IFA fees justified?

diveleader

Hi All
I set up two pensions for myself and my wife about four years ago. At the time, the IFA fees were paid separately, but there was an agreed 0.25% charge per fund which was for six monthly reviews / rebalancing.

My visits to the IFA have been sporadic, with the last one being 18 months ago (not sure if he should be contacting me to arrange or vice versa - although I would have thought he would have driven the meetings as he receiving a payment for them.)

I have arranged to see him in the next few days, but this got me to look at the pensions.

Pension values are approx 90k each at this stage, so for the ongoing advice (assuming I continue to push for the meetings) he receives £450. Our company contributes 38k pa jointly to the pensions, so this fee is going to increase.

I was thinking of asking him for to perform the reviews on a fee basis - how much IFA time would I expect for £400 -500?

Reviewing our funds (which are the same between myself and my wife) it looks like the AMC's would be less if we held them ourselves (just via a quick comparison with H-L).

In the 4 years, I have found his advice to be fairly 'run of the mill' ie he has never come out with an option that we hadn't already voiced.
So my other question is should I keep an IFA or look to transfer to a SIPP?

Or is there a third way, where I write to Scottish Life and inform them I no longer have an IFA to pay trail commission to (if that's what it's called)

I understand the IFA's can offer good value for money, so this isn't a dig at IFA's - it's more of what I should expect for a £500+ pa

Thanks

dunstonh

y visits to the IFA have been sporadic, with the last one being 18 months ago (not sure if he should be contacting me to arrange or vice versa - although I would have thought he would have driven the meetings as he receiving a payment for them.)

At 0.25% p.a. its probably reactive rather than pro-active. It only equates to £450 which is hard to give a fully pro-active service. You are starting to get into the range where a pro-active service is cost effective. So, it may be a case of agreeing a new service level.

I was thinking of asking him for to perform the reviews on a fee basis - how much IFA time would I expect for £400 -500?

A city location will be more than rural typically. A busier firm will probably be more expensive. Prestige firms tend to charge more. So, its hard to put a price on 27,000 IFAs business models.

Reviewing our funds (which are the same between myself and my wife) it looks like the AMC's would be less if we held them ourselves (just via a quick comparison with H-L).

I would expect Scot Life to be cheaper if you are comparing like for like. For example, you mention AMCs. HL offer unit trust/OEICs. So you shouldnt compare AMCs. Pension funds use the TER as the AMC. If you are going to use unit trust/OEICs then you need to look at their TER rather than the AMC. Scot Life has fund based discounts which can give you their funds (including trackers and some managed) for around 0.40% p.a.

In the 4 years, I have found his advice to be fairly 'run of the mill' ie he has never come out with an option that we hadn't already voiced.

Don't knock run of the mill. Most of the things that have gone wrong over the years have been the things caused by thinking out of the box or trying to be too clever. Scot Life is not an advanced investment platform but its a very good middle ground option. Scot Life are the biggest drawdown provider in the UK for example. So, they must be doing something right.

Or is there a third way, where I write to Scottish Life and inform them I no longer have an IFA to pay trail commission to (if that's what it's called)

it is not trail commission. That is what HL take on their SIPP. It will ongoing fees. Yes you can stop it.

To give you an idea from the IFA side....the problem for IFAs at the moment is the amount of documentation required and increased amounts of "cover your backside" means that some of the flamboyance that used to exist is being eased out (not always a bad thing as a low skilled adviser trying to be something they are not is not good). It also means that the cost of providing ongoing servicing has gone up and for small funds it often means that it is not cost effective to offer pro-active servicing on small fund values. You appear to be an acorn. Small fund value but good contributions which will be cost effective to service in years to come.

Jack_Griffin

Is he is saving you £500 pa?
What is he doing for you for that fee?
Can he justify it?

diveleader

Thanks Dunston - I appreciate what you are saying