Early retirement - should i use an IFA?

AlanP_2

Drawdown (of some kind) and annuities relate to the DC pot as you probably know and how you structure those can affect how much you get.

As Dunston has said an annuity via an IFA may / will offer better value but even IF you wnated to DIY that element you do not have to purchase an Annuity from the insurance company that has your pot at the moment, you can go somewhere else and "spend" your £180k.

One final thought drawdown / annuity are not necessarily either / or choices you can mix and match by spending say £100k on an annuity and keeping £80k invested to draw from.

Good luck whichever route you choose.

Fretman12

Hi James

Thank you and very,very useful. I've printed this out for my next meeting which follows in a couple of weeks after Ive submitted the lifestyle section Ive been given. The process is: I fill this section in then they build a package with options. I,m OK to take this and either use them, another company or DIY. If I choose them they also have annual reviews for me. I can't remember all the costs but will nail this down at the next meeting and probably compare elsewhere along with service user reviews which I think are important.

dunstonh

It should be noted that internet posters do not carry liability for their comments and measure risks in different ways to IFAs. The IFA does carry the liability and it would be them you complain to if something goes wrong. It is the IFA that pays the bill for putting it right. Not internet posters.

The use of illiquid options and non-mainstream investments without FSCS protection typically results in upheld complaints at the FOS for investors that have no indication of knowledge or understanding of those types of investments.

FOS decisions indicate that they position VCTs as suitable for experienced investors and they measure them as higher risk than regulated mainstream options. They would expect the investor to have a history of using unregulated investments or have significant wealth of which unregulated investments would only form a very small part. They also expect the investor to be able to explain their VCT risks and how it works to a greater level of understanding than a standard life personal pension fund.

Also, HMRC has said in the past that it will disqualify tax relief on EIS and VCT that are low risk. T

Look at the risks the Albion VCT lists.

(a) An investment in a VCT carries a higher risk than many other forms of investment.
(b) A VCT’s shares, although listed, are likely to be difficult to realise.
(c) You should regard an investment in a VCT as a long term investment, particularly as regards
a VCT’s investment objectives and policy and the five year period for which shareholders
must hold their ordinary shares to retain their initial income tax reliefs.
(d) The investments made by VCTs will normally be in companies whose securities are not publicly
traded or freely marketable and may therefore be difficult to realise and investments in
such companies are substantially riskier than those in larger companies.
(e) If a VCT loses its Inland Revenue approval tax reliefs previously obtained may be lost.

Whilst the regulator can be behind the times on some product options and that can lead to advisers being stuck between an out-of-date view and best advice, it is still worth noting the position of the FCA and the FOS.

Fretman12

Hi Dunston

Thank you. This is one very complicated and deep subject and I am glad I decided to go to an IFA and also reality check here too. Its very useful hearing from different viewpoints. I hope I would / will always look to choose the safest route possible and especially with this final big financial decision. Im thinking I will take whatever options I'm eventually given to one or two other IFA's and get feedback.

dunstonh

Just to follow on from that, the following is a snippet from a compliance company given to IFAs regarding VCTs.

...[we have] seen these products described as “lower risk” or “managed risk” in suitability reports; often these descriptions have been taken from the providers own literature. Whilst we accept that some of these investments may be less speculative than others as a skilful manager can take steps to research qualifying companies and invest wisely, the very nature of this type of investment product means that the level of risk will always be high. We are of the opinion that should a client complaint be referred to the Financial Ombudsman Service the likelihood is that the Ombudsman would consider the product to be high risk irrespective of any reference to low or managed risk in the product literature.....

....In general, for Suitability Reports, it is important to highlight the risk of the product being recommended. As these products are considered to be within the highest risk category of all RIPs we would suggest that the Suitability Report does not attempt to describe the products as anything but high risk. Although provider literature may refer to a product as being lower risk than other similar products on the market, advisers should be mindful of the context in which this terminology is used and not lose sight of the fact that these are high risk products. We would recommend that the wording used to describe the overall product in the Suitability Report is consistent with the high risk nature of this type of investment.

---

So, you can see that it is wrong to criticise advisers who position VCTs as high risk when everyone that matters does too. (RIPs in above stands for retail investment products)

atush

You mention a partner. Do you know if your NHS pension will pay them a survivors benefit?

Even if it does, you should probably marry. There are good tax and inheritance reasons to do so, and the sharing of PA and inheritance of the Serps part of state pension.

Fretman12

Hey atush have you been talking to her?

Yes my NHS one includes her I also have a will with her taken care of too. But a new hat for the wedding may be on the back burner for a while longer.

jem16

jamesd wrote: »

One thing to watch out for when using IFAs is that they may not use the most up to date investment options and this can do major damage to your income and security.

James I have to seriously question whether or not you have got considerably out of touch with the average person who is likely to seek advice from an IFA.

I do appreciate that in the 10 years since you joined MSE, your knowledge of investing has grown immensely, to such an extent that you are obviously very comfortable with varying types of investment.

However I think you have to rein in a bit of that enthusiasm and consider that the average client is not on the same wavelength. To suggest that any IFA that does not immediately suggest state pension deferral, P2P and VCts is bad news is just plain wrong and could lead some people down the wrong path if they decide to DIY on the face of that.

I have a friend who has recently been in touch with an IFA to consider what to do with a private pension pot for her husband. I have mentioned state pension deferment as a possible option as, under the current rules, it is certainly a good investment. However despite Public Sector pensions and a good amount of savings, neither is interested in doing that. Drawdown has been explained by the IFA but again they are not interested.

Their reason - they want to sleep at night without worrying what is happening to a drawdown pot. To them the security of the guaranteed income for life - and yes it was explained that state pension deferral gave them that - was worth more than an increased income.

If VCTs and P2P had been suggested they would have run a mile to be honest and never gone near an IFA again with the resultant possible worst option of DIY. For them this would have been wrong and I see them as pretty much your average IFA client.

I think it is certainly worth mentioning the various options to posters on here but to suggest that an IFA "can do major damage to your income and security" is taking it too far.

Playing_with_Fire_2

I'm dubious about the IFA's claim about fees and returns. Yes it is true that you may do no better if you DIY, but it is also true that you may get eaten by a shark, or that you may win the lottery.

I personally would run a mile from an IFA that would make a claim that you would probably break even before he has even discussed his costs, or what level of service you need (or he thinks you need). Paying someone 2% of your money every year doesn't guarantee or even make it likely that you will get better returns than DIY, but it will cost you 2%. Any IFA who says they can certainly do better than DIY is lying to your face.

Having said that, seeing an IFA is a good choice for some people. I would prefer to speak with an IFA on a paid hourly basis for advice rather than give them a % for management, but I trust myself much more than strangers. I would never let anyone who didn't disclose their fees straight up manage my money because they sound too slippery.

Choosing a solid investment strategy (and waiting) will make you money; paying fees (including an IFA, platform, fund fees etc) will take money away from you. They can stop you making mistakes or choosing a poor investment strategy, but you can also do this yourself with some research.

Lastly, what car does the IFA drive? Do you want to pay for that?

ManofLeisure_2

jem16 wrote: »

I think it is certainly worth mentioning the various options to posters on here but to suggest that an IFA "can do major damage to your income and security" is taking it too far.

Not if you've been the recipient of poor advice.