IFA Quote for Drawdown

addedvaluebob

hullenedgers wrote: »

Just one query he quoted the following figures re fund performance over the last 5 years quote.....the fund performance average over the last 5 years has been 13.62% for a cautious portfolio and 20.40% for a balanced portfolio. Just wondered if these are financial industry figures. We had discussed a balanced portfolio.

Run....

He just happened to get his commission/percentage fee wrong on £100,000

He want's £2,250 a year to monitor the investment performance.

He should only be using industry standard figures in comparisons and projections

If he is planning on moving the pension provider has he provided a comparison between where you are now and the alternative if any demonstrating to cost in pounds and pence over the next ten years?

addedvaluebob

dunstonh wrote: »

On a pension?

Before your time I think.

Pensions regularly paid between 0.25% and 1.25% trail that was how the adviser/broker built up the value of the business long term by creating the trail income stream alongside new business

Nosler

atush wrote: »

If you bother to look back and read you'll see I agreed that it was too high.

But I didn't tar ALL IFAs with that same brush, now did I? Or was that too colonial for you

excellent, so I think we've all agreed that 2.75% per annum to manage £300k is "too high".


I can only hope the OP either DIYs or finds an IFA that is less of a charlatan.

dunstonh

addedvaluebob wrote: »

Before your time I think.

Pensions regularly paid between 0.25% and 1.25% trail that was how the adviser/broker built up the value of the business long term by creating the trail income stream alongside new business

Pension funds have never paid trail commission. Trail commission was only paid on unit trust/OEIC funds. They had the ability to pay renewal commission. Depending on the era, how that was applied would vary. In the case of 14 years ago (the timescale mentioned) then it would have been instead of initial commission as that was when mono charged pensions were the norm.

In the years in the lead up to RDR, ongoing remuneration was mostly an explicit charge. Although some could do a a mixture of renewal and explicit charge. Again, not trail commission.

He want's £2,250 a year to monitor the investment performance.

Really? You are so out of date.

He should only be using industry standard figures in comparisons and projections

The FCA projection rules apply to providers. They do not apply to shortfall calculations. Although it would be common sense to consider them.

If he is planning on moving the pension provider has he provided a comparison between where you are now and the alternative if any demonstrating to cost in pounds and pence over the next ten years?

Yes on the comparison but why ten years? Typically, you would use 75 for drawdown or if annuity purchase is likely before that then you would use that age to compare to.

addedvaluebob

dunstonh wrote: »

Pension funds have never paid trail commission. Trail commission was only paid on unit trust/OEIC funds. They had the ability to pay renewal commission. Depending on the era, how that was applied would vary. In the case of 14 years ago (the timescale mentioned) then it would have been instead of initial commission as that was when mono charged pensions were the norm.

In the years in the lead up to RDR, ongoing remuneration was mostly an explicit charge. Although some could do a a mixture of renewal and explicit charge. Again, not trail commission

Yes on the comparison but why ten years? Typically, you would use 75 for drawdown or if annuity purchase is likely before that then you would use that age to compare to.

So this is from the FCA website.....


If you received financial advice or used an intermediary to buy an investment product before 31 December 2012, you may be paying trail commission. See three ways to stop paying it.
Trail commission is an annual fee paid to financial advisers by their customers over the lifetime of products such as pensions, with-profits bonds and unit trusts.

It is also paid to intermediaries, such as discount brokers and fund platforms, that recommend or enable the purchase of funds or other investments.

Trail commission is a percentage fee, typically 0.5%, which is taken out of the sum of your investment each year. It is usually included in the annual management charge, so it is not always clear that you are paying it or how much it costs you.

The trail commission may be intended to cover an ongoing service but is often paid to advisers each year without them reviewing their customers’ investments or providing further advice.

As for the ten years then yes, you should use 75, my point was that there should be an open explanation of where the customer is now compared with the proposal from the IFA so the consumer can see what the effect of the charges are.

dunstonh

So this is from the FCA website.....

The FCA have muddied the waters between trail and renewal commission. For example, renewal commission has no sunset clause. However, trail commission does. Sometimes they refer to trail commission as all types of ongoing. Sometimes they refer to it only in the context of UT/OEICS which was the major type of fund that paid trail commission whereas most life and pension funds did not.

Linton

addedvaluebob wrote: »

So this is from the FCA website.....


If you received financial advice or used an intermediary to buy an investment product before 31 December 2012, you may be paying trail commission. See three ways to stop paying it.
Trail commission is an annual fee paid to financial advisers by their customers over the lifetime of products such as pensions, with-profits bonds and unit trusts.

It is also paid to intermediaries, such as discount brokers and fund platforms, that recommend or enable the purchase of funds or other investments.

Trail commission is a percentage fee, typically 0.5%, which is taken out of the sum of your investment each year. It is usually included in the annual management charge, so it is not always clear that you are paying it or how much it costs you.

The trail commission may be intended to cover an ongoing service but is often paid to advisers each year without them reviewing their customers’ investments or providing further advice.

As for the ten years then yes, you should use 75, my point was that there should be an open explanation of where the customer is now compared with the proposal from the IFA so the consumer can see what the effect of the charges are.

As Dunstonh says, pension funds were always charged on a different basis to general investment funds. That is perhaps why your FCA quote uses "may".

Wouldnt a fairer comparison be charges + IFA portfolio against no charges + portfolio chosen by customer rather than simply charges vs no charges?

Nosler

dunstonh wrote: »

The FCA have muddied the waters between trail and renewal commission. For example, renewal commission has no sunset clause. However, trail commission does. Sometimes they refer to trail commission as all types of ongoing. Sometimes they refer to it only in the context of UT/OEICS which was the major type of fund that paid trail commission whereas most life and pension funds did not.

Ohhh so I was actually paying "renewal commission" for 14 years as opposed to "trail commission". That makes it so much better.

dunstonh

Nosler wrote: »

Ohhh so I was actually paying "renewal commission" for 14 years as opposed to "trail commission". That makes it so much better.

Quite possibly it does as it would mean that the person that sold it would not have got any initial commission. (14 years ago being the introduction of RU64 and mono charged contracts). So, you would have paid the same whether they were getting it ongoing or initial or a combination.

Nosler

dunstonh wrote: »

Quite possibly it does as it would mean that the person that sold it would not have got any initial commission. (14 years ago being the introduction of RU64 and mono charged contracts). So, you would have paid the same whether they were getting it ongoing or initial or a combination.

I just wish I had a job where I could do some work then get paid for it decades later


I believe the person that sold me the product got his initial commission then a nice little bonus each year afterwards.