Ongoing IFA Charge & Fees

segovia

wjr4 wrote: »

Very expensive option in my opinion! Is there a reason they have recommended this over other options?

1% - 3% has been quoted for an inital fee, I consider 0.75% to be good value don't you think?

segovia

dunstonh wrote: »

I suspect the problem with both sides is that they both assume you will be doing the best. i.e. the best DIY outcome vs the best advised outcome.

From other posts, the regular IFAs here all seem to end up with annual charges of around 0.9%-1.3% all in (assuming ongoing servicing). You can get advised solutions that take you through 2% p.a. And with DIY investors, they may be looking for 0.4% all in but you can get DIY solutions that take you through the 2% p.a.

I have set my stall out many times that I am not a fan of DFMs. I can see several that could be viable but most appear just to add a layer of charges unecessarily and make the adviser job easier (but you dont seem to get a discount on the adviser charge for that).


Correct.


not correct. Unless the IFA is also the DFM and they bundle their charges (not common but does exist).



Ongoing servicing is always optional. Although it may impact on the investment decisions if you say you are going transactional. Some business models may refuse to transact if you say you want transactional.


In this case yes. If the DFM is doing the investment side and you have little or nothing in the way of annual needs, then its not worth it.

Thanks, for the confirmation. My IFA would disagree with you regarding his VAT charge; however, as I am considering not choosing an annual managed service the VAT is irrelevant. I should also add that I am being charged 1.3% PA by my current personal pension provider and if I transfer to the DFM scheme fees are 1.08% inclusive of VAT. I suppose the question now is, does 1.08% represent good value for money as a management fee? Is it feasible that I could pay more than 1.08% for a non-DFM scheme?

dunstonh

I should also add that I am being charged 1.3% PA by my current personal pension provider and if I transfer to the DFM scheme fees are 1.08% inclusive of VAT. I suppose the question now is, does 1.08% represent good value for money as a management fee? Is it feasible that I could pay more than 1.08% for a non-DFM scheme?

As I don't like DFMs in general, I would say no. Someone that likes DFMs would say yes.

In your scenario, where you do not want ongoing servicing, I would personally use a multi-asset fund. 0.18-0.25% platform charge with 0.05-0.1% fund charge. Taking the upper end of both of those 0.35% total ongoing.

Whenever you pay higher charges for a managed solution, you have to decide whether the higher cost is viable or not. The passive only brigade will say no. The active only brigade will say yes. Those of us in the middle ground will say in some cases yes, in some cases no and will operate a hybrid option of passives by default unless a managed option offers sufficient potential to justify the higher cost.

So, you need to decide if that option is viable. I suspect most here will say no for that particular option.

Aegis

dunstonh wrote: »

not correct. Unless the IFA is also the DFM and they bundle their charges (not common but does exist).

Just expanding on dunston's point, this is a tricky grey area. The issue here is that if the IFA recommends a DFM and the majority of the work is associated with setting this up and monitoring it, the annual fee for the adviser does not qualify for the intermediation exemption in the same way as, say, an annual cash flow modelling exercise wouldn't qualify.



On the other hand, if the DFM is an incidental part of, say, setting up a pension (which is a qualifying retail investment product), and the annual service is very focused on the pension as a wrapper, then the annual fee can qualify as VAT exempt.


VAT is a really tricky area when it comes to mixing exempt and non-exempt activities, and I've definitely gotten it wrong a number of times in the past due to incredibly poor information about how this works.