Ongoing IFA Charge & Fees

dunstonh

Regarding charges, initial fees to move my pensions and my wife's PPP's to a SIPP is £3K and 0.5%+vat ongoing.

Is this about industry average?

0.50% p.a. is the dominant figure but it is rare to see VAT on it.
Initial at £3k would depend on the amount. £3k on £50k pot is a lot. £3k on a £300k pot is ballpark.

Discretionary investment management is Vatable but the advisory part, whilst it can be, is nearly always non-vatable. The requirement to avoid VAT is for there to be an "intention" to make a purchase. So, an ongoing service that provides top ups to ISAs or SIPPs at no cost, for example, would allow the ongoing service not to charge VAT as there is an intention to top up, even if it does not proceed that year. (simplified as there are more nuances to VAT than that).

So, with the ongoing fee, you would expect the IFA bit to have no VAT and if they are using a DFM then their charge would be vatable. personally, I am not a fan of DFMS as they often just add an unnecessary layer of charges. Although there are some low cost DFMs with a good track record where it can be viable. However, if the DFM is controlling the investment selection instead of the adviser, then maybe the adviser charge should be lower.

Some advisory firms, especially those with "Wealth Management" in their name are expensive and use DFMs and place everyone in the same DFM regardless of their need. These types are losing their IFA status left right and centre but some are still using the IFA tag when really they are FA.

My IFA has a platform that does that - I thought they all did.

Some platforms allow the IFA to white label. i.e. put their branding on it. However, you need to be careful as you could be mixing up an FA with an IFA.

edit: lots of replies I missed as i took my time replying on this one. So, some bits already covered.

segovia

wjr4 wrote: »

If you are seeing an IFA that is on par with one of those categories, you are seeing the wrong person! I couldn't imagine being 'salesy' with my clients - it's all about helping them & doing things in their best interests, not over-selling for the sake of it.

I went into the IFA engagement with an open mind, I was cautious as we have seen a few over the years and none had really impressed me so far. This is the first IFA engagement that I have actually welcomed and am prepared to trust.

My only concerns are establishing if the engagement represents value for money and is in line with current charging models.

jimi_man

HappyHarry wrote: »

Sometimes I really consider my time wasted posting in here. 😕

Yes I can see that:

OP: 'Hi, could someone give me some advice/opinion on xxxx'.
Helpful person volunteering some knowledge in his own time: 'Sure, it's xxxx'.
OP: 'Ok, thank you very much. By the way, you're all pond life leeches and I can't stand your sort'.

That's not just biting the hand that feeds you, that's kicking them in the xxxx when they're on the ground!!!

Unbelievable.

fred246

No one will actually say how many hours it takes to 'service' a pension. For a £400k pension you are charging £2k. How long does it take? The investments will be less than one side of A4. Are IFAs just very slow at reading and arithmetic or do they charge too much?

segovia

dunstonh wrote: »

0.50% p.a. is the dominant figure but it is rare to see VAT on it.
Initial at £3k would depend on the amount. £3k on £50k pot is a lot. £3k on a £300k pot is ballpark.

Discretionary investment management is Vatable but the advisory part, whilst it can be, is nearly always non-vatable. The requirement to avoid VAT is for there to be an "intention" to make a purchase. So, an ongoing service that provides top ups to ISAs or SIPPs at no cost, for example, would allow the ongoing service not to charge VAT as there is an intention to top up, even if it does not proceed that year. (simplified as there are more nuances to VAT than that).

So, with the ongoing fee, you would expect the IFA bit to have no VAT and if they are using a DFM then their charge would be vatable. personally, I am not a fan of DFMS as they often just add an unnecessary layer of charges. Although there are some low cost DFMs with a good track record where it can be viable. However, if the DFM is controlling the investment selection instead of the adviser, then maybe the adviser charge should be lower.

Some advisory firms, especially those with "Wealth Management" in their name are expensive and use DFMs and place everyone in the same DFM regardless of their need. These types are losing their IFA status left right and centre but some are still using the IFA tag when really they are FA.



Some platforms allow the IFA to white label. i.e. put their branding on it. However, you need to be careful as you could be mixing up an FA with an IFA.

edit: lots of replies I missed as i took my time replying on this one. So, some bits already covered.

Thanks, I think that confirms my IFA's justification for adding VAT to his 0.5% annual fee.

Overall the annual fees are

0.6% IFA inc VAT
1.08% Fund Management inc VAT

Overall 1.68% inc VAT

Overall 1.4% Net

I have an option of a nondiscretionary fund with no VAT but the IFA believes the discretionary fund is a better option for returns which will cancel out the VAT

J

[Deleted User]

segovia wrote: »

I have to confess to being very much Anti-IFA, and bracketing them in the same category as double glazing and used car salesmen (no offense to any DG of Car Salesman on this forum). However, having looked at the self-managed SIPP options and reading all the books recommended on this forum, I decided I don't have the time to invest in a long learning curve.

The problem isn’t IFAs but that their interests are misaligned with yours. It is in your interest to invest in a cheap and diversified simple portfolio. It is in his interest to make it complex and charge ongoing fees. Paying 0.5% with let’s say 4% expected real return is damaging to your financial future. It’s 13% of what you are expected to make. And if there are losses, you will still pay this fee on top. We are talking thousands of pounds year in year out.

The only thing you really need to learn is what are your main risks and how to handle risk. Shouldn’t take much time. IFA can’t do that for you, at least not well.

And if you don’t care enough about your financial future, just invest in a balanced all in one multi asset fund with low fees and sleep well. Chances are you will be far better off. Returns are uncertain. Fees come with a guarantee.

dunstonh

I have an option of a nondiscretionary fund with no VAT but the IFA believes the discretionary fund is a better option for returns which will cancel out the VAT

Investing it about opinion. Ask 100 people and you get 100 different answers. With that in mind, I take the opposite view that advisory is better than discretionary. It avoids VAT and many DFMS are expensive and dont offer value for money.

There are very many solutions available and suitability is the primary concern. Not returns. So, these 100 different answers could see say 95 of them being suitable and 5 not. Different strategies have different pros and cons. And it different times will be better than the other. So, do remember that these are all opinions.

0.6% IFA inc VAT

I dont understand why that bit has VAT on it. The DFM bit yes but not the adviser.

Also, that fee is quite high considering the IFA is not doing any of the work whatsoever about the investments. Just financial planning. At £400k, you probably are not that complicated. Certainly tax wrappers, Allowances use etc. However, for planning purposes, do you have affairs the need frequently updated financial planning or are things relatively stable?

As I said, I prefer advisory. Another may prefer discretionary. Some individuals prefer DIY. Some do that well. Some do that badly. Opinions vary and

I have to confess to being very much Anti-IFA, and bracketing them in the same category as double glazing and used car salesmen (no offense to any DG of Car Salesman on this forum).

Which is not a logical position. If you were talking about FAs, then I could understand that (sales reps are by their nature sales reps). Or if you were talking about 20-30 years ago then it could potentially be sales related. However, only you pay an IFA. The IFA doesnt earn from providers. The product an IFA "sells" is their service and advice. If you don't value the service, do not engage an IFA. No IFA wants a client that that would think what you do about them.

segovia

dunstonh wrote: »

Investing it about opinion. Ask 100 people and you get 100 different answers. With that in mind, I take the opposite view that advisory is better than discretionary. It avoids VAT and many DFMS are expensive and dont offer value for money.

There are very many solutions available and suitability is the primary concern. Not returns. So, these 100 different answers could see say 95 of them being suitable and 5 not. Different strategies have different pros and cons. And it different times will be better than the other. So, do remember that these are all opinions.



I dont understand why that bit has VAT on it. The DFM bit yes but not the adviser.

Also, that fee is quite high considering the IFA is not doing any of the work whatsoever about the investments. Just financial planning. At £400k, you probably are not that complicated. Certainly tax wrappers, Allowances use etc. However, for planning purposes, do you have affairs the need frequently updated financial planning or are things relatively stable?

As I said, I prefer advisory. Another may prefer discretionary. Some individuals prefer DIY. Some do that well. Some do that badly. Opinions vary and



Which is not a logical position. If you were talking about FAs, then I could understand that (sales reps are by their nature sales reps). Or if you were talking about 20-30 years ago then it could potentially be sales related. However, only you pay an IFA. The IFA doesn't earn from providers. The product an IFA "sells" is their service and advice. If you don't value the service, do not engage an IFA. No IFA wants a client that that would think what you do about them.

I agree with the observation that the IFA will not be doing much for his 0.6% per annum fee, I intend to ask what the benefits are in monetary terms. The total VAT element on 400K is £1,120.02 PA
so a significant number, I'll need to think about it.

Thanks

J

Albermarle

Sometimes I really consider my time wasted posting in here. 😕

Happy Harry, You have significantly more 'thanks' than actual posts , so some people clearly appreciate your contributions:)

fred246

At least with a double glazing salesman or a second hand car salesman you should get something for your money (windows or an old car). With an IFA you get nothing.