Worth having a pension fund manager over the pension company?

infocom

Hi

I am self employed and have a private pension arranged by my financial advisor. The pension company take about 1% commission I believe, I receive hardly any "personal/one to one" feedback from them just their annual (or biannual) generic report how their investments are doing.

My FA is now offering they manage my pension fund, but will take 2% commission and a transfer fee. They will provide more reporting and more personal/one to one service.

There are no guarantees but the intention is their more personal management of the investment would make more money for me than their additional cost (so I would still be better off) by reviewing and adjusting pension investments. I dont get any feedback about that from my main company.

Just wondered what anyone thinks, would a smaller/individual company pension manager who meets me and provides feedback and reporting be a good service to use compared to a main/large/national pension company doing it who dont know me and dont provide personal reporting/review?

Thanks

mania112

2% per year? That's way too much (in my opinion) it should be nearer the 0.5% mark, possibly 1%.

Put it like this, the fund that adviser selects for you will need to grow by at least 2% more than the fund you currently have, for it to be worthwhile.

infocom

I thought it would have to grow about 1% more to cover their additional 1%. but thats my point, I wondered if a more dedicated fund manager would be able to do that over a large national company. or it may be the opposite because the large company can pay for the better fund managers. I dont know.

mania112

From your original post it seems like your AMC (the charge for the investment) is 1% and the FA is now looking to charge you 2%.

Those are 2 separate charges - 3% total.

You normally pay an adviser a fee for recommending funds (and the other work they do) and also pay for the investment (and pay for the pension contract).

Sounds like a lot, but you can get all that for under 1.5% in many cases. Hence my thoughts that what you're looking at is expensive.

bigfreddiel

no one can beat the market - dont bother with any manager -oit yourself - open a sipp - invest in a balanced portfolio of cheap trackers - don't use any that charge more than .5% - thats one half of a percent - some vanguard etfs are only .09%- thats less than one tenth of a percent - if you do the maths a £100k fund at 2% is a fee of £2,000. at .09% your fees are only £90. so do you want to keep £1,910 for yourself or pay it to a manager who in the long term will not beat a tracker - its your choice - good luck fj

infocom

mania112 wrote: »

From your original post it seems like your AMC (the charge for the investment) is 1% and the FA is now looking to charge you 2%.

Oh yeah need to confirm if the original 1% still stands and its 2% extra, didnt think of that

if you do the maths a £100k fund at 2% is a fee of £2,000. at .09% your fees are only £90.

But as I understand it, my pension is spread across different types of investments, which can and will change in their return, so the fund manager would decide what to invest it and how much in order to maximise return, so although these are the fees, it may be possible I get more return with the manager who charges the higher fees, in which case its fine. but I have no idea which would be better at investing my pension, if my current pension provider does this spreading and regular adjustment, or if they do to what extent, whether they would consider my pension investment as important and spend the time on it compared to a more dedicate smaller local fund manager.

Linton

A lot depends on the size of your pension pot. A few £10Ks I would suggest can be sensibly handled by choosing a balanced fund from your pension provider and keeping things simple. In my view it really isnt worthwhile bringing in an outside advisor to gain you perhaps a few £100 if you are lucky.

Now suppose your pot is n X £100K. You can put a serious amount of money into more risky investments that may provide a much better return. And if you dont have the knowledge or inclination to manage this yourself it makes sense to pay someone else to do it. But if you are asking an IFA (you are talking to an IFA rather than a bank FA or similar arent you?) to do this work it should be for a fixed fee rather than % based. Paying someone £10K annually to manage a £500K pension is foolish.

infocom

It is more like the "A few £10Ks" end as opposed to the "n x £100k". So it does make sense the smaller size would not make so much anyway, but the larger size would need more management. Few more years yet.

I wouldn't have the time or knowledge to do it myself hence wanting an expert to do it.

It is a IFA, not from a bank, a smaller local financial company I use for financial advise.

mania112

bigfreddiel wrote: »

no one can beat the market - dont bother with any manager -oit yourself - open a sipp - invest in a balanced portfolio of cheap trackers - don't use any that charge more than .5% - thats one half of a percent - some vanguard etfs are only .09%- thats less than one tenth of a percent - if you do the maths a £100k fund at 2% is a fee of £2,000. at .09% your fees are only £90. so do you want to keep £1,910 for yourself or pay it to a manager who in the long term will not beat a tracker - its your choice - good luck fj

All fine until you said open a SIPP. SIPPs are expensive for investing in trackers.

But you sentiment seems ok in this instance. Save the 2% and buy a tracker fund in a cheap PP, or even a managed fund will also achieve your objective for (around) half the price.

Linton

infocom wrote: »

Oh yeah need to confirm if the original 1% still stands and its 2% extra, didnt think of that


But as I understand it, my pension is spread across different types of investments, which can and will change in their return, so the fund manager would decide what to invest it and how much in order to maximise return, so although these are the fees, it may be possible I get more return with the manager who charges the higher fees, in which case its fine. but I have no idea which would be better at investing my pension, if my current pension provider does this spreading and regular adjustment, or if they do to what extent, whether they would consider my pension investment as important and spend the time on it compared to a more dedicate smaller local fund manager.

You seem to be confusing 3 separate activities.

1) A fund manager who runs a fund of perhaps £50M-£1Bn and chooses to invest in various shares, bonds or whatever. The fund manager will sell a range of funds that may be general, may be entirely invested in a specific sector, or may provide a complete service moving money between different types of investment to keep a balanced portfolio. The fund manager will want a slice of your money to run the funds.

2) The pension company who is effectively the retailer for the fund manager and also handles the administration, tax etc. The pension company of course will need to be paid for the their efforts, they will get this from the fund managers. Some pension companies do have their own in-house fund managers.

You have to tell the pension company which funds you want to invest in which you believe will provide the return, sectors and risk (or its absence) you want. The pension company wont do this. So we have:

3) The Financial Advisor who will tell you which funds to invest in to meet your specific requirements, when to move money between funds and can deal directly with the pension company on your behalf. And of course Advisors need to be paid for their time. This is where the 2% comes in.

A final point - make sure you are dealing with an Independent Financial Advisor, not an FA from a bank who may well be no more than a salesman.

Linton

infocom wrote: »

It is more like the "A few £10Ks" end as opposed to the "n x £100k". So it does make sense the smaller size would not make so much anyway, but the larger size would need more management. Few more years yet.

I wouldn't have the time or knowledge to do it myself hence wanting an expert to do it.

It is a IFA, not from a bank, a smaller local financial company I use for financial advise.

If you want a hands off operation, for that amount of money I would suggest you just look for a single global balanced fund which will hold both shares and bonds and will move money between the two as values change. You wont get massive rises in value, but you will be at least partially protected from the inevitable large falls that happen every few years.