IFA fees

worlestone

Hi,

Could someone shed some light on IFA fees please.

I've had an initial meeting with an IFA to discuss potential retirement plans and get some idea of what's possible. I'm 56, looking to retire at 60, and have a couple of DB local government pensions which will pay approximately £5,000 each at 60. I also have a DC pension which stands at £375,000, this is primarily what the IFA is interested in helping invest.

The fees are tiered, 2% first 100k, 1% next 200K and 0.5% £200k+, approx £5,000 in first year, equating to 1.8% + an additional 0.5%, then each subsequent year an annual management fee of 1.5% plus VAT

Is this a normal/reasonable charge? I have nothing to compare it with

Thanks in advance

EdGasketTheSecond

So his advice has to return at least 2.3% and then 1.5% better than what you could do on your own to justify the fees. As you are retiring soon I wouldn't have thought there'd be much option for your £375K as you wouldn't want to take risk with much of it. You could invest it yourself in a combination of short-dated gilts or gilt fund, short-dated corporate bond fund (e.g. iSHares IS15) and maybe 10 to 20% in a worldwide equity fund like a Vanguard ETF with low charges or iShares core fund. Think about drawing out each year from 60 to 66 to maximise what you can take tax-free (UFPLS) unless you need the 25% tax-free lump sum in one go.

If the IFA's investments lose money then you still lose the IFA's percentage as well on top of your investment loss.

dunstonh

then each subsequent year an annual management fee of 1.5% plus VAT

Vat is not normally charged. If there is a discretionary investment element, then that bit is vatable but the rest shouldnt be. If there is no discretionary investment involved, then its normally all non vatable.

The initial charge is not unreasonable. Its in the upper of reasonable. We see a lot worse (such as SJP charging 5% initial) but you can also get better. What is that "additional" 0.5% for?

xylophone

Who is currently managing the pension?

Brynsam

'I also have a DC pension which stands at £375,000, this is primarily what the IFA is interested in helping invest.'

Never mind what the IFA is interested in doing, what do you want them to do? The way you've phrased that speaks volumes! Sounds pretty pricey for not much work.

Daniel54

Looks a bit expensive to me. I paid 1% of the DC pension ( approx £ 2,500 )for the initial report,which covered the DB and D.C. pensions as well as all my other assets in terms of retirement and estate planning .Ongoing servicing is 0.5% of the SIPP which also covers regular catch ups and ongoing advice/ guidance in respect of investment and inheritance planning ( and anything else I need a second pair of eyes on).This was agreed 4 years ago ,which is not long ago.

Daniel54

EdGasketTheSecond wrote: »

So his advice has to return at least 2.3% and then 1.5% better than what you could do on your own to justify the fees. As you are retiring soon I wouldn't have thought there'd be much option for your £375K as you wouldn't want to take risk with much of it. You could invest it yourself in a combination of short-dated gilts or gilt fund, short-dated corporate bond fund (e.g. iSHares IS15) and maybe 10 to 20% in a worldwide equity fund like a Vanguard ETF with low charges or iShares core fund. Think about drawing out each year from 60 to 66 to maximise what you can take tax-free (UFPLS) unless you need the 25% tax-free lump sum in one go.

If the IFA's investments lose money then you still lose the IFA's percentage as well on top of your investment loss.

The OP has £10k of DB income at age 60 plus their state pension at 67. The interaction between these guaranteed income streams and their DC pension warrants in my view detailed and personalised advice from an IFA ,rather than an investment plan based solely on costs and somewhat plucked out of the air.

My personal view is that trackers have a much greater role in accumulation than decumulation,when income and capital preservation become higher as priorities in terms of long term planning

westv

Remember of course that should the pension pot decline in value over the years the fees will too but your income should, hopefully, increase.

tacpot12

I'm paying about £400 pa in platform fees to self-manage a SIPP portfolio of c£375k. I also pay about £2000 in fund management charges via the fund AMCs, but I bet the IFA costs exclude any fund manage charges -something else to check.

If the IFA has excluded Fund Management Cgarhes, then they are proposing to charge you about £6500 pa for the same service that I provide to myself for £400. This means that their advice has to produce £6100 more income per annum to avoid costing you money over the DIY option.

Joey_Soap

Typically, these guys roll up at your house driving a E class Mercedes. Ask him where his customer's Mercedes E class are. You'll never have one if you're giving away your money like that, for certain.

Joey_Soap

tacpot12 wrote: »

I'm paying about £400 pa in platform fees to self-manage a SIPP portfolio of c£375k. I also pay about £2000 in fund management charges via the fund AMCs, but I bet the IFA costs exclude any fund manage charges -something else to check.

If the IFA has excluded Fund Management Cgarhes, then they are proposing to charge you about £6500 pa for the same service that I provide to myself for £400. This means that their advice has to produce £6100 more income per annum to avoid costing you money over the DIY option.

Yes, and we all know, that just isn't going to happen, don't we?