Cost of independant financial advice

marko121

Good evening,


At half way through my 50's, the stress regarding my pension arrangements grows each year. I find the whole thing too complex to get my head around, and, on top of that, there's the worry that instead of being correctly and professionally advised, I engage with the wrong person and end up getting ripped off and left with nothing....


The last advisor I spoke to wanted 5% of my total pension fund for the first year, followed by 3% each year after... I told him he was being ridiculous, thanked him for his time, and asked him to leave. This was about five years ago....


I now have three pension pots, with a fourth about to start, which has forced this issue back to the fore for me.


To that end, I contacted the advisor who set up an Aviva pension for me ten years ago, at a time when commission was still allowed. Back then, he corrected many of my misunderstandings regarding the independant financial advice industry, informing me that I probably couldn't afford his services going forward, asking if he could help me sort things out...


The reply is below....

Thanks for sending the information through, these are all Money Purchase Schemes , so they are all effectively the same as your Aviva Pension that I set up for you.

We could look at consolidating them all to the one plan, which would make it easier to monitor and reduce the paperwork. From a charging and performance point of view , we would need to write to the providers and ask some relevant questions , but looking at the detail we could reduce the costs on a like for like basis on the Aviva plan , but there is no detail on the remaining plans , so that needs confirmed.

The other aspect is the performance of the different plans , but again I need to write to them to establish that detail.

In terms of our fees , we would charge 3% of the amounts transferred to any new plan and an ongoing fee of 0.5%pa of the fund value, which would give you an increased service package from the current position, so as a guide the current cost of the Aviva plan is 0.8%pa with no on-going advice , but the new cost would be 0.9% pa , with advice available at no further cost.

If you want us to carry out the review Iam confident that we could produce better returns overall and have a more controlled approach to your pension planning as you head towards retirement.

Are these prices typical or competitive?
What can I expect of these 'services' I would be paying for?


Right now, I would expect that he would move the pots somewhere more productive (1 of them only increased in value by £2 last year) and also monitor performance ensuring that it is always optimum. Come pension time, I would expect him to translate all that legalese into something I can get my head around.
Is that a realistic expectation?


Thanks in advance for any time taken in replying, and apologies if this isn't posted in the right place.


Regards,
Mark.

sandsy

Without knowing the size of the pots you are considering transferring, it's hard to know if 3% is high or low.

An ongoing advice charge of 0.5% is typical (certainly don't go with anyone charging more) but the following clause that it would increase your Aviva cost from 0.8% to 0.9% makes no sense to me.

SonOf

The last advisor I spoke to wanted 5% of my total pension fund for the first year, followed by 3% each year after... I told him he was being ridiculous, thanked him for his time, and asked him to leave. This was about five years ago....

The average upfront is around 1.8% (with smaller investors paying more and larger ones paying less in percentage term). The ongoing is typically between 0.5% and 1% (with 0.5% being dominant but 1% typical on smaller values.

I have never seen any adviser take more than 1%p.a. and most ongoing charges as a bottom line would not usually exceed 2% nowadays.

bostonerimus

Educate yourself whatever you do. Start by understanding the pensions and funds you currently have. I’d like to understand why one of your funds rose such a small amount so see what it is invested in.

The fees you are being quoted sound like the norm, but that doesn’t necessarily make them ok or value for money. It’s easy to DIY and if you learn a bit you will be able to make an informed decision to DIY or stay with an IFA. If you do stay with the IFA you will be able to ask more relevant questions and understand the answers and know if you are getting good service.

xylophone

I now have three pension pots, with a fourth about to start, which has forced this issue back to the fore for me.

A new employer's scheme?

Had you looked into whether it would be possible (and if so, to your advantage), to transfer your old pensions into this pension?

[Deleted User]

Put it this way... Depending on the make-up of your investment, 3% might be your annual expected return. So, it means you have to work for another year before retiring. And then 0.5% ongoing, that’s 1/6 of you annual returns year in and year out. So, if you have 12 years left, add another couple of years.

Alternatively, you could read a couple of good books and follow what they say. If you don’t understand them, you can always go back to plan A, but find a cheaper adviser and avoid ongoing fees like the plague. Once the investment account is set up well, ongoing support should not be required.

Also, while having everything in one place is convenient, I struggle to justify paying anything for the pleasure - unless the providers are awful and expensive.

By the way, does this site have a list of recommended books on various financial subjects?

beamyup

You could take a look at something like pensionbee.com . They specialise in "beginners DIY" and consolidation.

shinytop

sandsy wrote: »

Without knowing the size of the pots you are considering transferring, it's hard to know if 3% is high or low.

An ongoing advice charge of 0.5% is typical (certainly don't go with anyone charging more) but the following clause that it would increase your Aviva cost from 0.8% to 0.9% makes no sense to me.

The current Aviva pension charges 0.8%. The IFA service would charge 0.9%; 0.5% to the IFA and presumably 0.4% to the platform/funds used.

pip895

OH had five different mainly very small pensions all "Defined Contribution". I rang Hargraves Lansdown and arranged for them all to be transferred in - I don't remember there being any charge and it was all pretty painless - a few forms to fill in and sign (it was ~ ten years ago though).

They do now have a platform charge of 0.45% - so depending on the funds you pick, could end up no cheaper than fidelity. It would potentially get rid of the 3% upfront but you would be without advise on what to invest in so it would only be viable if you are happy (after doing your research) making your own investment decisions. Other platforms are cheaper but generally less slick and with poorer websites.

Albermarle

If you really prefer to take advice rather than DIY, then I think 0.5% ongoing charge is OK , especially as the actual cost of the pension will reduce ( as IFA's have access to lower charges ) meaning you will not be paying hardly any more than now.
However I would try and get the initial charge for transferring the pensions down, as if you were doing it yourself it probably would not cost anything. Especially if you agree to ongoing charges then this should mean you get charged less for the initial transfer ( in my opinion )

marko121

SonOf wrote: »

The average upfront is around 1.8% (with smaller investors paying more and larger ones paying less in percentage term). The ongoing is typically between 0.5% and 1% (with 0.5% being dominant but 1% typical on smaller values.

I have never seen any adviser take more than 1%p.a. and most ongoing charges as a bottom line would not usually exceed 2% nowadays.

Thank you. I think there's about 90k between them all at the moment. Would that make the 3% reasonable?

Albermarle wrote: »

If you really prefer to take advice rather than DIY...

I do. I've tried reading/learning, and all it achieves is convincing me that I'll make a right royal mess of it, and won't realise this fact until it comes to actually retiring!

Albermarle wrote: »

However I would try and get the initial charge for transferring the pensions down, as if you were doing it yourself it probably would not cost anything.

This. I never think to haggle. I will definately push that angle.


Thank you all for the responses, very much appreciated. It would appear the consensus is that whilst he's not 'bargain basement', he's not overcharging either.
Mordko approached the other burning question for me, namely, if I'm paying him ~1k p/a, what kind of service should I expect?

Deleted_User wrote: »

If you don’t understand them, you can always go back to plan A, but find a cheaper adviser and avoid ongoing fees like the plague. Once the investment account is set up well, ongoing support should not be required.

This right here is what I was wondering when I asked...

Right now, I would expect that he would move the pots somewhere more productive (1 of them only increased in value by £2 last year) and also monitor performance ensuring that it is always optimum. Come pension time, I would expect him to translate all that legalese into something I can get my head around.
Is that a realistic expectation?

Should I expect more?


Regards,
Mark.