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Reasonable Charges?
Comments
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Jamesd makes some interesting comparisons of fees to income.
Of course, the withdrawal of 4.72%pa becomes more likely to be sustainable of an extra 0.5% of the fund isn't being removed each year.
There is no requirement to take an ongoing IFA service. You could decline it and just take advice on an ad hoc basis as and when you feel you need it, if it appears not to be good value for money.0 -
IFA qualifications are higher now. Good luck in finding one for £10ph. I can't even find a handy-man doing small jobs around the house for £10ph.
Which is why I DIY for most jobs that involve brain power and a whole load that "just" need manual dexterity.To be honest, I would prefer a fixed fee for the work so I know exactly what is going to be charged. I suspect the majority of IFA clients go with this too.
3% to 5% up front and 0.5% trail still seems to be the mode based on comments hereabouts.
Are there statistics that run contrary?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
IFAs no longer charge based on percentages, or so I'm told. Ask them for their RDR compliant charges.
No problem with percentages as long as it is also given in monetary basis.So what was the point? What we all want is to be able to access an IFA for some advice (such as I get from my financial and legal peeps) for an hourly fee.
Multiple research has shown hourly rate as the least wanted by the consumer. Percentage is the most wanted. Fixed fee is highly popular as well.3% to 5% up front and 0.5% trail still seems to be the mode based on comments hereabouts.
Average was always around 1.8% plus 0.5% p.a. before. What is typically happening is small amounts have seen initial rise on small amounts and fall on large amounts.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
No problem with percentages as long as it is also given in monetary basis.
Well, I have a problem with it and would run (not walk) away from any IFA who tried to pull that trick as they would immediately lose all credibility with me.
Please provide links to that research and (ideally) provide figures that show that percentages benefited the customer over the long term.Multiple research has shown hourly rate as the least wanted by the consumer. Percentage is the most wanted.
Again, links please as real customers in the real world report being asked for larger commissions, errr fees, err, percentages, even now.Average was always around 1.8% plus 0.5% p.a. before.
Come on guys, take our eyes off the honey pot and decide what your hourly rates are!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Given your age, you wouldn't get as much as I mentioned from an annuity so drawdown does seem likely to be a better choice.stevieb333 wrote: »The reason for me opting for drawdown is that I am only 56, and i am taking my pension early as I have just been made redundant.
There's a good deal of writing around about drawdown, including here, but given your apparent lack of investing experience, it seems to make more sense for you to at least initially pay the IFA. You're not in a great position at the moment to deal with mistakes that cost you a lot of money and the IFA should be able to avoid those.
You can help to reduce the fees by withdrawing the maximum permitted income, eventually that may start to reduce the amount the IFA is managing and hence the fee.
What you might consider is DIY managing of the lump sum within a S&S ISA, so you get experience that way. I'm assuming you're not using the lump sum for something unwise like paying off a mortgage.
What is the state of the equity in your BTL properties? If equity is available you may be able to draw capital from them to help your situation, either increasing your investable pot size or adding another property. Since you're not working your tax situation may well be better as well.
You've told us about part of your situation, perhaps you might share more so it's possible to do a more rounded assessment?
It's worth remembering that annuity purchase loses the whole of the capital at time of purchase and that income drawdown does normally plan to have a remaining that is very low at death if the longest life being provided for is reached. Unless there is some inheritance provision desire, at the cost of reduced income.Personally, I would find a withdrawal rate of 4.72% unsafe, in the sense that capital preservation of the £110k is likely to be threatened. The generally accepted and empirically tested rate in the US is 4% (though that has been challenged). I don't think there are any equivalent studies in the UK, but it's unlikely to be better.0 -
I have found this quite an interesting thread, many thanks for all contributors.0
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gadgetmind wrote: »Please provide links to that research and (ideally) provide figures that show that percentages benefited the customer over the long term.
I haven't seen any research myself, but my own personal experience supports the fact that customers prefer percentage charging to flat fees. The reason for this is that it can help to align the IFAs financial interests with the clients.
Example being, client invests £100,000 and IFA agrees to take a fixed monetary fee of £1,000 per year for managing the investment. Now the IFA will make £1,000 per annum as agreed regardless of the investment performance.
Whereas if the client opts for a 1% fee, the IFA will only get £1,000 per year if the investment performance keeps the fund at or above £100,000. If the IFA neglects and ignores the clients investment then they could lose out financially too as their % cut will be smaller. Now the IFA has an added incentive to really manage those funds well.0 -
Now the IFA has an added incentive to really manage those funds well.
Don't most outsource asset allocation and rebalancing?I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
The generally accepted and empirically tested rate in the US is 4% (though that has been challenged). I don't think there are any equivalent studies in the UK, but it's unlikely to be better.
On the contrary, Wade Pfau has done extensive work on broadening the original "Trinity" study (which suggested the 4% "rule") into the international context, including looking at UK historical returns.
For example, take a long hard look at: http://www.fpanet.org/journal/CurrentIssue/TableofContents/AnInternationalPerspectiveonSafeWithdrawalRates/
Excluding Canada, almost everywhere would've done very badly with a 4% withdrawal rate.
Annuities are such better value than most people think.
Warmest regards,
FAThus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...THE WAY TO WEALTH, Benjamin Franklin, 1758 AD0 -
I like this quote from the article.
"retirees who invest in costly mutual funds or who pay fees to financial planners must realize the strong effect it will have on their sustainable withdrawal rate."
I'd have liked to see figures for a rebalanced international portfolio rather than a single country one.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0
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