Should I pay for pension advice?

BeardedWonder

Considering whether I should diversify my pension portfolio as, in my main pension (15 yrs worth of contributions) with Hargreaves Lansdown 99% is invested in equities and the majority of that is in a single fund. Having had a pension review with my new company the feedback from the IFA was while my pension has performed very well it is high risk and I should consider diversifying into more stable funds. .

I’m now considering whether I pay 1% charge of my pension fund to receive detailed, personalised advice as to how to proceed. Or, attempt to review this myself. The questions I’m looking to answer during this process are:

What split to have between equities and other investments?
What percentage of my pot to invest in equities?
Which particular funds to invest in?

Is it worth paying for the financial advice or is that something which can be gleaned from freely available information?

I am leaning towards paying for the advice but wanted to ensure it is worth it before committing.

Thanks

dunstonh

Having had a pension review with my new company the feedback from the IFA was while my pension has performed very well it is high risk and I should consider diversifying into more stable funds. .

It is very common for inexperienced DIY investors to invest above their risk profile. Typically those that read the media for fund recommendations or look at "approved" funds lists from platforms (which are nothing more than marketing lists).

What split to have between equities and other investments?

Depends on what you risk profile and the investment strategy you are going to use. Usually that split is fluid if you are going for a risk targetted approach.

What percentage of my pot to invest in equities?

as above.

Which particular funds to invest in?

Depends on your research, due diligence and opinion and what investment strategy you are looking to utilise.

Is it worth paying for the financial advice or is that something which can be gleaned from freely available information?

It is up to you. If you DIY well, you can save money. If you DIY badly then it can be a costly error.

It is for you to decide if you are going to put the effort in and if you understand what you are doing. If you do, then go DIY. If you dont then use an adviser.
An adviser may not be that expensive compared to what you have. HL costs you 0.45%. IFA platforms are around the 0.2x% range. So, a typical 0.50% IFA charge is already covered by potentially half the saving in platform charge. Of course, you could move to a cheaper DIY platform or you could find a more expensive IFA. However, these are all part of the decision making process that only you can decide.

lisyloo

I pay 0.5% and get on going advice.
I consider DIY investing a big risk.
My advisor only has to do 0.5% better than me which I think is odds on.

wjr4

Financial advice is also not just based on your pensions. It may be worth getting advice to see if you are on track to retirement/also help with other issues rather than just your pension.

lisyloo

good point.
i dont know if im lucky or unusual but my 0.5% includes any other advice i want e.g. estate plannnig.
i tend to have an annual review but can do ad-hoc if anything is needed.

wjr4

Our ongoing charge also includes estate planning and any other financial advice required. I think concentrating on one area can be damaging sometimes.

C_Mababejive

If i had a pot of say £750k ,what sort of annual charges might i expect to pay for investment/ IFA management?

dunstonh

C_Mababejive wrote: »

If i had a pot of say £750k ,what sort of annual charges might i expect to pay for investment/ IFA management?

0.5% p.a. for adviser fee (as it is the dominant figure used) and around 0.20% for platform fee (for a decent platform - there are cheaper but less functional ones). Fund charges are the same whether DIY or advised.

[Deleted User]

...in other words it will cost you 40,000 pounds or so over the next 10 years with the charges escalating at the rate of the market minus 0.5% annually. You might gain or you might lose. You take all the risk and the return is uncertain. The one and only certainty is that you will be paying 0.5% for as long as you are with your IFA.

Alternatively you could read a few good books at the cost of 50 pounds and a little time, get a better understanding of risk, asset allocation and behavioural issues (which you need to do anyway as advisers are generally terrible at evaluating this and no filled in questionnaire knows as much about you than you).

And you don’t need to DIY. As luck would have it there are awesome, simple and easy to manage products readily available for anyone willing to take responsibility for his family’s financial security into own hands. Advisers have an incentive to unnecessarily complicated investments to justify their exorbitant fees. And the punch line is that whether you use IFA or not, you are just as responsible.

Using an all in one fund or a couple of ETFs is no more “DIY” than assembling an IKEA table is “DIY”. Nobody should be doing actual DIY with the stockmarket because you’d be competing against professionals and programs.

SeniorSam

Mordco, a few good books on investing will never achieve the years of learning that an IFA has to achieve to offer advice. That adviser has to undergo testing and pass exams before being allowed to advise. If you think you would reach that level with a few books, then you are most likely to fail in your own guidance.

dunstonh

..in other words it will cost you 40,000 pounds or so over the next 10 years with the charges escalating at the rate of the market minus 0.5% annually. You might gain or you might lose. You take all the risk and the return is uncertain. The one and only certainty is that you will be paying 0.5% for as long as you are with your IFA.

Why are you not growing your own food and lifestock? You would save money by doing that.
Why are you not servicing your own car, boiler etc? You would save money as well.

Using an all in one fund or a couple of ETFs is no more “DIY” than assembling an IKEA table is “DIY”. Nobody should be doing actual DIY with the stockmarket because you’d be competing against professionals and programs.

And two of the top 10 selling funds at HL are expensive "all-in-one funds" where the person is paying more than using an IFA. On top of the expensive HL platform charge.

DIY does not mean you save money automatically.