Choosing an IFA and fees

Bianchiintenso

It's come to that time where I have about4 years left before i decide to take my private pension, It's been in the same place now for 35 years basically just left doing its own thing, so figured the sensible thing to do albeit late to seek advice from an IFA. I know the first meet is free, but is it considered bad form to have a meet with 2 or 3 to get real feeling for who you feel you can trust/work with. The first meeting I had said the fee was 5% of investment, but based on the amount they would only charge 2% first year and 1% per annum thereafter?
Is this a reasonable charge? in line with the market.
many thanks in advance for your advice

HappyHarry

Bianchiintenso wrote: »

It's come to that time where I have about4 years left before i decide to take my private pension, It's been in the same place now for 35 years basically just left doing its own thing, so figured the sensible thing to do albeit late to seek advice from an IFA. I know the first meet is free, but is it considered bad form to have a meet with 2 or 3 to get real feeling for who you feel you can trust/work with. The first meeting I had said the fee was 5% of investment, but based on the amount they would only charge 2% first year and 1% per annum thereafter?
Is this a reasonable charge? in line with the market.
many thanks in advance for your advice

Of course it's not bad form. Shop around, and make sure you find one you are happy with. You will be trusting them with your money, so take your time. Just make sure they are independent.

Those fees look high if you've over £100,000.

xylophone

You need to do your research.

https://www.moneyadviceservice.org.uk/en/articles/when-and-where-to-get-pensions-help-and-advice

You could try a preliminary discussion with Pension Wise to clarify your options.

https://www.pensionwise.gov.uk/en?gclid=EAIaIQobChMI2ZHR-9GJ2AIVprXtCh2V8Ad9EAAYBCAAEgLv5fD_BwE

Bianchiintenso

Thanks amount involved would be £250,000, so 2% and 1% thereafter sounds high?
Also after initial chat he was going to go away and look at some options, am I right in thinking before he does any paid/fee work on my behalf we would sign an agreement etc, ie he couldn't take it on himself after an initial chat to start fee paying work?

Bianchiintenso

I pretty much know what i want to do with my pension, the reason i want an IFA is to see if my pension is working as hard as possible, In my head I had an idea I would pay an agreed fee for this work rather than an ongoing commission?

dunstonh

ut is it considered bad form to have a meet with 2 or 3 to get real feeling for who you feel you can trust/work with.

Not at all. However, just be wary that often advisers will get a letter of authority to contact your existing providers on that first meeting. That allows them get the information needed for the next stages, should you proceed. If you get multiple advisers doing this, it could create complications as providers will give the info to the last one received.

The first meeting I had said the fee was 5% of investment, but based on the amount they would only charge 2% first year and 1% per annum thereafter?

If the investment value was £10,000 then 5% is very reasonable. Percentages need to be placed in a monetary context. A lot of adviser firms have tiers (so x% for first amount, y% for amount above and so on). Others have a flat percentage with cap and collar. Some will do fixed fee. Regardless of the method, it is the monetary amount that matters.

Ongoing tends to see 1% used for smaller amounts but reducing to 0.5% for larger amounts.

Thanks amount involved would be £250,000, so 2% and 1% thereafter sounds high?

You should be looking to get on 0.5% p.a. by around that amount.

am I right in thinking before he does any paid/fee work on my behalf we would sign an agreement etc, ie he couldn't take it on himself after an initial chat to start fee paying work?

Until you sign a fee agreement or (in case of electronic contact) you give the instruction to proceed to the next stage, you cannot be charged.

I pretty much know what i want to do with my pension, the reason i want an IFA is to see if my pension is working as hard as possible, In my head I had an idea I would pay an agreed fee for this work rather than an ongoing commission?

Commission was abolished in 2013. Its all fee based now (except on contracts arranged prior to 2013 where it can be retained). Some people dont need ongoing services. Some do. I just did a case for someone this morning that is transactional (no ongoing). I am about to start another which is very similar but will have ongoing service. The amounts are similar too. The one without servicing is using more basic investments because there is no ongoing servicing) and the one with is using more advanced options. Most IFAs are happy catering for all types.

Bianchiintenso

That's a great help Dunston, much appreciated, but that leads me onto with only 4 or 5 years before i aim to start a drawdown and with the fees mentioned could that be to short a timescale in changing from what i believe to be a reasonably performing fund (i could be wrong on that score though?) into something that will not cover the extra costs i'll incur? Or are IFA's so watertight that they wouldn't possibly advise such a scenario?

Linton

Bianchiintenso wrote: »

That's a great help Dunston, much appreciated, but that leads me onto with only 4 or 5 years before i aim to start a drawdown and with the fees mentioned could that be to short a timescale in changing from what i believe to be a reasonably performing fund (i could be wrong on that score though?) into something that will not cover the extra costs i'll incur? Or are IFA's so watertight that they wouldn't possibly advise such a scenario?

If you are planning to drawdown over perhaps several decades of retirement then I dont see any reason why your portfolio should change very much when you do retire. Half your money wont be needed for perhaps 15 years. Just talk to the IFA about your medium/long term plans and he/she will be able to advise you appropriately.

bostonerimus

Do you need an IFA? Before you potentially waste 5% of your pension and then another 1% with ongoing fees (which could be 25% of your sensible drawdown amount) educate yourself about investing and money management. Even if you still decide to use an IFA you will be in a far better position to understand and assess the advice. Remember this is your money and you should be in charge.

bostonerimus

Bianchiintenso wrote: »

That's a great help Dunston, much appreciated, but that leads me onto with only 4 or 5 years before i aim to start a drawdown and with the fees mentioned could that be to short a timescale in changing from what i believe to be a reasonably performing fund (i could be wrong on that score though?) into something that will not cover the extra costs i'll incur? Or are IFA's so watertight that they wouldn't possibly advise such a scenario?

There are no guarantees. An IFA will give you advice, but won't promise anything and might even subcontract the investment side of things out to a third party. I think you can probably do as well by yourself, but you might not feel confident about that just yet which is why I think educating yourself is vitally important.

Unless you buy an annuity or put everything in guaranteed savings bonds you are going ton have to risk at least some of your capital. Also as you should be planning for maybe 30 years in retirement you need to get some growth of your pension pot to keep up with inflation. Therefore, for most people the pre and post retirement portfolio should not be that different.

BLB53

I pretty much know what i want to do with my pension, the reason i want an IFA is to see if my pension is working as hard as possible, In my head I had an idea I would pay an agreed fee for this work rather than an ongoing commission?

Do you really NEED an IFA? As you have a few years before retirement, why not explore the DIY route and save yourself many thousands of your hard-earned £££s...it's not really so difficult when you start to look at a very simple strategy.