IFA fees advice

Snozzle

I am looking to transfer my DB pension from my previous employer out and having done research / read the forums wonder if anyone could clarify a few points.

I understand I will need a IFA but on contacting one to find the fees have been advised 3% with a 0.5% ongoing annual fee.

Given by the time I meet an IFA I will have collated all our income / expenses, investments, savings etc is this an average rate or is there anyway I could reduce the costs. I must admit I was hoping to pay in the region of 1 - 1.5% as had hoped to simply be signed once they had looked at my figures. I plan on investing the monies myself both now and on an ongoing basis.

Conversely, if 3% is the norm, for that should I simply be expecting a signature from an IFA approving the transfer or should they be advising for the price where I could invest the monies?

Thank you for any advice you can give.

tacpot12

The IFA won't recommend anything based on your own figures. They will insist on doing the calculations themselves. Be prepared for the answer to be different to what you expect. You should be able to find an IFA who will provide advice for a fixed fee. Given you plan to self manage, the fee should be around £1000.

Snozzle

Ah - thanks. I was under the impression that they had to sign to say they had given financial advice and either agreed that they had no objection to the transfer out or that they didn't recommend it.

I don't really need the financial advice as we have on-going income from other sources so I appreciate the figure you gave as that is thousands cheaper than advised.

dunstonh

I understand I will need a IFA but on contacting one to find the fees have been advised 3% with a 0.5% ongoing annual fee.

Ongoing reviews are optional. An IFA cannot insist on that. It can make sense with larger pots and the investment advice given initially is likely to be different if you dont have it. However, they cannot insist on it.

0.5% is the dominant figure. 3% needs to have context. Many IFAs run a cap and collar on that initial charge. Some will have tiered rates or offer a fixed charge option.

I must admit I was hoping to pay in the region of 1 - 1.5% as had hoped to simply be signed once they had looked at my figures.

Context needed. 1% of £10k is £100. 1% of £1m is £10,000. £100 is too little. £10,000 is too much. Both are 1% though. it is the monetary amount that matters.

The IFA will not look at your figures. They have to run it through their own TVAS.

Conversely, if 3% is the norm, for that should I simply be expecting a signature from an IFA approving the transfer or should they be advising for the price where I could invest the monies?

3% is not the norm. The regulator used to collect figures and publish an average. It doesnt anymore. However, the last set it published gave an average of 1.8% with 0.5% ongoing.

The IFA should be considering the whole thing. Whether its right to transfer, who to transfer it to and what investments to use.

pip895

The best I could find was around 1% (£2500 min) There were ongoing fees between 0.5 and 1% but they didn't have an issue with you transferring to a DIY provider once the money was transferred to a SIPP. I'm still going through the process at the moment.

Malthusian

Snozzle wrote: »

Ah - thanks. I was under the impression that they had to sign to say they had given financial advice and either agreed that they had no objection to the transfer out or that they didn't recommend it.

The regulations say the adviser only has to sign to say they have given advice (and not whether it was for or against). However there is only one SIPP provider that I know of who will accept a transfer without a positive recommendation. So you either need a positive recommendation or to use that SIPP provider.

However as pip895 mentions, once you've got your CETV out you can do a second transfer to whoever you want without any IFA involvement. Obviously you lose any regulatory protection you may have had over the initial transfer.

Aegis

tacpot12 wrote: »

The IFA won't recommend anything based on your own figures. They will insist on doing the calculations themselves. Be prepared for the answer to be different to what you expect. You should be able to find an IFA who will provide advice for a fixed fee. Given you plan to self manage, the fee should be around £1000.

£1,000 for a higher-than-average risk DB transfer? I wouldn't go near that!

Bear in mind that the requirements for a self-managed investor are no different, i.e. it is still necessary to do a transfer analysis based on the charges and likely range of possible return outcomes of the eventual portfolio. This means that a self-invested pension will need even more work than normal for an IFA, as they will have to dig into the proposed portfolio to understand what level of volatility might be expected and to estimate a reasonable rate of return to use for forecasting possible outcomes and stress testing the projections against market shocks.

I've done cases like that before, and they're far more work than a transfer into a more standard investment portfolio because you have to really dig deep to make sure the client isn't planning on doing something completely inappropriate.

tacpot12

I didn't ask the IFA that did my transfer analysis to review my proposed portfolio, they just reviewed the transfer against their standard portfolio for my level of risk.

dunstonh

tacpot12 wrote: »

I didn't ask the IFA that did my transfer analysis to review my proposed portfolio, they just reviewed the transfer against their standard portfolio for my level of risk.

Sounds like one of these "pop up" companies that are doing transfers on the cheap without full compliance and will likely close again when this window has closed and will dump their liabilities onto the FSCS.

Snozzle

Hi - thanks for all your replies. I am beginning to realise what a minefield this all is. I currently have a SIPP with Standard Life and simply hoped to transfer the DB pension pot of c £115,000 to them (if they accept them) - and then split the monies into 3 or 4 funds to spread the risk. Nothing fancy and would be happy to simply keep up with inflation over the years (anything else is a bonus!). As I have said earlier all being well I would never need to touch this pension pot and would live off other income. The mortgage would be paid off and our lifestyle isn't too extravagent. The IFA BTW asked for 3% and then 0.5% annually as I said earlier.

Again thanks for all your advice. Off to do a little more research.

Aegis

tacpot12 wrote: »

I didn't ask the IFA that did my transfer analysis to review my proposed portfolio, they just reviewed the transfer against their standard portfolio for my level of risk.

In my view, the adviser was very foolish to do that. The FCA has made it clear that DB transfers must be assessed based on where the transferred sum will actually be invested rather than against some hypothetical model, with particular regard to whether the critical yields are realistic based on the chosen investments. What they did for you was in breach of pension transfer regulations, and could feasibly see them having their permissions to carry out that kind of business reviewed. Not a risk I'd ever take for myself or my company!