IFA Ongoing Charges

ian16527

Thanks for your replies. I am a little naïve in the financial planning world but learning rapidly.

The pension I have for the 60K is not a specially managed fund, just off the shelf packaged one so nothing special so I cannot see any reason for this to be managed. My other pensions are DB ones and it was recommended to check the CETV's of these and get a report whether or not to transfer. This would incur more costs so I have decided to leave them for later

I was aware of the fees and I got the service that I asked for, but I think the ongoing management of a packaged pension fund is perhaps not what I want at the minute.

ian16527

Regarding the DB pension pots, the small one CETV is around 21K mark, so am I right in thinking I could transfer this myself into a new pension? I have had them both reviewed with a recommendation to keep them as I expected, but this one I cannot get until 65 so I would like to move it.

[Deleted User]

Linton wrote: »

Who said that? The investing universe isnt made up of "good funds" and "poor funds". A far more useful division is "appropriate funds" and "inappropriate funds", the categorisation depending on the objectives and situation.



A professional may base their choice of funds on a technical analysis using data, tools and techniques that are not readily available to the private inexperienced investor. There is no way it would be appropriate simply to hand over this sort of portfolio to the inexperienced investor and say "its yours, you run with it". It would be far more useful to recommend a simple multi-asset fund solution of the right risk/return which can be easily managed with little knowledge.


For a £60K pension portfolio which would provide an income of perhaps £2K/year the single multi-asset fund solution seems to me to be exactly the right solution for the OP. Paying an IFA to manage a bespoke portfolio of that size must surely be difficult to justify economically for either party.

This is what was said “However, the adviser firm will usually use different investments for non-servicing clients and that could impact on the returns. Our servicing portfolio outperforms the transactional multi-asset funds we would use.“

In other words, having charged the poor guy 3%, having recommended a portfolio, they would switch to something they believe to perform worse unless he keeps paying a ransom. That’s bad in my book.

“Rebalancing” and all the other magic words = something that’s very simple to execute, takes very little time and anyone who has basic maths skills should be able to educate themselves.

I have been threatened like this 15 years ago. Read a few books. Withdrew all funds. Put them into a cheap couch potato portfolio. My return has been substantially higher than the expensive fund recommended by the advisor over the same period of time.

Takedap

Deleted_User wrote: »

I must admit, saying to someone who has just paid you thousands of pounds “I will put your money in poor funds unless you keep paying thounds every year” does sound like extortion.

Linton wrote: »

Who said that?

dunstonh wrote: »

You can refuse ongoing servicing and you can turn it off. However, the adviser firm will usually use different investments for non-servicing clients and that could impact on the returns. Our servicing portfolio outperforms the transactional multi-asset funds we would use.

Sounds to me like it's saying that non-servicing clients get a worse deal. Certainly sounds like only one type of client is getting a fully independent service?

Linton

Deleted_User wrote: »

... Read a few books. Withdrew all funds. Put them into a cheap couch potato portfolio. My return has been substantially higher than the expensive fund recommended by the advisor over the same period of time.

That's easy to do. Simply take rather more risk than you told the advisor you would be happy with. Then if you are successful, as you probably will be, you can tell the world what a brilliant investor you are compared with the useless professionals. If you fail, as you may, just keep quiet.

dunstonh

Takedap wrote: »

Sounds to me like it's saying that non-servicing clients get a worse deal. Certainly sounds like only one type of client is getting a fully independent service?

Ongoing or transactional doesn't impact on the independent status.

Where an adviser puts in place a bespoke portfolio of single sector funds, the FCA expect it usually to be maintained with ongoing servicing (rebalancing for example). If the person does not want ongoing servicing then the most appropriate and suitable investments should be recommended. That usually means multi-asset funds (but could be other things as well). It would be inappropriate to recommend an investment solution that needs ongoing work and knowledge and understanding to someone that doesn't have it.

Linton

Takedap wrote: »

Sounds to me like it's saying that non-servicing clients get a worse deal. Certainly sounds like only one type of client is getting a fully independent service?

In quoting my posting you forgot a bit:

The investing universe isnt made up of "good funds" and "poor funds". A far more useful division is "appropriate funds" and "inappropriate funds", the categorisation depending on the objectives and situation.

A professional may base their choice of funds on a technical analysis using data, tools and techniques that are not readily available to the private inexperienced investor. There is no way it would be appropriate simply to hand over this sort of portfolio to the inexperienced investor and say "its yours, you run with it". It would be far more useful to recommend a simple multi-asset fund solution of the right risk/return which can be easily managed with little knowledge.

HappyHarry

dunstonh wrote: »

You can refuse ongoing servicing and you can turn it off. However, the adviser firm will usually use different investments for non-servicing clients and that could impact on the returns. Our servicing portfolio outperforms the transactional multi-asset funds we would use. No IFA can guarantee that is the case but ongoing servicing usually pays for things like rebalancing, reviews, fund changes, tops etc.

It is very much a personal choice what you want and need.

For those accusing IFAs of providing a worse service to thos not paying an ongoing fee, have a quick think about what really happens:

(i) If a client is paying an ongoing service, they would get a portfolio that is constantly monitored and tweaked every year or more often, to ensure it is balanced correctly, and the constituent parts of the portfolio are still valid.

Clearly, if a client doesn't want an ongoing service, then such a portfolio may cause the client to be far worse off in the future, as the original portfolio falls more and more out of synch with regards to where it should be.

(ii) However, there are plenty of good multi-asset funds that are actively managed by the fund manager, that could be appropriate, and would not need constant tweaking by the adviser.

So, an adviser would likley recommend the first option to a client paying an ongoing fee, as this is likely to produce the best result for them.

An adviser is also likely to recommend the second option to a client that does not want an ongoing service, as this is likely to produce the best result for them.

It's not a matter of advising good portfolios to ongoing clients and bad portfolios to non-ongoing clients. It's a matter of advising appropriate investment strategies to each and every individual client.

[Deleted User]

Linton wrote: »

That's easy to do. Simply take rather more risk than you told the advisor you would be happy with. Then if you are successful, as you probably will be, you can tell the world what a brilliant investor you are compared with the useless professionals. If you fail, as you may, just keep quiet.

That’s a good point. The original conversation went like this “are you ok losing lots of money? No? Then here is a balanced fund, [heavily overweight in the home market and with a massive charge every single year whether you gain or lose].”

There was no discussion on the defined benefits we have outside this investment or the need to control costs - the one thing investor can actually control.

Lesson learnt: investors should read good books by the likes of John Bogle and William Bernstein, understand what investment risk really means and develop their own investment policies and strategies. Filling in a bunch of checkboxes with an IFA is meaningless.

fjh

Re ongoing servicing charges- would an 'option' be to 'link' 'Growth to cost?
E.g x% of annual growth -or would that increase the 'risk'