IFA annual commission on pension pot

Mick70

If possibly doing a DB To DC transfer , to Royal London, I understand the upfront fees (3k) for the IFA to give initial advice on whether to transfer as apparently involves a lot of work ? I also have a 0.75% fee if the actual transfer does take place (again im assuming that is fair - one advisor had quoted 2%!)..
But , if the transfer would go to Royal London , who then do the investments , why do you then pay the IFA an annual %fee (0.35% of fund in this case) , not really sure if that is just doubling up on fees that Royal London would already be taking annually ?
The pot would not be accessed for a few year yet.

Any advice much appreciated ,
Mick

Albermarle

Royal London is only the pension provider , they do not provide any advice .Either you or the IFA has to decide how to invest the money within the pension . You are paying the IFA for their advice on how to exactly invest the money within the pension .
This would be exactly the same if the pension provider was not Royal London .

fjh

So the OP. Could invest with the Royal without paying ongoing fees to IFA? Or will the Royal insist on ongoing involvement of IFA.?
I am in a similar situation with the Pru

tacpot12

There is quite a bit of work in providing the transfer advice, and there is a significant cost for insurance to cover you in case where the advice is later judged to have been incorrect.

Once the recommendation to transfer or not is given, there is then some administrative work to complete the forms that get sent to the DB scheme, and to actually invest the money that the DB sends to the IFA. However, deciding what to invest in, and deciding on a regular basis whether to remain invested is another form of advice, and it is that which the IFA wants to charge 0.75% pa for.

Apparently the industry average is 0.5% pa for pension investment advice.

This advice is difference from the service you receive from RL's Investment Managers. The RL Investment Managers don't work for you directly, they have no knowledge of your individual requirements. They decide how best to construct an investment fund to meet a specific objective that they think there will be many customers for. The fund fees pay for the costs of the RL investment managers and the cost of creating the fund.

RL may also charge you what might be terms "platform charges" to cover the cost of the IT system, dealing costs to buy and sell fund units/shares/bonds etc., managing tax relief and income tax on withdrawals.

Your IFA should have explained this to you, but many do not because the more the customer knows the harder it is to charge high fees!

Bear in mind that while your IFA should create an investment portfolio to meet your specific needs, if they have more than a handful of customers, there will be many customers with very similar needs and similar attitudes to risk, so the IFA is almost certain to have a 'model' portfolio that you will be allocated to based on your needs and attitude to risk. That way the IFA's cost of designing a portfolio are spread across all the customers assigned to that portfolio. This is an efficient way on managing their work. Only the wealthiest clients will have (or need) their own bespoke portfolio. The IFA does have an hard job deciding what to invest in, given that they are supposed to consider the whole market, and the market is constantly moving.

SonOf

IFA annual commission on pension pot

Commission ended on new business at the end of 2012. Only on pre 2013 business can it continue if it was already in place at that time

But , if the transfer would go to Royal London , who then do the investments , why do you then pay the IFA an annual %fee (0.35% of fund in this case) , not really sure if that is just doubling up on fees that Royal London would already be taking annually ?
The pot would not be accessed for a few year yet.

Ongoing investment advice and suitability and no charges on administration tasks (which usually includes drawdown events, top ups etc)

RL do not provide advice. They are the provider. The adviser provides the advice. Hence why the charge is split. In the old commission days, the charge wasnt split and you just paid a total.

So the OP. Could invest with the Royal without paying ongoing fees to IFA? Or will the Royal insist on ongoing involvement of IFA.?

Ongoing charges are always optional. Dont assume it will be cheaper in the long run. And the adviser will probably recommend a different investment strategy without ongoing servicing.

[Deleted User]

there is a significant cost for insurance to cover you in case where the advice is later judged to have been incorrect.

Isn’t it a cool system that th e customer gets to pay extra because the advisor might be incompetent?

bowlhead99

Deleted_User wrote: »

Isn’t it a cool system that th e customer gets to pay extra because the advisor might be incompetent?

Capitalism provides a cool and convenient system that allows advisers to select the work they want to take on and charge whatever fees they agree with their customers. As a result of more money being charged to people who can afford to pay it, for advice on their larger pots of money or for various complex services which are riskier for the adviser to take on, the adviser is able to get sufficient fee income so that customers with smaller pots and simpler needs don't need to pay higher fees to the adviser which they might not be so readily able to afford.

At the end of the day, you find across most professions that service providers are not going to want to offer a service which presents a high level of business risk without being adequate compensated. You see that in law, accounting, financial services, private health etc. Is it 'pretty cool' that a portion of customer revenues will fund insurance (including self-insurance) for service providers' potential mistakes?

I suppose so, because if people did not pay a risk premium when buying the service, providers would be reluctant to offer the service, which would not help people who wanted or needed the service, due to the old "price is a function of supply and demand' malarkey.

Aegis

Deleted_User wrote: »

Isn’t it a cool system that th e customer gets to pay extra because the advisor might be incompetent?

No, it sucks. But pick any profession, any shop that you visit, any service than you require, and the cost of insuring against risk will (or should - some will be under-insured) be included in your fees.

Mick70

fjh wrote: »

So the OP. Could invest with the Royal without paying ongoing fees to IFA? Or will the Royal insist on ongoing involvement of IFA.?
I am in a similar situation with the Pru

As far as aware Royal London dont insist

Mick70

Also it is Royal London who Would receive the transfer not the IFA

SonOf

Deleted_User wrote: »

Isn’t it a cool system that th e customer gets to pay extra because the advisor might be incompetent?

Pretty much the same in most service sectors. Jobs that carry more risks get the risk priced into job.