Do I have to pay an IFA pension yearly ongoing fee?

johnjo569

Hi, As the title states, I was wondering whether I HAVE TO pay a yearly ongoing management fee to my IFA for my pension?

I currently have a £200,00 plus pension pot that I have had with the same pension provider for 6 years. My IFA helped me to set this up and I was very happy with his help. Its tinkering along nicely and i am happy to keep things as they are. If in the future I decide to say, lower my risk level, I will be happy to get him to do this for me.

My problem is I have a yearly ongoing management arrangement fee with him set at 0.4%. When I first set this up it seemed reasonable but over the years I have realised I barely need him, if at all. I can go online anytime and see how my pension is performing. That yearly review lasts all of 1 hour and for that I have worked out it costs over £800.00 based on 0.4%!!! Thats £800.00 an hour or worst case scenario if i change my pots around slightly its 2 hours work, thats still £400 per hour!! Times that by 10 years and its up to £8000.00 in management fees, it feels like a ripoff, a scam. I know its not and 0.4% is about average but even so where else can you get those figures except becoming a pro footballer!

I would like to have a fee based assessment where I can choose when I want it and save myself a lot of money in the process.

Can I do this? Can I tell my IFA I no longer want the ongoing pension management relationship based on a percentage charge. Can I cancel this arrangement? If he isnt open to a fee based arrangement can I find somebody else who is?

Fairs fair, we all have to earn money but I really don't feel I am getting value for money, £800+ for 1 hours work seems extreme.

If anybody has any experience with this it would be much appreciated.

Browntoa

Depends what your IFA contract you signed says about notice periods .

May be 30 days , may be 6 months

Albermarle

If you posted this on the pensions board you might get more answers, especially from the couple of iFA's who regularly contribute.

Pension_Geek

You don't 'need' to, but there will be more than this hours work involved, and as you approach retirement, some advice is probably going to be a good thing for you to have.

Also worth considering that some platform providers charge an orphan client fee (Novia off the top of my head).

johnjo569

Thanks Browntoa. I'll have to check this out.

johnjo569

Pension_Geek wrote: »

You don't 'need' to, but there will be more than this hours work involved, and as you approach retirement, some advice is probably going to be a good thing for you to have.

Also worth considering that some platform providers charge an orphan client fee (Novia off the top of my head).

I get the fact i'll need advice as I go along, especially as I get closer to retirement and decide to scale back on my risk and decide what avenues I want to take with regards to taking money out of my pension but at the moment its not the case that I need that level of advice and it does seem these percentage charges work out very expensive unless you have a fairly small pension pot. I just cant see how £800+ a year is justified for my present situation. In any other walk of like this would be deemed as a scam on MSE

johnjo569

Thanks Albermarle

dunstonh

Hi, As the title states, I was wondering whether I HAVE TO pay a yearly ongoing management fee to my IFA for my pension?

No. Ongoing servicing is optional. It cannot be mandatory.

The only consequence is that if you have a bespoke portfolio, you will no longer get it rebalanced and no portfolio adjustments will be made. Often, the consequences of that will cost more than the adviser fee.

In any other walk of like this would be deemed as a scam on MSE

And most people who post "scam" on MSE are not scams.

OldMusicGuy

If you feel you are not getting value for money, you have two alternatives: switch to another IFA or manage your investments yourself. There are plenty of people on this board that DIY - I have a much bigger pension pot than you which I manage myself (not trying to boast, just trying to show that people that DIY do not just do it on small pension pots).

You say "If in the future I decide to say, lower my risk level, I will be happy to get him to do this for me." Why do you need him to do that for you? On many pension platforms you can adjust the investments yourself.

You need to be a bit clearer about the pension scheme you have. It could be that the IFA has their own specific set of portfolios and that is what you are paying for on an annual basis (in addition to the meeting). However, if you just have a selection of funds on a common pension platform, you could easily manage that yourself. It sounds like you are in the latter situation, but it's not clear.

It took me about 5 years of reading, researching and experimenting to get to the point that I was comfortable to DIY. These books helped me: "Investing Demystified" by Lars Kroijer and "DIY Simple Investing: A Guide to Simple but Effective Low Cost Investing" by John Edwards. The Monevator website is good as well.

It is possible to terminate the relationship with your IFA (subject to your contract and pension) and then get one-off advice when you think you need it. I'm not sure how keen IFAs are to do this, I think they prefer a long term relationship. The IFAs on here will probably comment.

HappyHarry

johnjo569 wrote: »

I get the fact i'll need advice as I go along, especially as I get closer to retirement and decide to scale back on my risk and decide what avenues I want to take with regards to taking money out of my pension but at the moment its not the case that I need that level of advice and it does seem these percentage charges work out very expensive unless you have a fairly small pension pot. I just cant see how £800+ a year is justified for my present situation. In any other walk of like this would be deemed as a scam on MSE

It's not a scam. A scam is where you are deprived of funds through trickery or lies. Your IFA seems to be quite up front and transparent about the fee, so calling it a scam is rather misleading of you.

You may feel it is expensive, but that does not make it a scam.

Anyway, no, you should be able to cancel your ongoing service with your IFA at any time, and no more fees will be taken from your pot and paid to the IFA.

However, should any of your funds / portfolio fall by the wayside, you won't be informed or have any recommendations to change. If you don't pick this up yourself, it could cost you an awful lot more than £8,000 over the next ten years.

Your adviser is likely to put far more than one hour into this. Just because you are sitting with your adviser for one hour, does not mean that this is all the work they do over the year for you.

it feels like a ripoff, a scam. I know its not and 0.4% is about average but even so where else can you get those figures except becoming a pro footballer!

You're confusing fees with adviser take home pay. Do you think that when you spend £100 in a supermarket, that all that money is paid to your cashier? Of course not. Similarly, your adviser isn't being paid £800 per hour either.

**Edit - crossed with dunstonh above

johnjo569

dunstonh wrote: »

No. Ongoing servicing is optional. It cannot be mandatory.

The only consequence is that if you have a bespoke portfolio, you will no longer get it rebalanced and no portfolio adjustments will be made. Often, the consequences of that will cost more than the adviser fee.

Its not a bespoke portfolio its just a standard Royal London pension where you choose your 'pot level' and the fund is managed by Royal London, its very much a hands off style pension.

And most people who post "scam" on MSE are not scams.

Apologies Dunstonh scam does sound a little heavy, it just FEELS a lot of money to pay out. If my pension has a bad year due to a world some crisis etc and say returns are down to 3-5% my pension charges me its annual percentage fee then add my advisors fee and before you know it over 20% of the profit on my investment has gone on fees.. thats a lot considering i'm working like mad to save and secure a decent retirement. This feels like compound interest in reverse!