Prudential fund charges

bobbymotors

Hello and thanks in advance for any help.

Excuse my ignorance on this...I have a lump sum due from Aviva and because its over £30k I have to take financial advice.

Fair enough, I've taken some, it cost £1200, they have suggested a medium / low risk prudential fund that has historically returned 5-7% p.a.

However out of this there is a management charge from the pru (fair enough)

But there's also a 1% annual fee to the IFA.

Is this standard or not?

bigadaj

What's the cetv that you are working from, Ie the pot value?

What's the pru charge?

1% is fairly standard for low value pots with ifa, once you get up to six figures and beyond then it should be dropping to 0.5%.

Also once you have trAnsferred out then you can transfer to another provider, potentially a diy option with no adviser charge.

Typical full adviser options might be looking at 1.5% or a bit more, self managed options can easily go below 0.5%.

bobbymotors

i think the pru is 1.25% cant remember exactly.

value is75k

so seems above board....although 2.25% charges = half the return!

dunstonh

Excuse my ignorance on this...I have a lump sum due from Aviva and because its over £30k I have to take financial advice.

only if there are safeguarded benefits (that means guarantees which can be very valuable).

But there's also a 1% annual fee to the IFA.

Is this standard or not?

Where you employ the adviser to give ongoing servicing, then 0.5% is the dominant figure used but 1% is common for smaller fund values. Ongoing servicing is optional. You are not required to have it.

value is75k

Under 100k, so 1% is ballpark.

so seems above board....although 2.25% charges = half the return!

The adviser is talking net of charges. Not before charges.

bobbymotors

Thank you dunston, you know your tuff.

'Where you employ the adviser to give ongoing servicing, then 0.5% is the dominant figure used but 1% is common for smaller fund values. Ongoing servicing is optional. You are not required to have it.'

So do I just say 'no thanks'? - I've already signed paperwork to agree to it BTW

'only if there are safeguarded benefits (that means guarantees which can be very valuable).'

Thee are but it's only a 4.5% GAR nothing dramatic

'The adviser is talking net of charges. Not before charges.'

don't understand?

'although 2.25% charges = half the return!'

What I meant was 1.25% for pru + 1% for IFA = 2.25% = half the return. Or am I working something out wrong?

BLB53

Could you ask the IFA to transfer the pension to a SIPP such as AJ Bell Youinvest for a one-off fee and then invest in something like Vanguard Lifestrategy funds? Total costs would be under 0.5% p.a.

dunstonh

Could you ask the IFA to transfer the pension to a SIPP such as AJ Bell Youinvest for a one-off fee and then invest in something like Vanguard Lifestrategy funds? Total costs would be under 0.5% p.a.

Why would the adviser want to use AJ Bell? IFAs have cheaper/better options available than them.

Also, the use of Pru suggests the Op is cautious and wants in built security. You don't use Pru unless that is the reason (as conventional risk based investment options with no security are available elsewhere cheaper). Pru have an excellent record of delivery on an investment option that some consider out-of-date and expensive. It goes against everything that many DIY investors believe but it does the job. I have had people in that fund for decades and they have gone through the dot.com bust and the global recession and it has been a reliable steady Eddie. It really is an anomaly which other providers have failed to replicate and have killed their equivalent. I would still personally prefer conventional risk based investments for myself but the Prufund does have a market.

So, yes, you can get cheaper but it would mean using different investments which may not suit the objective.

BLB53

Why would the adviser want to use AJ Bell?

Not suggesting the adviser use AJ but as the OP is forced to use an adviser he could ask the adviser to transfer to AJ with a view to then taking charge on a diy basis which would work out much cheaper than the 1% Prudential fund plus the ongoing advisers fees.

dunstonh

BLB53 wrote: »

Not suggesting the adviser use AJ but as the OP is forced to use an adviser he could ask the adviser to transfer to AJ with a view to then taking charge on a diy basis which would work out much cheaper than the 1% Prudential fund plus the ongoing advisers fees.

Which option with AJ Bell (or other) would you use to provide the capital security options that the Pru has?

You don't pick Pru because its cheapest or best platform software. Pru can be beaten in all areas except one and that is the prufund. So, if the prufund is the objective for having it, then it doesnt really matter if an alternative is cheaper if that alternative does not meet the objective.

Personally, I set most under £100k cases to transactional as they only want reviews/updates on an infrequent basis. i.e. pay when needed and used. We have some with under a £100k who like and want the annual visit but we actually try to put people off ongoing on small amounts unless they have a need or really want it. The OP does not have to have ongoing if it is not wanted. The product doesnt need to change because of that.

bobbymotors

Hello again Dunston

I don't mind paying someone for work that they've done.

However I don't really want the IFA taking £800 every year for nothing.

I have signed to let them take their 1%, and already paid £1200 for the advice...fair enough, you were quite I DO want cautious, steady growth.

I'm tempted to let them have that 1% for this year and then say 'no thanks, no further advice needed thank you'

Which means they will have had approx £2k for setting it all up.

Which I think is fair.

Can I do this?

dunstonh

However I don't really want the IFA taking £800 every year for nothing.

Not everyone needs ongoing servicing. Not everyone wants it. So, if you don't then cancel it.

I have signed to let them take their 1%, and already paid £1200 for the advice...fair enough, you were quite I DO want cautious, steady growth.

And you can end it any time. Typically most contracts will say 28 days notice or that sort of ballpark.

Can I do this?

Yes you can. And ending it does not mean you end the relationship with the adviser. It just means you pay an ad-hoc fee next time you use them (and that can be paid via the product too - just as the normal ongoing is).