Pension, IFAs advice

HarryD

I have a friend who is not very clued up on investments, pensions etc. He tends to go for whichever outfit has the best sales pitch and is currently with St. James's Place Wealth Management (having switched - at cost - several times) and I suspect he is paying a lot in fees.

He has asked me to go through his current setup and give him some suggestions.

I know a little bit about these things, but as they say, a little knowledge...

So I am thinking one option might be to suggest he goes for a low cost platform and then to pay a professional IFA a fixed sum each year for an annual review (rather than paying an IFA a % commission). Is that realistic? How much would be a reasonable charge?

My friend has investment assets of several hundred thousand but no DB pension. His concern (which is eating him up) is will his investments give him enough pension and security in retirement.

I hope to be able to reassure him that his assets are more than adequate to give him a comfortable pension. One of his concerns is that he might be paying fees and charges such that his broker will be earning almost as much as he is from his heard-earned cash.

Any suggestions from the experts on this forum would be appreciated.

dunstonh

and is currently with St. James's Place Wealth Management (having switched - at cost - several times) and I suspect he is paying a lot in fees.

oh yes. IFAs typically like coming across people with SJP policies. Can usually save tens of thousands. My best one against them saved £300k in the effect of charges over the pension term.

So I am thinking one option might be to suggest he goes for a low cost platform and then to pay a professional IFA a fixed sum each year for an annual review (rather than paying an IFA a % commission).

Commissions havent existed for a few years. Plus, IFA platforms are cheaper than many of the DIY platforms. Do they need a platform?

How much would be a reasonable charge?

Impossible to say. City firms tend to be more expensive than rural. Firms focusing on high net worth tend to be expensive for small values but better on higher. Some firms focus on ongoing servicing, others transactional.

One of his concerns is that he might be paying fees and charges such that his broker will be earning almost as much as he is from his heard-earned cash.

They wont be earning as much and they may individually be earning less than an IFA would as it is the product that is expensive and the cost is spread over adviser and SJP.

HarryD

Thanks. So with SJP, how might he be paying fees and charges? A management fee? Might they have put him in high-charge funds...? I'd like to be able to point out to him how he might be able to save charges/fees.

I take the point about going via an IFA and then with a platform to which they have access, rather than eg H-L.

So, ballpark, would say £500 be a reasonable figure for an annual review with a (rural) IFA? They make recommendations, and he executes via a platform. Or they recommend and (who?) executes via an IFA platform? Just ballpark.

Point about charges was that if, say, his underlying investments yield 4%, he might be paying perhaps half that in fund charges and fees at the moment. Which could be significantly reduced.

dunstonh

So with SJP, how might he be paying fees and charges?

via initial charges and fund charges. They dont disclose in the same way an IFA would.

Might they have put him in high-charge funds...?

That is all SJP have.

So, ballpark, would say £500 be a reasonable figure for an annual review with a (rural) IFA?

depends on what he wants. That would be right at the lower end if he wants really basic options. Although, he is paying many thousands a year over the odds at the moment.

HarryD

Yes, he said he paid 5% of his pot when he switched to SJP. Heart breaking! And from what you say, he could be paying that whenever they switch him into another fund. Plus AMCs. OK, I know what to look for when he shows me the paperwork.

So maybe £500 - £1000 for an annual review with an IFA would be reasonable.

Many thanks for your replies.

Any recommendations for an IFA in West Sussex anybody? Or, is there a register or something I can look up to find IFAs?

Aegis

HarryD wrote: »

Yes, he said he paid 5% of his pot when he switched to SJP. Heart breaking! And from what you say, he could be paying that whenever they switch him into another fund. Plus AMCs. OK, I know what to look for when he shows me the paperwork.

So maybe £500 - £1000 for an annual review with an IFA would be reasonable.

Many thanks for your replies.

Any recommendations for an IFA in West Sussex anybody? Or, is there a register or something I can look up to find IFAs?

In terms of charges, I'd be surprised if £500 would get you anywhere with an IFA even out in the sticks. £1,000 is still towards the low end of the ongoing fee scale, but you ought to be able to convince someone to run an annual meeting to discuss plans and legislative changes for that sort of fee. Expect to get around 5-8 hours of the IFA's time a year for that sort of fee, depending on location and qualifications, and further expect that the preparation, conducting and documenting of a meeting will take a minimum of four.

LHW99

Find an IFA via unbiased.co.uk