IFA Charges -thoughts please..

TheSurveyor_2

I have a;

• SIPP of approx. £150k
• A S&S ISA of approx. £44k

both set up and managed by an IFA.

I have had a recent IFA review and recommendations are to transfer both into a wrap product with an initial IFA charge of 1% of the fund values.

I also have;

• A deferred final salary pension with a transfer value approaching £500k.
• A cash ISA worth approx. £36k.

IFA recommendations for these are also to transfer or move them into a wrap product with IFA charges on the following basis;

• Up to £250,000 at 3%
• £250,001 to £500,00 at 2%
• £500,001 upwards at 1.5%

On-going management fees on the total amount would then be at 1%.

So in summary, based on the charge proposal the initial IFA charge would be approaching £15k on a total value of funds of £718,000.
On-going management of the fund would then be charged at 1%.

Any new funds introduced after the end of 2015 would revert to a 3% initial charge.

I have only had experience of one IFA and so far I have had good service and been happy with their advice, however I wonder if these charges are reasonable or whether I should be negotiating a lower charge or maybe finding an alternative IFA.

Your collective thoughts would be much appreciated.

SeniorSam

Your age would help when asking for advice, but as an alternative, you could arrange for Hargreaves Lansdown to transfer the SIPP for you, which will not cost you to do this. The final salary scheme is another matter and needs advice which I cannot give. Depending on the funds you then select for the SIPP, the charges may be far lower that you have been quoted and full details are available on their web site.

The people at HL are always extreemly helpful with advice and guidance and will be happy to talk with you on the telepohone. If you did wish to have an advisers care, then there would be charges, which they can discuss with you.

I moved my pensions into HL some years ago, selected 3-4 investment funds and have no charges. I have been very pleased with the move and although coming up to 75, have only taken a small lump sum to spend so far and the remaining funds continue to grow.

Sam

TheSurveyor_2

Sam,
Thanks for your swift reply. I am 54 and don't anticipate giving up work until 60 and more likely 65.


My query was more related to the level of charges and how they compare in current market, I know I will need advice on certain aspects of my investments its just a question of whether I am paying too much for it.

Keep_pedalling

I also have a review with my IFA next week so happen to have his charges at hand.

None of these are pension funds and we have around £700k spilt between NISA and General portfolio accounts which are held in a Transact wrapper.

Set up charges - IFA 0% Tranact 0.05%
Annual charges -IFA 1% Transact 0.29%

Regardless of charges I would need some pretty strong arguments for transferring my FS pension over, and it's something my IFA has never recommended.

xylophone

I also have;

A deferred final salary pension with a transfer value approaching £500k.
A cash ISA worth approx. £36k.


IFA recommendations for these are also to transfer or move them into a wrap product with IFA charges on the following basis

And the rationale for this is?

DesG

You would think he would use some lube!

jem16

TheSurveyor wrote: »

So in summary, based on the charge proposal the initial IFA charge would be approaching £15k on a total value of funds of £718,000.

Far too expensive and you could do much better.

The problem with % fees is that they become much too expensive on large amounts unless there is a cap and collar.

I would also seriously question the idea of moving a deferred final salary pension to a SIPP unless there are very strong reasons behind it. There are a few reasons where it's sensible but these are in the minority. Do you have health issues or are likely to die young? Do you have a spouse/family?

On-going management of the fund would then be charged at 1%.

Again much too expensive. For an amount of that size you should easily get 0.5% ongoing for the IFA.

Any new funds introduced after the end of 2015 would revert to a 3% initial charge.

So not content with £7180 per annum for ongoing management he also wants to charge 3% for new funds! Many servicing IFAs would put new money through with no initial charge.

I have only had experience of one IFA and so far I have had good service and been happy with their advice, however I wonder if these charges are reasonable or whether I should be negotiating a lower charge or maybe finding an alternative IFA

My opinion is that the whole lot is far too expensive and you should seek advice elsewhere.

dunstonh

An IFA using percentages on initial business should be looking at caps and collars or a method of tiering to ensure that large value holdings do not get out of control.

Open ended uncapped/non-tiered percentages are not good value for money and should be avoided.

As Jem says above, if you are paying a decent ongoing servicing charge, many advisers would add increments at no additional cost as part of the ongoing arrangement.

Up to £250,000 at 3%
£250,001 to £500,00 at 2%
£500,001 upwards at 1.5%

Ruddy Hell. That is really expensive. Is this a prestige firm? (high cost but takes you out places and pays for everything). That is just a crazy cost for 2015.

TheSurveyor_2

xylophone wrote: »

And the rationale for this is?

The rationale given is to allow more direct control over the way the fund is invested and give more options on the ways the benefits can be taken in future such as an income drawdown arrangement from the pension fund when I decide to dip into the fund.
Also to provide better death benefits to my estate, although I am fit and healthy and don't expect to be meeting my maker for a good few decades yet! However, I don't have children and in the event of my untimely demise a sum based on 5 times 50% of the deferred pension would go to my estate.

jem16

TheSurveyor wrote: »

The rationale given is to allow more direct control over the way the fund is invested and give more options on the ways the benefits can be taken in future such as an income drawdown arrangement from the pension fund when I decide to dip into the fund.

At the moment the deferred pension isn't invested but provides you with a guaranteed set of benefits. You have said the transfer value is £500k - what is the actual value of the pension plus any lump sum on retirement?

Also to provide better death benefits to my estate, although I am fit and healthy and don't expect to be meeting my maker for a good few decades yet! However, I don't have children and in the event of my untimely demise a sum based on 5 times 50% of the deferred pension would go to my estate.

You haven't mentioned whether or not there is a spouse? If there is a spouse then there would be a pension for him/her on your death.

philwal_2

The charges sound very expensive you should shop around or try and find an adviser who charges flat fees for both initial and ongoing reviews