IFA charges - are these reasonable

inthebubble

Hello again everyone


I've now been for an initial meeting with an IFA/Chartered Financial Planner and got an initial sense of direction - and of potential charges.


Any thoughts on whether this is reasonable would be much appreciated.


Work falls into four parts:


1. Review £125k AVC portfolio (17 funds with two providers) and make recommendations about asset allocation/choice of funds from range on offer.


Set fee: £500 (costed on basis of three hours work).


2. Advice on funds/asset allocation for £20k of S&S ISAs from my rather clumsily self-selected portfolio on Hargreaves Lansdowne.


Fee: TBC (he initially said 3% until I said that wasn't reasonable). It was suggested that these transfer to a new platform with a total cost of 1.6% annually to include IFA's advice, 3-month review/rebalancing, the fund costs and the costs if the wrap and platform these funds will sit within. Of that 0.5% is the advisor's fee, 1.1% is to do with the costs of the funds, wrap and platform.


3. Set up new S&S ISAs on a drip feed basis with same annual 1.6% fee.


4. SIPP pension, on same platform (the IFA concurred with advice received here to cease paying into AVCs). Fee: 1.6% annually for same service as above.


My understanding is that they subscribe to some sort of online portfolio modelling service, to help them pick the right funds, get the right balance between them, review them, rebalance etc and that this would drive decisions about what to invest in the pension and ISAs (taking into account that my objectives/timeframes are different for these two vehicles.).


Overall, I'm looking at putting about £35k a year for the next two and a half years into the pension/ISAs.


Any questions I should ask?


Thanks again for sharing your advice and expertise.


All best


inthebubble

Your_Hero

It is very reasonable for the work required. Essentially you are paying £500 for the advice for the AVCs, plus a small fee (TBC) for the ISA and 0.5% for the ongoing advice.

Perhaps find out what else the ongoing service/advice covers? E.g. cost of meetings included? It usually is, but it is not uncommon for some firms to charge separately.

kangoora

I'm looking at engaging an IFA next week and your description above is pretty close to my situation.

Pension fund is almost identical, I've got about treble your funds outside the pension but I'm also looking at contributing very close to your figures but for the next 5 years and not 2 and a half years.

One thing I'm not quite understanding is what the IFA total charges come to. Is it just the £500 for the AVC pension review and then 0.5% ongoing charge on all the rest of the SIPPs/ISAs excluding platform/fund charges.

Also, are they never going to review/balance your AVC fund going forwards or is that intended to be a separate charge in the future as and when you ask for it?

Probably absolutely no help to you but could help me a lot with getting an idea of what charges I am likely to be facing.

inthebubble

Many thanks, Your Hero.


I assume the platform/wrap/fund charges seem reasonable too? I know that there are able DIYers on this forum who can drive their core costs very low, but I don't think I'm in a position to spend much time on research or make very good decisions.


To answer Kangoora's questions:


"One thing I'm not quite understanding is what the IFA total charges come to. Is it just the £500 for the AVC pension review"


Yes


"... and then 0.5% ongoing charge on all the rest of the SIPPs/ISAs excluding platform/fund charges."


Yes

"Also, are they never going to review/balance your AVC fund going forwards or is that intended to be a separate charge in the future as and when you ask for it?"

Yes, the latter. Agree that we might look at it in 2.5 years, when I am 55 and expect to become a deferred member of the FS scheme that they are attached to. Then at that stage develop a plan for slowly protecting these funds until I am 60, which is when I expect to take them, along with the main scheme pension.


Thanks again to Your Hero, who was the one who sent me off to an IFA in the first place.


All best
inthebubble

Your_Hero

inthebubble wrote: »

Many thanks, Your Hero.

I assume the platform/wrap/fund charges seem reasonable too? I know that there are able DIYers on this forum who can drive their core costs very low, but I don't think I'm in a position to spend much time on research or make very good decisions.

The charges are roughly in line with an actively managed fund and a standard platform charge. Do bear in mind that charges are not the only consideration but one of many other important things to consider.

However, if you do have a strong opinion on this matter, you could ask the IFA to use passive funds instead which will reduce the annual fund charges but it may not provide the right diversification you need or what he/she is trying to achieve for you.

And you are welcome.

kangoora

Thanks ITB


I was 95% sure i'd read it right, but was very nice to get a reply confirming it.