£115 per hour + 2.5% initial fees

TaDa

I just sought some IFA advice about a couple of pensions I have and I was quoted £115 per hour for advice for each - roughly 3 hour each - so >£600 in total and then there was a 2.5% fund transfer 'fee' if I took uo any advice (i.e. £2,500 for each £100k pension pot)

This strikes me as rather excessive - fees for the advice _and_ 2.5% for the implementation - is this 'reasonable'?

Weighty1

I thought the average hourly rate was something like £175, although I could be wrong. So what are you getting for your money and do you see this as being of good value? If not don't take them up on their proposal.

TaDa

I guess I don't really understand why I pay twice
If I'm paying an hourly rate for their advice - why should there be an additional 2.5% for acting on it?
Say I had a £100k pot and I was charged for 5 hours work - the hourly rate fee would be £575 - what do they additionally do that is worth the extra £2500 - assuming a relatively negligible amount of extra work, this bumps up their hourly rate to £715!!!
Am I missing something here? I mean they're not the fund managers or anything like that - they're just brokering the deal
Is this normal?

ACG

Im not an IFA, I have previously worked with one and as much as I did not particularly like the bloke, he was worth his money. His job was not to just switch it to a new fund and job done, he monitored it and ensured it was the best to be in, it was performing as expected and if not he spoke to people to pick up on the issue sooner rather than later.

I can not say whether or not those fees are excessive. I do always struggle with companies that charge a percentage based fee as I can only assume the work is the same whether the fund is £50k or £500k but I could be miles out. I suppose they are pickiing up extra risk on larger pots?

Speak to your IFA about it. My pet peev is when people are not happy but then do not raise it as a concern. If I have an issue with something I always raise it, you may work through it, you may not - but at least everyone knows where they stand.

TrickyDicky101

If the transfer happens does the % fee cover any ongoing costs/fees payable or is it simply a one-off fee payable? It does smack a little of having one's cake and eating it but without knowing the full background it is a little difficult to judge. You aren't talking about a DB pension pot are you?

takman

I personally would never pay those kinds of fees but I can understand why they charge them in that way.

If they are giving advice that increases a pension pot by 5% then the people with the largest pot are going to benefit more so that's why they charge a percentage fee.

TaDa

The pot in question is a standard life pension fund - the IFA is taking on no risk - they investment fund will have its own charges - so this 2.5% is a one-off fee just to broker the deal.


Are there any IFAs out there that charge a normal fee but don't demand a % of transfer charge on top?

TrickyDicky101

I wonder how the % fee would be enforced? Surely it would bring into question the true independence of the advice if it was linked to a particular provider or, alternatively, how would the IFA know you had followed the advice if you chose not to tell them? As a matter of interest, how did you find this IFA? Was it through a personal recommendation?

TaDa

I got the IFA through a service suggested on MSE - I used the 'half hour introduction' - which he immediately explained would not include any actual advice and instead did pretty much a full fact find - despite us trying to keep him on track for pension fund advice.


I too was/am wondering how it would/could be enforced


I guess the advice would be worded in such a way that I did not know the provider - but in order to get that advice I have to pay the first fee so I may never find out.


You're right of course - the actual provider should not be paying him out of 'my' money so if that is the process it sounds doubly dodgy - so it must all be in the wording of the 'advice'


The more I type the more seedy/dodgy it sounds

HappyHarry

Could you not just ask your adviser to explain the fees, and address your concern of "paying twice"?

If you're not happy with the explanation, then find another adviser.

The fee is not "enforced", however, you would expect to agree to a fee before the adviser does any chargeable work.

You would normally sign an agreement, which would allow the pension provider to deduct funds from your pension and pay them directly to the adviser.

Most modern pensions allow adviser charging to take place, providing there is a suitable agreement in place.

Paying from your pension for pension related work is not "dodgy". It is usually far more efficient to pay an adviser from your pension than paying your adviser directly. This is because if your adviser charges you £1,000, you could either write a cheque to the adviser for £1,000, or a cheque to your pension provider for £800, which would then be grossed up to £1,000 through tax relief. The adviser could then be paid the £1,000 by your pension provider.

It sounds to me that you might do worse than speaking to your adviser again, and finding out what is being charged, for what work, and how the adviser will be paid their fee.

dunstonh

Paying an hourly rate and then a transaction rate is unusual. Although I do know a number of firms that have a similar model in that they price each stage of the process but their charges are lower.

Segmenting fees into stages of the process protects the adviser from people doing half the process for free.

hich he immediately explained would not include any actual advice and instead did pretty much a full fact find - despite us trying to keep him on track for pension fund advice.

What he did was correct. Most factfinds have a core layout of details and then sections on various discussion areas applicable to the area you want to cover. The core bit will still include things that you may not immediately think are relevant but they could be.

I too was/am wondering how it would/could be enforced

Once you get to the point of agreeing the fee, the adviser would get you to sign a fee agreement. That could be enforced by the courts if you refused to pay.

You're right of course - the actual provider should not be paying him out of 'my' money so if that is the process it sounds doubly dodgy - so it must all be in the wording of the 'advice'

Paying the fee out of the pension is one of the most tax efficient ways of doing it and how most pension advice is paid for. Quite normal and correct and cheaper than paying it by cheque.

The more I type the more seedy/dodgy it sounds

Nothing dodgy at all. However, these are questions you should be putting to the adviser.

Working with an adviser requires decent communication between you and the adviser. It is a two way street. If either of you fails to communicate then it will not result in an optimal process.