IFA fees and starting pension

steviewander

I am trying to gather my thoughts after an initial 'free' meeting with my first ever Independent Financial Advisor.

I am 43 years old and have recently paid off my mortgage with my partner and with about 50k in stock and shares ISA in full time employment with £750 a month to put away somewhere each month.

I have sought a meeting with an IFA to get advice on whether I should start a pension or whether it was too late. She advised that she would always advise starting a pension despite that at my age it isn't ideal because of the 20% government top up.

I have been reflecting on our meeting and looking at the charges her company makes and it is substantial at 4% for the initial work and then subsequent 0.5% yearly management fees for my ISAs and potential pension. Can anyone advise me if this is normal, good value or excessive?

Part of me feels I should just start my pension on my own without her help. CONFUSED!

Thanks in advance.

JoeCrystal

What about your employer's pension scheme? As you mentioned that you are in full time employment, that should be your first port of call. Especially that they will contribute at least 2% into it. What is the issue with your employer's pension scheme that you are not taking advantage of?

PosterBoy77

I am not sure why you would need to use a Financial Advisor if you have already successfully been investing into a S&S ISA. You can easily establish a SIPP with various funds platforms and you can choose many managed funds to put your money into. A 4% fee and an annual 0.5% charge seems quite a bit.

cloud_dog

steviewander wrote: »

I am 43 years old and have recently paid off my mortgage with my partner and with about 50k in stock and shares ISA in full time employment with £750 a month to put away somewhere each month.

So you've built up £50k in S&S investments, I assume on your own (with partner); why the need for an IFA? Did another IFA assist you with your S&S or did you DIY?

What has changed that you feel you need an IFA now for the pension?

EDIT: ^^^^ What he/she said above ^^^

PeacefulWaters

It's not too late for a pension. You don't have to utilise an IFA.

What do your employers offer pension wise? Getting the maximum matched funding from that is step one.

Beyond that, Cavendish Online and HL are two of many choices to consider.

Come back with some numbers on your employer schemes. Have a browse around other providers and come back with some questions around investment options.

4% feels steep but not outrageous up front, especially if it includes your ISA. 0.5% ongoing is fine, but do you need it?

Utilising good knowledge here can help you DIY.

Brynsam

Which company does the IFA work for?

Why do people think that because they didn't start a pension while in the cradle, it is somehow 'too late'? Unless you've reached the age of 75 (at which point you can't get tax relief on pension contributions), and you want to save for your retirement - or at least the later part of your life - a pension remains an excellent and tax efficient means of saving.

BLB53

Part of me feels I should just start my pension on my own without her help. CONFUSED!

If you feel comfortable running your own S&S ISA then it should be fairly straight forward to do your own SIPP via one of the low cost platforms such as AJ Bell Youinvest (which I use) or HL for example.

Maybe get hold of the 'DIY Pensions' book by Edwards before you proceed but I do not think you should be paying fees to an IFA for something you can achieve yourself.

dunstonh

I have been reflecting on our meeting and looking at the charges her company makes and it is substantial at 4% for the initial work and then subsequent 0.5% yearly management fees for my ISAs and potential pension. Can anyone advise me if this is normal, good value or excessive?

Context is needed. 4% of £10,000 is low. 4% of £100,000 is high.

How does that 4% fit with a regular contribution? An adviser can only charge on regular premiums in the first 12 months. So, 4% of 12 months of regular is actually very cheap.

steviewander

Thank you for all your replies.

More context is indeed needed.
So I have £50k in an S&S ISA because the cash ISA account had dropped to 0.1% interest rate and having been fed up with low interest rates for so long, I transferred most of it into a medium risk portfolio with Nutmeg because it easy and requires little input from me (I have no experience in stocks and shares).

My reason for seeking an IFA is because we have just finished paying off the mortgage and so I have the opportunity save into pension now that I have more spare cash, but do not know if to keep putting it into Nutmeg S&S ISA as a saving vehicle for retirement as I am already 43, or start a pension and try and build up a pot as fast as I can.

Just a correction sorry, I am self-employed working 40hrs a week renting a chair in a high end salon and not entitled to employers pension scheme. Having been there 10 years, I forget and feel employed. The benefits of self-employment outweigh the benefits of being employed, especially as the salon pension scheme is the bare minimum and my wage is substantially higher than it would be if I was employed.

The 4% upfront fee is for dealing with a sum of £50k in funds but decreases to 3% should my funds reach above a higher amount. The 0.5% ongoing management fee is the same for all clients regardless of how much money is involved. The IFA is with AFH wealth management.

dunstonh

The 4% upfront fee is for dealing with a sum of £50k in funds but decreases to 3% should my funds reach above a higher amount.

Tiering of charge is common. As are caps and collars on the charge.

The 0.5% ongoing management fee is the same for all clients regardless of how much money is involved.

That is the most dominant figure. However, ongoing servicing is optional.If you dont want ongoing servicing then it cannot be forced on you. However, the adviser may not offer the same investments.

Sticking to the context theme The IFA could set up an ISA and pension with ongoing costs a third of those of Nutmeg. So, initial fee is higher but thereafter it is cheaper and a breakeven point will come. Alternatively, the IFA may have a model portfolio that costs more but out performs nutmeg.

Or you can go proper DIY and get cheaper than both IFA and Nutmeg.

steviewander

dunstonh wrote: »

Tiering of charge is common. As are caps and collars on the charge.



That is the most dominant figure. However, ongoing servicing is optional.If you dont want ongoing servicing then it cannot be forced on you. However, the adviser may not offer the same investments.

Sticking to the context theme The IFA could set up an ISA and pension with ongoing costs a third of those of Nutmeg. So, initial fee is higher but thereafter it is cheaper and a breakeven point will come. Alternatively, the IFA may have a model portfolio that costs more but out performs nutmeg.

Or you can go proper DIY and get cheaper than both IFA and Nutmeg.

Thanks for your insight. My concern is that I won't be able to build up enough before I retire (hopefully 60) and I end up with just a few thousand pounds a year in a dismal annuity. Realistically I probably won't be able to get a pot above £150k. I have no idea if this is enough.