Questions to ask IFA following Sipp recommendation

Imnoexpert_2

Hi

'Her indoors' has had a pension report from an IFA concluding that she should move from a Standard Life Personal pension 1 which is invested in 9 funds (which same IFA company set up 13 years ago) to a SIPP. They have chosen Fidelity as the platform.

I think this is the way to go because of flexibility, IHT considerations, charges etc. So I get the context. She is 50 by the way.

The proposed switch would involve a payment 1% up front (0n circa £70K and 0.5% p.a. to the advisor. The illustrations show this together with Fidelity fees will be quite close to what the Standard Life charges are. The hope is that the new portfolio would outperform the current one (heard that before).

I need to make sure I understand the charges and benefits
Is Fidelity a wise choice (no others were mentioned)?
If the charges on the new arrangements come to Product Charge 0.25%, platform charge £45 p.a, investment charge .71%, adviser charge .5% and of course the initial 1% and the reduction in yield is 1.63% is that ok?

So what questions should I be asking the advisor before going ahead?

Thanks
ps just read a thread about the 5% up front they paid - ouch!

dunstonh

'Her indoors' has had a pension report from an IFA concluding that she should move from a Standard Life Personal pension 1 which is invested in 9 funds (which same IFA company set up 13 years ago) to a SIPP. They have chosen Fidelity as the platform.

That sort of move is very common. Pensions have come a long way in recent years and platforms using unit trust/oeic funds are far more popular than pensions using mirror fund versions. Plus, charges are generally lower than back then.

The proposed switch would involve a payment 1% up front (0n circa £70K and 0.5% p.a. to the advisor. The illustrations show this together with Fidelity fees will be quite close to what the Standard Life charges are. The hope is that the new portfolio would outperform the current one (heard that before).

That is not unreasonable. Indeed, 0.50% on less than a £100k is becoming less common with that figure often reserved for larger amounts now).

If the charges on the new arrangements come to Product Charge 0.25%, platform charge £45 p.a, investment charge .71%, adviser charge .5% and of course the initial 1% and the reduction in yield is 1.63% is that ok?

0.71% would suggest use of managed funds or a combination of managed/passive. The fund charge is out of the adviser's hands and would be the same on any platform. 1.63% including adviser charge is fine.

So what questions should I be asking the advisor before going ahead?

You have read the report. So, what questions does that bring up that you feel need to be asked?

ps just read a thread about the 5% up front they paid - ouch!

And your wife's is right where you expect it to be. So, that should give you some confidence.

sandsy

Make sure you know what service you will receive on an ongoing basis from the adviser for him to earn his 0.5% ongoing adviser charge, ie. how often he will make contact with you, meet with you, rebalance your funds so they continue to meet your investment objectives etc. You might also want to ask if there would be additional charges if you were to invest further lump sums or if this would be covered by the ongoing adviser charge.

If you don't feel you need an ongoing advice service , you can always turn it off at some point in the future (check T&Cs on notice periods) and pay for adviser services on an ad hoc basis as and when you need them. That will reduce your reduction in yield to 1.13%