Can I top up my pension without going through finanical adviser?

cornfake

I'm trying to get to grips with how much my wife an I are paying for financial advice. We have been seeing our adviser for the past few years to top up our pensions with a lump sum.

Our financial adviser is charging us for a Regular Review Service – (the charge is 1% of our ISAs = £582, plus 0.5% of our pensions = £850, plus 4% of the lump sum = £300). Is this too much?

Can I just change my regular contributions, or top up with a lump sum without going through the adviser?

dunstonh

Can I top up my pension without going through finanical adviser?

If your provider has a direct to consumer option then yes. If not, then no.

Our financial adviser is charging us for a Regular Review Service – (the charge is 1% of our ISAs = £582, plus 0.5% of our pensions = £850, plus 4% of the lump sum = £300). Is this too much?

That does not seem unreasonable in monetary terms. Personally, we do increments without initial charge for those on an ongoing service arrangement and I know that is a common model with other advisers too but I also know it can depend on the amount you have invested via the adviser.

I am not a fan of changing adviser remuneration with tax wrappers as it can indicate a potential bias or at least give a perception of one. I would prefer a clean rate across all tax wrappers.

cornfake

Thanks for your reply.

I was thinking of stopping the Review Service and just seeing an adviser when we need actual advice. We've not been happy some of the advice that we have had from our adviser, or the way that we have been charged for it.

Two years ago I told my adviser that I wasn't happy with the performance of one of the funds in my pension (and my son's Collective Investment Account) and wanted to switch funds – JPM Natural Resources fell off a cliff and had shown no sign of recovering. I was advised not switch funds, and now JPM Natural Resources has lost further value. For comparison, my son's CIA is worth 15% less than we invested four years ago while our ISAs have gone up be 25% over the same period.
Is that bad luck, or bad advice?

We saw our adviser last month, and she has now switched funds in all of our investment pots. Previously the ISAs, pensions and CIA had their own selection of funds. Now my pension, ISA and the CIA are all invested in Cirilium Dynamic and my wife's pension, & ISA are both invested in Cirilium Moderate. Is it riskier having all our investments in just two funds?

I didn't want the adviser to do anything with our ISAs, but she sold us the Cirilium funds and said there was no fee for switching. Then she gave us forms to sign for 1% of the value of our ISAs. We were happy with the performance of the ISAs, so there was no real need for her to touch them!

Our adviser has written in our financial review paperwork that she is no longer independent – although she didn't actually say that when we saw her. Her company is now effectively owned by Old Mutual.

atush

Your adviser is not responsible for the performance of a fund I assume you chose.

He told you not to switch as switching after a fall as doing so is generally emotional trading and he is supposed to not fall to this. The fund could have come good as well (and eventually will just as the oil price eventually will). His job is to keep you from being too emotional but in the end you took his advice and didn't have to? Was that fund too high risk for you int he first place?

What is your alternative? To choose your funds yourself, and to chop and change during corrections? Thus locking in falls in value? How do you think you would perform going forwards?

dunstonh

Two years ago I told my adviser that I wasn't happy with the performance of one of the funds in my pension (and my son's Collective Investment Account) and wanted to switch funds – JPM Natural Resources fell off a cliff and had shown no sign of recovering. I was advised not switch funds, and now JPM Natural Resources has lost further value. For comparison, my son's CIA is worth 15% less than we invested four years ago while our ISAs have gone up be 25% over the same period.
Is that bad luck, or bad advice?

The adviser doesnt change how things perform. You have a portfolio of funds with allocations in the major sectors. No-one knows in advance what the performance will be and the sectors will perform differently at different times.

I tend to put the fixed interest allocations into the ISAs and the equity content into the GIA until the ISA is big enough to start carrying the equities. This is due to tax efficiency. I treat it as one portfolio over two wrappers. However, it does mean the ISA and GIA will perform very differently. However, you cant look at them as individual accounts as that would be wrong.

There is no bad advice in what you have said.

We saw our adviser last month, and she has now switched funds in all of our investment pots. Previously the ISAs, pensions and CIA had their own selection of funds. Now my pension, ISA and the CIA are all invested in Cirilium Dynamic and my wife's pension, & ISA are both invested in Cirilium Moderate. Is it riskier having all our investments in just two funds?

Sounds like the adviser has simplified the portfolio. Possibly a result of similar conversation you have had that you typed here? If the adviser doesnt believe you have the ability to understand a bespoke portfolio, then moving to a simpler option is a sensible thing to do.

I didn't want the adviser to do anything with our ISAs, but she sold us the Cirilium funds and said there was no fee for switching. Then she gave us forms to sign for 1% of the value of our ISAs. We were happy with the performance of the ISAs, so there was no real need for her to touch them!

Without knowing the composition of the ISA and GIA its difficult to say but I suspect the asset mix would have left you unbalanced if they did not make the change.

Our adviser has written in our financial review paperwork that she is no longer independent – although she didn't actually say that when we saw her. Her company is now effectively owned by Old Mutual.

It shouldnt make much difference in the scheme of things as you were already invested on the Skandia/Old Mutual plafform and that is effectively a whole of market platform. However, generally it is considered better to look at IFAs and restricted but whole of market advisers. Not limited panel or single tied.

jamesd

cornfake wrote: »

Our financial adviser is charging us for a Regular Review Service – (the charge is 1% of our ISAs = £582, plus 0.5% of our pensions = £850, plus 4% of the lump sum = £300). Is this too much?

it is about 25% of all of the investment growth that you could expect from a mixture of investments, about 20% of what you might get using the UK stock market alone, which has had about 5% plus inflation growth long term. Taking 20-25% of all of your investment growth doesn't seem like a great deal.

cornfake wrote: »

Can I just change my regular contributions, or top up with a lump sum without going through the adviser?

It is common for IFAs to sign up their clients to products that do not allow the customer to do those things. You can contact the platform where you're money is invested to find out what they allow in this product and how you an switch to a different product with them. You'd also have the option to transfer to current products from other places.

cornfake wrote: »

Two years ago I told my adviser that I wasn't happy with the performance of one of the funds in my pension (and my son's Collective Investment Account) and wanted to switch funds – JPM Natural Resources fell off a cliff and had shown no sign of recovering. I was advised not switch funds, and now JPM Natural Resources has lost further value. For comparison, my son's CIA is worth 15% less than we invested four years ago while our ISAs have gone up be 25% over the same period.
Is that bad luck, or bad advice?

In October 2011 it was announced that the long term manager of the JPM Natural Resources fund, Ian Henderson, would be leaving as manager in January 2012, offering help until March 2013. It is pretty routine advice that those who use active funds should sell when there is a manager change because that often comes with a change in performance from good to bad. In this case Mr. Henderson got his market timing perfect, announcing his departure around the top of the market. So I'm not so much wondering why two years ago you were told to leave the money in as why it hadn't already been moved out between October 2011 and your next meeting after that.

It's possible that your adviser has recognised that you will notice mistakes and is trying to reduce the potential for that to happen in the hope of keeping your business.

cornfake wrote: »

I didn't want the adviser to do anything with our ISAs, but she sold us the Cirilium funds and said there was no fee for switching

Did she actually went so far as to change your investments after an explicit instruction from you not to do that?

cornfake wrote: »

said there was no fee for switching. Then she gave us forms to sign for 1% of the value of our ISAs. We were happy with the performance of the ISAs, so there was no real need for her to touch them!

And she also tried to charge you for the change you told her not to make? Did you sign?

I suggest that you consider that the relationship between you has broken down. An adviser who will act directly contrary to your instructions, says she won't charge you for it then charge you anyway is not one you want to have.

You may also want to make a complaint about the ISA actions.

cornfake wrote: »

Our adviser has written in our financial review paperwork that she is no longer independent – although she didn't actually say that when we saw her. Her company is now effectively owned by Old Mutual.

It is quite common for advisers to try to save costs by using "networks". Some of those networks do not allow advisers to be independent financial advisers, insisting that they either become restricted advisers or leave. A critical difference is that an IFA has to consider all products of all types while a restricted adviser can use only a limited range of products. One of the larger networks is Sesame which was then merged with mortgage broker Bankhall to become Sesame Bankhall, together then owned by Friends Life [STRIKE]Old Mutual[/STRIKE]. All of the financial advice business of that is now being got rid of[STRIKE]sold[/STRIKE], leaving just mortgage broking, so the advisers won't be part of Friends Life[STRIKE]Old Mutual[/STRIKE] much longer either. Sesame a few years ago chose to ban those using it for their FCA regulation from being independent financial advisers, insisting that they become restricted instead.

Best to ditch the adviser on the basis of their misconduct towards you.

jamesd

As to whether selling was predictable as a good idea, the fund was discussed here over the years. Here's some of what I wrote about it on 22/12/2013:

jamesd wrote: »

Can you handle it dropping to a quarter of what you paid? Can you handle a loss of 50% of what it's worth today? Lets look at some of the prices of the accumulation version of this fund:

20-12-2013: 566.40
21-11-2008: 297.10
4-1-2011: 1194.00

The 2008 low was 52% of 20-12-2013 price and 24.9% of the 4-1-2011 price.

Ian Henderson's departure as manager of this fund for twenty years was announced in October 2011, with full manager replacement in January 2012 and Henderson to remain in advisory role until the end of March 2013. His departure market timing seems to have been pretty good and those who followed the common recommendation to sell or at least reduce the holding when the manager changes would have benefited from doing it.

If it's available to you, you might consider Investec Enhanced Natural Resources for a less volatile natural resources holding. Less volatile on the up side as well as down.

Here's how that change would have worked out, blue is JPM, red is Investec:
Or over three years:


For those who can deal with it, there's been a lot of bad news and it's not to unreasonable to view now as a long term regular buying opportunity. Just be sure you have the stomach and patience for a five plus year time horizon if you do. And remember that at a price of around 450 today it's still well above the 2008 low of 297. You could still easily see a 50% drop after buying today. Not a fund for widows and orphans. But why not use the Investec fund or another, given that there's reason to expect more volatility and no need to take a risk on an unproven manager?

Regular buying of small amounts has been reasonable since the big initial drops, for those with the stomach for it. Such buyers would still be down a lot at the moment but that's why it's regular buying, not lump sum buying. Personally, while I think about natural resources, I think there are better opportunities elsewhere at the moment. I have a bit in the sector but not a lot and much of what I do have is incidental to other funds, not specialist natural resources funds.

dunstonh

It's possible that your adviser has recognised that you will notice mistakes and is trying to reduce the potential for that to happen in the hope of keeping your business.

The adviser is dumbing down the investments. Given the misunderstanding the OP has, that is not a surprise.

It is common for IFAs to sign up their clients to products that do not allow the customer to do those things.

IFAs use providers that retail products via IFAs. There is no point using products for the DIY market as that would create a double layer of charges.

One of the larger networks is Sesame which was then merged with mortgage broker Bankhall to become Sesame Bankhall, together then owned by Old Mutual.

Old Mutual does not own Sesame Bankhall. Friends Life does (soon to be Aviva).

All of the financial advice business of that is now being sold, leaving just mortgage broking, so the adviser won't be part of Old Mutual much longer either.

Its not being sold. They are closing the network side and offering members a choice of moving to another network or staying within the group with bankhall. Old Mutual have nothing to do with it.

Best to ditch the adviser on the basis of their misconduct towards you.

Nothing in the ops post suggests a single bit of misconduct. Misunderstanding by the OP for sure and a recommendation that is more simplistic but that is not a bad thing and sounds like the correct thing in this case.

jamesd

dunstonh wrote: »

Nothing in the ops post suggests a single bit of misconduct.

Do you think it is OK to ignore a client's instruction not to make an investment move, say it won't be charged for, do it anyway and charge the client anyway? I don't.

dunstonh wrote: »

Misunderstanding by the OP for sure and a recommendation that is more simplistic but that is not a bad thing and sounds like the correct thing in this case.

The client correctly identified a poor fund choice. We don't know whether they were thinking of a different fund in the same sector but whatever their reasoning they did a better job than their IFA was doing for that fund, except for trusting their IFA and sticking with it.

I agree that a change to one fund is good, but for the adviser more than the client. The IFA got it wrong on the fund to have in the sector, notably not paying due respect to the change of manager announcement that could have got their client out of the fund before the big drops. Change of manager is something that even some of the consumer-oriented products like that from HL notify about in email because it's so significant.

dunstonh wrote: »

Old Mutual does not own Sesame Bankhall. Friends Life does (soon to be Aviva).

Thanks for the correction. It went the opposite way from the way I described, Sesame bought BankHall from Old Mutual.

dunstonh wrote: »

Its not being sold. They are closing the network side and offering members a choice of moving to another network or staying within the group with bankhall.

Note sure that it is clear yet that no money is being paid, though is started out as Friends Life puts Sesame up for sale in 2013. It appears as though they may have been unable to find a buyer at a good, or perhaps any, price. It'll be interesting to find out whether Friends Life has to pay someone to take the business, keeps the past liabilities but not the advisers or receives some sort of payment.

dunstonh

Do you think it is OK to ignore a client's instruction not to make an investment move, say it won't be charged for, do it anyway and charge the client anyway? I don't.

The OP said they didnt want to do it but the tone in the message was that they agreed to it in the end.

The client correctly identified a poor fund choice. We don't know whether they were thinking of a different fund in the same sector but whatever their reasoning they did a better job than their IFA was doing for that fund, except for trusting their IFA and sticking with it.

Its not a poor fund choice. The sector had a poor period but there is no way to know in advance. The Skandia allocation to the specialist sector would only have been a few percent anyway.

Using hindsight to look at performance on a fund that is highly volatile in a limited period is not justification. The commodities and mining sector has experienced a torrid time since Neil Gregson took over as manager in January 2012. The manager is not responsible for the performance of the sector.

but whatever their reasoning they did a better job than their IFA was doing for that fund, except for trusting their IFA and sticking with it.

The OP doesnt understand investing. That is clear from the post (which is nothing to be embarrassed about). A fund falling in value is not bad advice and sticking with an unbalanced portfolio because that bit went up during a period is not how anyone should invest.

I agree that a change to one fund is good, but for the adviser more than the client.

If the client cannot understand the workings of a portfolio of single sector funds then moving to multi-asset is a sensible move. Its common sense.

jamesd

Neil Gregson was handed a disaster in the making by a manager showing his market timing ability by getting out with excellent timing. He didn't choose or manage to do what his peers did to reduce losses. His peers did, he didn't, so I'm unimpressed by him so far.

I have the impression that the weighting used here was not just a few percent, particularly in the ISA, where it somehow managed to show negative returns during a general bull market.

It's far from impossible to know that you at least reduce weightings when a great manager leaves, nor is it particularly hard to have at least some idea of whether we're in a part of the economic cycle where natural resources funds can be expected to do well.

For whatever the reasons, the adviser here seems to be using active funds but not actively selecting them based on the usual ways that I'd expect active funds selection to be done, particularly in the area of manager changes. It's almost as though there was a check box for natural resources and a fund was picked without any regard to events within that fund or whether it had the right characteristics for the relevant part of the economic cycle. Or maybe it was just picked on past performance and the manager change was ignored.