IFA setting up a pension

zagfles

bostonerimus wrote: »

I'm an advocate of the DIY approach as long as you understand the basics of investing and managing your funds. You'll be saving yourself IFA fees, but now your money is entirely your responsibility. So you must educate yourself. There are lots of books and websites and I particularly like this series of youtube videos by Lars Kroiger as a starting point. Keep things simple and keep investing regularly.

https://www.youtube.com/watch?v=_chiIIxMGl0

Good advice, though I don't think you need to become an investment expert if you use someone like PensionBee and use their default strategy. Millions of people are in workplace pensions and the vast majority just use the default option which usually works on a similar basis.

bostonerimus

zagfles wrote: »

Good advice, though I don't think you need to become an investment expert if you use someone like PensionBee and use their default strategy. Millions of people are in workplace pensions and the vast majority just use the default option which usually works on a similar basis.

Often the case, but knowledge is a good thing and what better thing to know about than money....ok so you've already come up with 10 better things, but knowing how to manage your money will allow you to go out and do all those better things knowing rather than hoping that things will be ok. It will also reduce the risk that someone will rip you off and will remove nasty surprises from your financial life.

Basically don't trust anyone to be a better guardian of your money than yourself. If you use a robo-invester it's not an excuse to remain dumb when it comes to money.

fred246

In the 1990s my dad and his work colleagues were all asked to take early retirement. An IFA set up a seminar as they were all receiving lump sums and promised he would be with them "all the way through their retirement adjusting their investments." The IFA took thousands off each in commission and promptly retired himself leaving them all furious. All he did was put half in a UK income fund and half in a product with 60% shares and 40% bonds like VLS60 only not as good. My dad had no internet and the 'mystique' of the IFA was the ability to buy such products. The current 'mystique' seems to be buying lots of different funds in small proportions. When you see the list you think 'Whoa that's complicated. I could never do that myself.'

MK62

bostonerimus wrote: »

Yes.

Over the years I've had several company defined contribution plans invested with large fund companies and their total fees tended to be in the 0.5% range. When I left each employer I took the opportunity to move my DC pot into an Individual Retirement Account (IRA) with Vanguard. The IRA is a little like a SIPP. With Vanguard in the US there are no platform or trading fees if you buy Vanguard funds, so the only cost is the fund fee itself. Once you reach 59.5 years old then you can make withdrawals from the IRA without any cost, but it's all taxable.

It would be great if UK investors had access to such low cost pensions......
It would not be so great though if we then had to pay income tax on all of it......

I suppose it's hard to compare apples to apples though, as the whole financial system is so different over there to the UK system, despite some obvious similarities in certain areas.


As to the OP's dilemma, I'd certainly be somewhat alarmed at being hit with a 3k+ upfront fee, plus 0.75% ongoing, if that's all the adviser has come up with.

zagfles

fred246 wrote: »

In the 1990s my dad and his work colleagues were all asked to take early retirement. An IFA set up a seminar as they were all receiving lump sums and promised he would be with them "all the way through their retirement adjusting their investments." The IFA took thousands off each in commission and promptly retired himself leaving them all furious. All he did was put half in a UK income fund and half in a product with 60% shares and 40% bonds like VLS60 only not as good. My dad had no internet and the 'mystique' of the IFA was the ability to buy such products. The current 'mystique' seems to be buying lots of different funds in small proportions. When you see the list you think 'Whoa that's complicated. I could never do that myself.'

Or even just one (multi-asset) fund! Just look at this thread, it's a real eye-opener, where the OP was paying almost 2% for one expensive multi-asset fund via an adviser:

https://forums.moneysavingexpert.com/discussion/5553079/sipp-fee-question

Apparently this is OK because if the adviser had chosen a selection of single asset funds and rebalaced periodically, the customer might have gone into panic mode and overriden the IFA and sold all the funds that went down and bought all the one that did well and apparently that could all be seen as the IFA's fault for allowing that to happen so he needs to cover his backside by not letting that possibility arise :rotfl:

dunstonh

The IFA took thousands off each in commission and promptly retired himself leaving them all furious. All he did was put half in a UK income fund and half in a product with 60% shares and 40% bonds like VLS60 only not as good.

VLS60 didnt exist in the 90s and equity income had a significant boom period. So, actually, it probably did better than VLS60. Remember if you map the underlying assets of VLS60 back further in time than its launch, it would include the sustained poor performance of the US and with its heavy weighting towards that, it would have underperformed for around 5-7 years.

You cant really compare 90s investing styles with today. The lack of internet and choice back means the avearge consumer didnt have access to the style of investing you can get today.

The current 'mystique' seems to be buying lots of different funds in small proportions. When you see the list you think 'Whoa that's complicated. I could never do that myself.'

What do you think VLS60 is doing under the skin? it is buying lots of different funds in small proportions. Except it is limiting itself to in-house trackers. Whereas an IFA is picking the funds to fit each of those sectors from the marketplace. I would take the increased performance of the model portfolio over VLS60 any day personally. However, I also use VLS60 for smaller investors at times.

fred246

dunstonh wrote: »

An adviser is not necessary just like a dentist isnt. The key is to knowing what you are doing.

Obviously a silly statement. You might be able to pull a tooth out if it is rotten enough but nothing else.
It does make me laugh when IFAs compare themselves to something like a dentist. An IFA asks a few questions and fills a few forms out. I had a relative who worked at a bank and she did the exams after a few nights at an evening class.
A dentist has to be academically brilliant and then spends years of training and needs years of practical experience.
The problem with IFAs is that they make it so obvious that their only goal is to line their own pockets. Time and time again.

dunstonh

It does make me laugh when IFAs compare themselves to something like a dentist. An IFA asks a few questions and fills a few forms out. I had a relative who worked at a bank and she did the exams after a few nights at an evening class.

I did the banking exams back in my banking days. it was three nights a week for 3 years. You should not belittle your relative's efforts to improve herself. Going to college 6pm-9pm after working 9-5 is not easy.

A dentist has to be academically brilliant and then spends years of training and needs years of practical experience.

And that makes them brilliant at financial services does it?

Aegis

fred246 wrote: »

Obviously a silly statement. You might be able to pull a tooth out if it is rotten enough but nothing else.
It does make me laugh when IFAs compare themselves to something like a dentist. An IFA asks a few questions and fills a few forms out. I had a relative who worked at a bank and she did the exams after a few nights at an evening class.
A dentist has to be academically brilliant and then spends years of training and needs years of practical experience.

Which exams did she sit after a few nights at an evening class? I can't imagine it was even the ones required for any of the level 4 qualifications, let alone the advanced diploma exams. I'm academically very strong indeed, and I wouldn't have passed any of the advanced exams without significant work experience in the sector.

The problem with IFAs is that they make it so obvious that their only goal is to line their own pockets. Time and time again.

Do we? News to me, and to the prospect clients I have specifically turned away because I didn't think I could add enough value...

fred246

A highly skilled professional person has asked for advice. An IFA comes to see him, asks a few questions and says "I will fill the forms out for you for £3160." Do you not understand that that fee is totally out of proportion for the work done?