IFA fees

IronWolf

I need some opinions on an IFA that my parents have seen recently and the fees he's proposing to charge.

My dad has a deferred final salary pension which he's due to collect in a few years. He saw the IFA who requested a transfer value and it was deemed to be worth over £500k. My dad subsequently had £ signs in his eyes and couldn't quite believe it. The IFA advised that he transfer it out and put it into some sort of trust, where the IFA would invest the money and provide a pension to my dad.

My dad was particularly drawn to this idea as he worries about my mum and doesn't think she will manage if something happens to him and she only gets a 50% spouses pension. She only has a tiny pension built up herself.

I said I was surprised that the IFA was advising this as I thought it was virtually impossible to find an IFA willing to do this as they get sued so easily if it goes wrong. He said that the IFA was doing it through someone else because it was true he couldn't get insurance for this type of advice. This all started to sound really dodgy to me, but apparently the guy is a registered IFA.

Anyway, the IFA said he normally charges 1% p.a. on pots but would reduce to 0.8% on £500k+. I think this sounds like a ridiculously large fee for him doing not very much in all likelihood.

So how does this sound to everyone? I think my parents need someone to look after their pot so am not averse to an IFA doing it and collecting a fee, but this seems excessive. And the deal itself feels questionable.

dunstonh

My dad has a deferred final salary pension which he's due to collect in a few years. He saw the IFA who requested a transfer value and it was deemed to be worth over £500k. My dad subsequently had £ signs in his eyes and couldn't quite believe it. The IFA advised that he transfer it out and put it into some sort of trust, where the IFA would invest the money and provide a pension to my dad.

What sort of trust? Normally pension transfers go into another pension (ok, pensions can be trust based or contract based but in most cases, the trust side isnt mentioned)

said I was surprised that the IFA was advising this as I thought it was virtually impossible to find an IFA willing to do this as they get sued so easily if it goes wrong.

Historically correct. Statistically 9 out 10 final salary schemes for the last 30 years upto around 18 months ago would not be suitable to transfer. However, we are in, what is expected to be, a narrow window where transfer values are far exceeding the likely benefits for many schemes. So much so, that the figure of suitability could be as much as 9 in 10 being suitable.

He said that the IFA was doing it through someone else because it was true he couldn't get insurance for this type of advice. This all started to sound really dodgy to me, but apparently the guy is a registered IFA.

All very normal. Only around 1 in 10 advisers hold the required permissions. So, most IFAs, in this scenario, will refer it to someone that does.

Anyway, the IFA said he normally charges 1% p.a. on pots but would reduce to 0.8% on £500k+. I think this sounds like a ridiculously large fee for him doing not very much in all likelihood.

0.8% is high on a pot of £500k. 0.5% is more typical. However, it is certainly not a case of doing not very much.

And the deal itself feels questionable.

They only area I agree with you on is the size of the fee. The rest of it sounds very plausible and normal for current times.

IronWolf

Thanks Dunstonh. It's good to know that it's all above board.

I'll have a word with them and get them to try and haggle down the fees.