Cost of independant financial advice

OldMusicGuy

marko121 wrote: »

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!

It's not that hard and it's possible to do it without making a right royal mess of it.

Have you read "DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning" by John Edwards? If not, I would really recommend you do so before you finally decide what to do.

Albermarle

To the OP be aware that some posters have strong views about not using/paying IFA's and doing it yourself .
Others think that for someone lacking in confidence/knowledge it is worth paying someone.

In the end only you can make the decision. From what you have said already it could be the cost is worth it .

I've tried reading/learning, and all it achieves is convincing me that I'll make a right royal mess of it,

[Deleted User]

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.

First of all, any investment that had a positive return last year did well. Most asset classes experienced small losses.

Secondly, never act on one year’s performance. It’s meaningless.

Third, you should only compare against appropriate benchmarks rather than absolute values.

Last but not least... Best returns are usually experienced from investments that have been left alone or forgotten. That’s not what I do (I regularly look at what’s going on) but it’s been proven time and again. And if monitoring is taking place, most of the time “do nothing” is the best approach.

Occasionally one may need to rebalance but it’s rare this is really necessary and then the benefit is to risk management rather than returns.

Do the investments right. Then forget about them. This strategy is particularly advantageous now that you can literally buy the world with a single cost efficient product that will do the rebalancing for you.

bostonerimus

marko121 wrote: »

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?

If you have a well designed portfolio there should be no need to do any moving of funds other than maybe a bit of rebalancing. Chasing return often leads to very poor outcomes. I haven't adjusted my portfolio in 7 years because it's doing just what it was planed to do.

You are obviously worried about your pensions and the best way to solve that issue is to educate yourself. So stop listening to financial types (other than on this forum of course ) as they will often want to make things more complicated than necessary. Taking control of your finances will make things seem far clearer as you will be able to ignore all the garbage and distractions once you have a good plan that you understand. That can be done DIY or with an IFA, but your plan will be better in either case if you are knowledgeable.

Here is a link with some basic information. It is a start and has links to some well known and regarded books at then end. Taking a month or so to read and learn about personal finances will be the best investment you will ever make.

https://www.bogleheads.org/wiki/UK_investing

HarryGray

It is difficult to gauge without knowing your figures, but 3% on any amount seems high for an IFA to charge. Typical charges would be 0.5% to 1% adviser fee and then add on the platform fees and fund costs. Usually takes it to maximum 2% a year depending on what you're investing in.

Then there's the actual 'cost' of the IFA. Depending on your needs, they are almost always worth it and can save you £££ thousands in the long run.

Aegis

HarryGray wrote: »

It is difficult to gauge without knowing your figures, but 3% on any amount seems high for an IFA to charge. Typical charges would be 0.5% to 1% adviser fee and then add on the platform fees and fund costs. Usually takes it to maximum 2% a year depending on what you're investing in.

Then there's the actual 'cost' of the IFA. Depending on your needs, they are almost always worth it and can save you £££ thousands in the long run.

The problem here may be the size of the investment pot. £90k at 0.5% is £450 a year, which doesn't cover many costs for the IFA and may actually represent a loss each year just in the cost of maintaining the portfolios (depending on the investment approach being used). If the IFA were to levy a fixed minimum cost of, say, £1,200 a year, that is immediately over 1% on a portfolio of £90,000.


I think for a portfolio of 90k, the aim should be for a one-off piece of work to consolidate into something that doesn't require ongoing advice. Anything else is likely to be unnecessarily expensive and probably not likely to generate significant benefits after costs.

Duffbeer

You have 3 pensions - there are special rules for small pension pots (under £10,000) which can be taken as a cash lump sum, see pensionsadvisoryservice.org.uk.

Once you amalgamate, this option is lost, so I'd echo the advice above, take a month and try and read up a bit more before paying for advice - even if all you do is scribble down a list of topics that you need to query with the IFA.

Best of luck - there are some simple one-stop providers that you may already have visited online like Nutmeg investments and Nest pensions. There's also the aspect of drawing your pension in a tax-efficient way which needs as much thought as investing it. Leaving 3 separate pots might be a sensible thing or not, for different circumstances. For example, being able to leave two pots growing tax free while starting to draw on another.

Mick70

what area is the OP ?
Can you not contact 3-4 IFAs in the area for quotes ?
As others say the going rate seems to be around 0.5% p.a IF want to use an IFA and a similar amount to the pension provider for using their platform and services

Malthusian

Duffbeer wrote: »

Once you amalgamate, this option is lost

It isn't - there are providers who will split the pot up into up to four parts so you can take three of them under the small pot rules.

Leaving 3 separate pots might be a sensible thing or not, for different circumstances. For example, being able to leave two pots growing tax free while starting to draw on another.

There is no need to keep them separate if that is the motivation - the undrawn funds from the third pot have the same tax treatment as the other two.

marko121 wrote:

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!

One of the reasons people pay IFAs is so they can put their feet up knowing that it hasn't been made a right royal mess of.