Financial advisor charges help PLEASE....

steveyt_2

Hello. This is my first post so please be patient with me. Ive had a independant review from a financial advisor and they have told me my Prudential 'with Profits' pension which I have had since the age of 18 (I am now 47) is not performing well and she has advised me to move to Scottish Widows Retirement Account as she has predicted it should perform much better than Prudential to the tune of about £14,000.

I have received all the paperwork back and I am shocked at the charges and wondered if I am doing the right thing. The charge is 4% for the initial changeover which equates to £3,800 and 1% every year thereafter which will be approximately £900. Do these charges seem realistic or could I get better elsewhere? I have 30 days to cancel the agreement.

tony4147

So your pot is around £95k, in my eyes £3,800 seems a lot, but I believe that 4% is quite the norm.

Not wanting to upset any IFA's etc, but I really don't know what they do for £3,800, for me and most people it is several weeks work to earn that sort of money and I'm sure that IFA's don't spend weeks doing a review on an individuals pension!!

Linton

Prudential I thought had one of the better WP funds. What figures lead you to believe it is not performing well? You cant expect it to do as well as say a FTSE100 tracker over the long term, but it is much less volatile and so more suitable for those of a nervous disposition.

bigadaj

I'd cancel if I were you, that's a lot of money.

The ifa should be charging a fee for the work, this could be percentage based but I'd be haggling down from their quoted numbers, 2% initial and 0.5% servicing as a target.

My understanding is that unless the ifa has adjusted their risk profile then they can't say their suggestion changes will outperform, as the indicative returns remain the same.

xylophone

independant review

a financial advisor

Is this an Independent Financial Advisor?

What figures has she shown you to back up her assertion that your Prudential pension

"is not performing well"?

What has she used by way of comparators?

dunstonh

Ive had a independant review from a financial advisor and they have told me my Prudential 'with Profits' pension which I have had since the age of 18 (I am now 47) is not performing well and she has advised me to move to Scottish Widows Retirement Account as she has predicted it should perform much better than Prudential to the tune of about £14,000.

Are you sure?
The way you have worded that and the mention of a specific figure would suggest that the £14,000 is the reduction in the effect of charges over the term. IFAs use analysis software that allows pensions to be compared on a like for like basis on growth rates to see what the difference in the effect of charges is over the term. This is expressed in actual figures. i.e. £14000 could be the difference in the effect of charges.

Investment returns are always unknown. So, it would not be possible to put a figure on performance. Pru is not bad on their With Profit funds. However, a cost saving should not be sniffed at.

I have received all the paperwork back and I am shocked at the charges and wondered if I am doing the right thing.

What exactly has shocked you?

The charge is 4% for the initial changeover which equates to £3,800 and 1% every year thereafter which will be approximately £900. Do these charges seem realistic or could I get better elsewhere? I have 30 days to cancel the agreement.

4% is high on £95000 in the fee based world. You would ideally be looking for no more than £3000. So, its not crazy amounts out but you could get cheaper.

1% a year if its an adviser charge could be high. However, if its to the total charge shown as a reduction in yield over the remaining term, then that is fine. It could well be that as knowing how Pru plans come out when I have compared them, the reduction in yield over the term would need to be better than 1.1% (many years ago, Pru changed the pricing on most of their old plans to be the equivalent of a 1% p.a. charge (which equates to 1.1% reduction in yield).

Ive had a independant review from a financial advisor

Did you approach the adviser or did they cold call you? You should never use cold callers. You should use a firm of your choosing.

Freecall

In my view it is this kind of thing that gets Financial Advisors a bad name.

From what you say she has either said or at least implied that she can get you a better return by moving your pension. She can’t possibly know this.

What a Financial Advisor can do is to match your financial needs to suitable products in the marketplace having taken account of your personal circumstances.

From what you say, she must have already done this as she has already told you that your Prudential with profits plan does not meet your needs.

This may or may not be the case but I don’t believe that she can possibly know that from a short pre-engagement chat.

If you want help managing your finances then you will ultimately need to pay for that help although £3,800 to someone who can decide what your needs are in one quick meeting sounds extremely excessive.

Financial Intermediaries of all kinds (including Independents) can only help you look at your own financial situation and guide you to appropriate products, they cannot possibly instantly know what is right for everybody who walks through the door.

bmm78

tony4147 wrote: »

Not wanting to upset any IFA's etc, but I really don't know what they do for £3,800, for me and most people it is several weeks work to earn that sort of money and I'm sure that IFA's don't spend weeks doing a review on an individuals pension!!

You'd probably be surprised at how little the IFA typically sees of that amount.

That said, I agree with the general consensus that 4%/1% is a bit over the odds, all other things being equal.

steveyt_2

xylophone wrote: »

Is this an Independent Financial Advisor?

What figures has she shown you to back up her assertion that your Prudential pension

What has she used by way of comparators?

Hi....thanks for the replies....the financial advisor did use (and i cant remember the name of it now) some sort of comparison site software showing that over the term i would be £14000 worse off with the With Profits Prudential plan compared to the Scottish Widows although i am not sure that she meant the Scottish Widows would out perform it by that much or i would save that in fees over the next 20 years but my thinking is if the advisors are making nearly £4000 for half a days work and nearly £1000 once a year for tweaking it then the Prudentials fees must be horrific but ive just no idea what they charge.

She did say that there are better Pensions nowdays and although the Pru with profits used to be good theres better out there now.

The advisor was from a local firm (arranged via a call centre). It was free and no obligation but I am so confused and annoyed i signed up before thinking it thru.

bigadaj

bmm78 wrote: »

You'd probably be surprised at how little the IFA typically sees of that amount.

That said, I agree with the general consensus that 4%/1% is a bit over the odds, all other things being equal.

Go on then, how much?

dunstonh

Hi....thanks for the replies....the financial advisor did use (and i cant remember the name of it now) some sort of comparison site software showing that over the term i would be £14000 worse off with the With Profits Prudential plan compared to the Scottish Widows although i am not sure that she meant the Scottish Widows would out perform it by that much or i would save that in fees over the next 20 years but my thinking is if the advisors are making nearly £4000 for half a days work and nearly £1000 once a year for tweaking it then the Prudentials fees must be horrific but ive just no idea what they charge.

That is what I thought as charges are the only things you can compare on a like for like basis and put an actual figure on it. So, what they are saying is that the SW pension will save you £14,000 due to reduced charges over the term. The two biggest comparison software providers are selectapension and O&M. You may see reference to the name on the paperwork.

If the reduction in yield is 1%, that does not mean the adviser is getting paid that 1%. Indeed, it would suggest that the adviser is not being paid anything ongoing. The comparison has to include product provider, investment fund and adviser charges for it to comply with the FCA guidelines. You appear to think, at the moment, that its only the adviser charge.

Pru's charges are rarely horrific. As I mentioned higher up, they standardised theirs back in 2001 to be comparable to a 1% stakeholder that grew at 7% a year (which effectively means it could be a little more or less than 1% if different growth rates were achieved). So, the fact that this one is showing £14k higher fund value on comparison which suggest that the TOTAL costs are less. If they were not, then the Pru plan would have a higher value on the projection.