Insistent Client charges

wrangler42

I have recently been informed by my financial advisor that if I wish to proceed with a pension fund transfer against his advice, he will follow my instructions but will impose an "insistent client" fee of £1500.

I understand that charging an insistent client fee may be appropriate in some circumstances, and is I believe primarily to cover the advisor should the client subsequently attempt to claim he has suffered financially. I am however wondering whether £1500 is reasonable.

To put this in context, I have a SIPP in drawdown from which I have already taken my 25% tax free lump sum. I am 62, still fully employed and do not intend to retire immediately at 65. I have a separate pension which is now in the "fully paid up" state, and I am considering transferring this to my SIPP and taking the 25% lump sum on this now. The SIPP has around £130000, and the fund I'm considering transferring is around £33000. Charging £1500 for transferring £33000 seems a lot to me. Is this (a) reasonable (b) ethical? (A rough calculation shows this would reduce a future annuity by around £10 per week - which is unlikely to be as useful to me as the lump sum would be right now.)

My advisor thinks I do not have quite enough pension to meet my needs when I do retire, and so is adamant that even the £8000 I would lose in pension funds from this transfer would be harmful.

Should I wish to proceed against his advice, is it possible to realise the 25% lump sum without involving an advisor?

mania112

£1500 isn't an unreasonable sum for the work involved - i'm not sure why the adviser has 'sold' this as an insistent client fee. It's just a standard sort of fee you should expect to pay for this work.

The adviser is telling you not to do this. You don't need the money. So why do you insist on transferring this sum?

wrangler42

Actually, I really do need the money right now - not sure how you got the impression I don't.

You make an interesting point, however. I have indeed been treating this charge as an "insistent client" charge My advisor already takes an annual management fee and would take the extra fee on any sum transferred so I was assuming he would not make a charge - and £1500 as a "fine" for not following his advice is what seems excessive. I would understand it much better if it was in fact comprised of a transfer charge payable whether or not the transfer was thought appropriate plus an extra insiststent client penalty.

Freecall

I thought that these had been done away with. Some firms used to impose these fees but they have always been a bit controversial.

Can you imagine any other service where simply not accepting advice means you have to hand over a wodge of cash.

Sure, the FA has to cover his back if you are doing something he considers stupid and that he could get stung for but this should be in the form of you absolving him of responsibility not him trousering a fistful of cash.

It's the kind of thing that gets the industry a bad name.

bmm78

The charge is the cost of providing advice and processing the business. Insistent Client cases are still advice where the adviser needs to have analysed your situation before making a recommendation, and all this still needs to be documented. The adviser is still liable for the advice not to proceed being correct.

In practice there is a bit less work involved than a typical advised case, but not to the extent that the adviser can be expected to work for free.

£1500 may or may not be expensive. However, there is nothing unethical or shady about it, unless it has been imposed as a "penalty" rather than a charge for work undertaken on your behalf. It's upto the firm to decide what to charge, and upto you to decide whether you wish to pay it or go somewhere else.

Insistent Client cases can still be challenged by FOS, and also can attract unwelcome attention for the FCA. From an advisory firm point of view, I'd expect there to be a decent charge to cover this. Whether this actually provides value to the client is a different matter entirely.

jamesd

It is not necessary to use this or normally any adviser to take the lump sum. You can do this easily through many personal pension providers like Hargreaves Lansdown, SIPPDeal and others.

Once you have taken the lump sum it is worth considering what the adviser might say if you wanted to transfer the remaining drawdown pension pot. There is then no issue of the lump sum potentially being harmful to take because it's already been taken. It then becomes more of a question of ongoing charges and investment choices. As well as the benefits and costs of having two pots with different GAD calculation dates before the switch. I think the benefit is worthwhile because it prevents all of your income being affected by poor market conditions at the time of just one calculation.

If you did take the lump sum the GAD calculation date would be preserved on transfer, it could not just be combined with the existing pot and share its calculation date.

It's worth wondering why you need the money right now and whether there might be cheaper ways to get it. Certainly paying £1500 in fee would make it more expensive than using most loans to borrow the money and considerably more expensive than using 0% credit cards.

Freecall

bmm78 wrote: »

The charge is the cost of providing advice and processing the business. Insistent Client cases are still advice where the adviser needs to have analysed your situation before making a recommendation, and all this still needs to be documented. The adviser is still liable for the advice not to proceed being correct.

In practice there is a bit less work involved than a typical advised case, but not to the extent that the adviser can be expected to work for free.

£1500 may or may not be expensive. However, there is nothing unethical or shady about it, unless it has been imposed as a "penalty" rather than a charge for work undertaken on your behalf. It's upto the firm to decide what to charge, and upto you to decide whether you wish to pay it or go somewhere else.

Insistent Client cases can still be challenged by FOS, and also can attract unwelcome attention for the FCA. From an advisory firm point of view, I'd expect there to be a decent charge to cover this. Whether this actually provides value to the client is a different matter entirely.

I may have misunderstood (perhaps the OP could clarify) but I read it as being an additional fee on top of the fees charged for doing the work.

mania112

wrangler42 wrote: »

Actually, I really do need the money right now - not sure how you got the impression I don't.

Because you are full time employed and do not intend to retire for 3 more years.

Your pension is for retirement, nothing else.

mania112

Freecall wrote: »

I may have misunderstood (perhaps the OP could clarify) but I read it as being an additional fee on top of the fees charged for doing the work.

I think the OP has also misunderstood. It seems to be a cost for advice and transfer.

bmm78

Freecall wrote: »

I may have misunderstood (perhaps the OP could clarify) but I read it as being an additional fee on top of the fees charged for doing the work.

Yeah, I think that point probably needs clarifying (probably by the OP with the adviser).

To be fair, the adviser should be making it clear what exactly the OP is paying for, if he expects him to sign an agreement to do the business.

bigadaj

bmm78 wrote: »

Yeah, I think that point probably needs clarifying (probably by the OP with the adviser).

To be fair, the adviser should be making it clear what exactly the OP is paying for, if he expects him to sign an agreement to do the business.

Sounds like some crossed wires to me, the ifa seems to be intentionally pricing this high to avoid having to do the business.

As jamesd's said probably worth trying to keep this separate if the OP really wants to proceed with this and do down a DIY route if possible.