ago.Room to negotiate fee/commission ?. How many hours time does it take to source and set up an enhanced annuity ?.What approx. % increase can an enhanced annuity achieve?.

bigmatt1174

In all honesty the transaction for an annuity is probably one of most simple transactions for an IFA, i.e. not too many hours!

If he is a true IFA he should have given you the option to pay by fee - this is a requirement of being an IFA - they cannot state that they only receive commission - but their fees have to be clear and you have to know what they are before any chargeable work is undertaken. If a fee is charged then you should be presented with a fee agreement. Have you received either a Service and Costs Disclosure Document (SCDD) or a Menu or a Client Agreement which documents exactly what is chargeable and when?

Without knowing why you have gone for an enhanced annuity you cannot say what the increase will be - have you disclosed medical/smoker status details to the advisor so he can determine what enhancement he can get you??