Dimensional Pension Funds through IFA

mageliken

I posted some time ago about starting up a personal/stakeholder pension and having my limited company make contributions into it for me.

I have some small savings in a S&S ISA in Vanguard LifeStrategy (VLS) 80 and 100 products, which I am comfortable with however I have not been very clear on whether or not I should be trying to achieve a similar thing with the funds available through various pension providers. I am happy to subscribe to the 'cheap is good' theory in terms of fees, but it is then selecting the funds which has given me some difficulty when researching previously. I recall a good quote on the forums about it not making sense 'to pay less to get less'.

I am looking at making between £10k-15k as an initial contribution. My thinking to some extent was that it would be difficult to go too far wrong with this amount if I were to go down the DIY route and that doing something was better than nothing?

A local IFA agreed to have an initial chat with me about pensions, and perhaps unsurprisingly did not think much to the DIY approach. He spoke about diversification, selecting products with low fees, and gradually favouring bonds over equities the closer I reach the age I wish to draw from the pension - all of which made sense to me and is inline with the knowledge I've picked up from here.

He suggested that he "likes" Dimensional funds as they ticked many/all of the boxes I've mentioned above. If we wanted to proceed he did say that he had questionnaires or similar to determine my risk profile - I assume that this may result in either different funds entirely or the selection of particular Dimensional funds?

I've had a search the forums for Dimensional and there aren't very many mentions and I can't seem to find an awful lot online. I understand it is only available via. IFAs, but I suppose the key question for me is how do I make a judgement call as to whether or not an initial 3% fee for advice and then 1% ongoing yearly fund fee is a better option than trying to find something a little cheaper (perhaps .25% ongoing yearly fund fee?). I do appreciate that what I would be paying for in that 3% is for advice, which I don't want to underestimate. Am I paying for a "better" fund which will likely outperform the ones I will pick myself, or am I paying more to have funds that may suit my needs more closely?

Again, I come back to how important is this really on the amount I am looking to contribute. However, I am paying this serious consideration as this will be more important as my contributions grow.

Has anyone been through a similar process and understood how it works and whether or not these fees seem reasonable for the advice and potential product being offered? Any thoughts on Dimensional?

dunstonh

A local IFA agreed to have an initial chat with me about pensions, and perhaps unsurprisingly did not think much to the DIY approach.

DIY is good if you know how to DIY and can do it well. Just like any form of DIY. The same applies if you do it badly. You can make a mistake that ends up costly.

A lot of advisers, myself included, see a lot of really poor quality DIY portfolios. Frequently having no structure, investing above risk profile and/or fashion investing based on what they read in the newspapers.

So, there is good and bad out there.

I've had a search the forums for Dimensional and there aren't very many mentions and I can't seem to find an awful lot online.

I dont believe they are made available to DIY investors. That may explain why.

how do I make a judgement call as to whether or not an initial 3% fee for advice and then 1% ongoing yearly fund fee is a better option than trying to find something a little cheaper (perhaps .25% ongoing yearly fund fee?).

3% plus 1% ongoing is high. Although we dont know the context. However, its unlikely you would build a portfolio using dimensional funds on less than £100k. 100k would be £3000 and thats too much nowadays.

Am I paying for a "better" fund which will likely outperform the ones I will pick myself, or am I paying more to have funds that may suit my needs more closely?

Impossible to answer. How do we know whether your selection will be better structured and better researched?

mageliken

Thanks dunstonh.

I feel like I have the charges set out (3% plus 1% ongoing) but they only spoke about liking Dimensional, so this may not mean that this is their intention - and indeed I suspect they would want more information from me before being able to make a suggestion.

Do you have any thoughts on whether or not it is the 3% or the 1% that is particularly high? I assume that the 1% is really related to the fund (if the IFA was able to give me a figure for this, then perhaps they do have one or a few already in mind?). I was clear that I am only looking to start with £10-15k (although there are two of us looking for pensions so he saw it as £20-30k total). Please correct me if I'm wrong, but when I then look at the actual amount that I would pay £300-450 for the service I'm getting (advice) it doesn't sound like it would be unreasonable? Particularly if whatever fund is chosen is setup and we can continue to contribute without any further fee payable to the iFA?