What are considered reasonable IFA charges?

pinkforfloyd

I'm seeking advice on IFA quotations I have received and currently considering.

My DC pot is valued around £250000 and so far quotes seem to vary from 2-3% of pot value + £500 per annum review to no charges up front with an ongoing yearly cost of 0.75% of total investments. I would accept medium risk with a hope of gaining 3% growth per annum.

Is it reasonable to expect the most expensive IFA to handle investments better and thus maximizing return or does that not necessarily follow?

I have very little understanding of investments so require someone to manage it for me but trusting the IFA to do the right thing seems difficult to judge.

Any advice appreciated. Thanks.

TheTracker

I have very little experience of toilets and frankly am not interested in learning how to maintain them. My toilet needs work.

Would it follow that the most expensive plumber would do the best job?

How much would you pay a plumber? Most would calculate it as the cost you'd avoid by doing it yourself, plus some risk premium to ensure that the work he does is protected enough not to screw you over. I'd meet a few, and get a few quotes. I'd go with the one who balanced price, experience, and attitude.

An IFA is not that different to a plumber in such respects.

Linton

The best IFA may well not be the most expensive. For example some IFAs may focus on particular types of customer, perhaps High Net Worth, and be less interested in other types for whom they will not try to price competitively.

Since in the overall scheme of things your total amount of money is moderate and your needs, at first sight, seem to be relatively simple I suggest you look for a local IFA with whom you feel comfortable working and perhaps is recommended by neighbours and friends rather than one of the flashier city ones. A good interpersonal relationship is very important.

Maximising return isnt the absolute objective. It needs to be a return that meets your needs/wants constrained by choosing a range of investments that are appropriate to the amount of risk you are prepared to take and your timescales. That is more important than being able to identify funds that may provide massive returns but on the other hand may not.

An annual 3% growth is an undemanding return.

jem16

pinkforfloyd wrote: »

My DC pot is valued around £250000 and so far quotes seem to vary from 2-3% of pot value + £500 per annum review

With a £250k pot, 2-3% is greedy. Even 1% is too high but closer. What is this for - transferring? Is that the initial charge?

to no charges up front with an ongoing yearly cost of 0.75% of total investments.

That sounds more like it with a pot of that size. Although 0.5% ongoing is more normal for that amount.

Which IFA did you feel most comfortable with?

SeniorSam

Consider having a word with Hargreaves Lansdown on this matter. You may be pleasantly surprised.

Sam

jem16

SeniorSam wrote: »

Consider having a word with Hargreaves Lansdown on this matter. You may be pleasantly surprised.

Sam

HL are not IFAs any longer, but Restricted FAs.

Their platform fee of 0.45% would normally be considered high on this pot size. Out of interest why would you recommend talking to them?

pinkforfloyd

Thanks for all advice so far.

Jem16: The one I was most comfortable with was quoting me 2% initial charge after TFLS so about 4k with £500 annual reviews. However not so sure about his experience with investments hence the post. It seems to be a minefield out there for the inexperienced retiree.

jem16

pinkforfloyd wrote: »

Jem16: The one I was most comfortable with was quoting me 2% initial charge after TFLS so about 4k with £500 annual reviews.

Ah I see. You are talking about starting Drawdown I assume as opposed to transferring a pension pot.

So the 2% ( £4k ) is for the initial advice then. I still feel it's rather high and you can do better.

However not so sure about his experience with investments hence the post.

How are you gauging that? What do you feel he's not experienced with?

You could see 5 different IFAs and all have different opinions.

I would try to choose a small local firm where you can work with the owner/director/partner. That way you should be able to build up an ongoing relationship with someone who's not about to disappear.

dunstonh

I'm with Jem. I would look for a fee around zero to £1500 as the range.

Employee advisers tend to have to charge more as the employer takes a cut. So, maybe look for owner/partner/director advisers who are frequently more interested in the ongoing side of the remuneration rather than an initial hit.

Investments are about opinion. There are over 30,000 conventional options and an infinite number of variations. So, you will always end up with a different recommendation with different advisers. The important thing is to have structure. So, an adviser that presents a strategy and structure should be fairly easy to spot.

TheTracker

For me investment is not about opinion or subjectivity at all. It's about science and objectivity. Until IFAs believe that they'll be closer to homeopathy than plumbing.

bigfreddiel

Linton wrote: »

The best IFA may well not be the most expensive. For example some IFAs may focus on particular types of customer, perhaps High Net Worth, and be less interested in other types for whom they will not try to price competitively.

I cannot believe that an IFA Would give an uncompetitive quote if they weren't interested. Surely the honest way would be just to explain why they wouldn't take you on as a client.

Cheers fj