Adviser fees

spock007

When my wife passed away I was tasked with managing my step-daughters' money. I was recommended an advisor who the money has been with. I want to add money to their accounts and the one-off fee for this (as it's under £150k) is 3%. So for £20k that's £600. Is this sort of fee typical?

Furthermore, if we want to retain our annual review and advice service, the charge is 0.5%. There's approx £200k so that's £1k a year for a bit of advice and a risk questionnaire filled out. I was thinking of going for the 0% basic service (transaction-only with no advice - no response to a market dip.. but then I don't know what the point having an adviser is in that case). Is percentage fee normal for one piece of annual advice and if so, is 0.5% normal? I'm just thinking I could use that £1k elsewhere.

This is in no way a slight to the adviser. I'm just curious what's the norm and if the above seems ok or not.

Thanks

Albermarle

0.5% annual fee seems to be about normal for a relatively simple investment portfolio and once or twice yearly reviews.
What is not normal is being charged for adding to your investments . Is this an advisor charge or is this the initial charge for the investment funds ?
Initial charges were once widespread but competition has slowly eroded then away .
If you invest yourself with a DIY platform then normally there is no initial charge . Also no advisor charge of course but then you have to make your own decisions , which is not for everybody.

SonOf

When my wife passed away I was tasked with managing my step-daughters' money. I was recommended an advisor who the money has been with. I want to add money to their accounts and the one-off fee for this (as it's under £150k) is 3%. So for £20k that's £600. Is this sort of fee typical?

If the investments are on a transactional basis (i.e. you pay the adviser as you use them) then yes, that fee is fine in monetary terms - £600 that is.

If you pay the adviser for ongoing servicing, then most will handle the top-ups with no additional costs as part of the ongoing servicing arrangement.

Is percentage fee normal for one piece of annual advice and if so, is 0.5% normal? I'm just thinking I could use that £1k elsewhere.

0.5% is the most dominant figure used by advisers.

Are you invested in a multi-asset fund or a portfolio of funds? (the latter would usually see the adviser adjust the holdings to rebalance and confirm research each year).

spock007

OK so good to know about the 0.5%, thanks.

I'll have to get home to check the docs but I think it's labelled as "initial charge" though I'm not sure if this goes to adviser or towards fund. I'll check and revert once I've got the answer. I was thinking of investing up to £30k for myself but that'd be £900 initial charge.....

Thanks for other reply, too - I will have to check over the coming days. Really appreciate your input - thank you!!

bowlhead99

Make sure you understand what you are getting for the ongoing service, because you may think that you will get a 'response to a market dip', but the adviser might not think there is any reason to particularly 'respond' if the portfolio is still suitable; markets will dip multiple times per year and it may be a while before the portfolio allocations naturally drift away from their targets.

Anecdotally, the dominant fee for ongoing servicing in relation to the market for independent financial advice is about half a percent, so you are in line with the market. That usually involves straightforward rebalancing of the portfolio, ensuring all the selected funds are still fit for purpose, and perhaps moving the existing money from unwrapped investments into iSA or pension wrappers as new allowances become available each year. Sometimes it will incorporate deploying new funds alongside the existing ones if the aims of the portfolio haven't changed and it's just going to be more of the same with no extra discussions expected about purpose, risk, suitability etc. But other advisers might charge if you are adding more money and the advised portfolio is growing significantly other than by the natural growth and income of the holdings.

If you go for a transaction only service without ongoing servicing or advice, it will be up to you to do your own rebalancing, mess around with tax wrappers, determine for yourself if the holdings are still suitable from time to time, and so on.

Depending on what your adviser thinks your stepdaughter's (or your own) level of understanding and interest) engagement with the investment process is, he might give you a more simplistic solution if it is only going to be one-off advice - because he can't rely on you to actually do the ongoing rebalancing to keep the portfolio targeted at its original level of risk, and not to dump all the equity funds out of panic at the exact wrong time at the bottom of a crash and miss the rebound, etc. In that case, instead of building you his favourite model portfolio, he might pick a simple mixed asset fund where a fund manager periodically does the rebalancing. You could of course just buy one of those yourself.

Really the adviser's advice and any ongoing servicing is mostly about (a) getting something suitable for your stepdaughter's needs and (b) ensuring it remains appropriate over time. If you are comfortable managing your own portfolio and know how to build and monitor something for your stepdaughters needs, you are right that you can just use the cash you would have spent on fees, on something else, just as you might choose to get your own hands dirty in your driveway rather than paying a guy to do an oil charge.

bostonerimus

Those fees don't sound out of the ordinary, but I think your initial feeling that you don't get very much value for what you are paying is spot on.

spock007

I wonder if I can get around the initial charge fee by instead just changing my monthly pay-in from £200 to £2-3k.... it's then just changing a number I'm already paying in with.

SonOf

spock007 wrote: »

I wonder if I can get around the initial charge fee by instead just changing my monthly pay-in from £200 to £2-3k.... it's then just changing a number I'm already paying in with.

Unlikely as the contract terms for regular premiums are usually based on an annualised premium.

spock007

I'm afraid I didn't understand that...
I've e-mailed to ask re clarification w.r.t. on-going and initial cost fees.

SonOf

spock007 wrote: »

I'm afraid I didn't understand that...

If the advice firm is charging on new money being added then they will likely have a charge for both single premiums and regular premiums. And where it is on a regular premium, it will usually be a percentage of the annualised premium increase. e.g. x% of 12 months worth.

spock007

Ah, sorry - I get you... thanks!