Acceptable IFA Charges ?

jonbg

I've been recommended an IFA by a friend

I think I'm getting good advice but just wondered if the up front charge might be a bit high.

So far he's looked at 3 pensions I've already got (two dead and one ongoing)
Advice there is they are doing well and cheap so leave them alone.

Plus I have 80k to invest in something which looks like its going to be 1 or 2 active managed funds. which he's currently working on the fund options and advice, and my personal risk preferences

They have lots of charging options but he advises its likely to be a few years before I need to do anything therefore just one up front fee of 3.1%
no ongoing charges unless I particularly want it at 0.5% PA and he's happy to take the odd phone call/email or add funds to the platform (within reason) for no charge. Only if I need to do something which triggers another review will they charge.

Basic question is on the above scenario do you think 3.1% on 80k is too much?

dunstonh

They have lots of charging options but he advises its likely to be a few years before I need to do anything therefore just one up front fee of 3.1%

Its not outrageously high but its more than you would expect (£1000-£1500). Its more in line with pricing from 5 years ago. Unless you are already invested in ISAs, then I would expect an annual requirement for servicing to bed & ISA.

jonbg

dunstonh wrote: »

Its not outrageously high but its more than you would expect (£1000-£1500). Its more in line with pricing from 5 years ago. Unless you are already invested in ISAs, then I would expect an annual requirement for servicing to bed & ISA.

Thanks for the quick reply.
I currently have no ISA so this includes using my full allowance (now and the coming april) and wrapping as much as possible in that. I think that the charge will also include utilising each subsequent years allowance and also the potential to add some funds if its not enough to trigger a review.
I'll check but if all that is included each year in the one off % does that make the 3.1% more reasonable?
Sounds like I still need to get it down really

dunstonh

I currently have no ISA so this includes using my full allowance (now and the coming april) and wrapping as much as possible in that.

So, that would be bed & ISA for multiple years until the whole lot is in ISA.

I think that the charge will also include utilising each subsequent years allowance and also the potential to add some funds if its not enough to trigger a review.

in which case, the fee is very generous. Normally that would fall under the ongoing servicing side with most advisers (the 0.5% p.a. bit). I would verify what you are getting. Perhaps getting it documented on your fee agreement too.

jonbg

Are you saying that usually I'd expect to pay a minimum of around £400 PA (0.5%) on the whole 80k in order to wrap just the extra £15000 allowance each year in the ISA ? plus maybe add some funds within that fee (I think he said around 5k wouldn't trigger a review) ?

If that's right it would take 3 years to take the initial 3.1% (£2500) down to £1300 which initially you said was about right.
any time after that if still not incurring charges I'm doing well.

Does that sum it up correctly?

dunstonh

Are you saying that usually I'd expect to pay a minimum of around £400 PA (0.5%) on the whole 80k in order to wrap just the extra £15000 allowance each year in the ISA ?

yes. It is a regulated transaction. So, the IFA has to carry out all the usual due diligence and research as if it was a standalone transaction.

plus maybe add some funds within that fee (I think he said around 5k wouldn't trigger a review) ?

it varies with firms. I dont charge clients on an ongoing servicing contract to top up. I would charge them on a transactional one. That is the most typical model. A top up also triggers all the work requirements.

As long as you get it confirmed in writing as to what the service is you are being offered (both now and future activity) then you are fine.

TheTracker

Wrapping it in an ISA is not what attracts the costs, its the ongoing advice to ensure your changeable risk profile and circumstances still matches what you're invested in. However, it sounds to me like he is saying he is confident what he chooses now will suffice for 2-3 years, so come back and see him then. From what I've seen on this forum 0.5% sounds about right for ongoing service, but I wouldn't expect to pay 0.5% if all he is doing is topping up 15k to the same fund(s), thats not an ongoing service. You need more info...

jonbg

thanks very much for the advice.
basically what was discussed was that the fund investment would be over min 5 years and more likely 10 or more for me unless for some reason it was doing diabolically or changed in some way.
Fund/s will be chosen based on past 10 years performance and my preferred risk level, though looking at the graphs they all more or less hit the same lows and same highs, the trick being to avoid getting out on a low eventually. I wont be investing in anything classed as high risk.
On that basis there is not much point chopping and changing unless you are into that (I'm not) so not much work to do, no need for ongoing advice unless requested.
he would obviously alert me to any important changes and take a phone call or email for the odd query or advice at no cost. I'm checking with him that an annual incorporation of my isa allowance with the same fund/s and any small ish top ups of a few thousand into the same fund/s will/would also be free