Independent financial advice

thegentleway

Hi,

I guess the question I'm asking is do you really a financial advisor for your pension?

I've spoken to an FA at 7IM and another from Critchleys. I can see how their services are great for lots of people and circumstances but I can't see what value their management services bring to someone who is confortable managing it themselves.


There are four pensions from a pension sharing order which I want to consolidate into one SIPP. I've looked AJ Bell, HL, and ii charges and ii is the lowest cost for my circumstances. I just need to open a SIPP and respond to the four schemes with the new SIPP details. That's the first step, the FAs want up to £10k just to do that!?

The next step is to invest some of it. I would do some research and pick a dozen or so lost cost passive funds in line with low risk profile. Again, I can see how an FA could be very useful here if I wanted to put all my pension in Japanese equities. However, I'm confortable picking funds (I already do in my S&S ISA) and I would run my proposed pension portfolio past an FA just to make sure I'm not doing anything stupid (can just pay them for piecemeal work). That's the second step, again the FA want loads of money on a per annum basis to do this for me as part of their wealth management services?!

Finally, there is drawing down in a tax efficient way. Again, I'm confortable looking up tax rates etc... I do my own tax return for my property and BJJ businesses. I run it past an accountant for a few quid just for a sanity check, which is worth it as he does from time to time make small corrections. Again, I can run past my draw down plan past a FA as piecemeal work to make sure I'm not paying extra taxes!

Hopefully that sounds sensible and money saving but please let me know if my naivety is getting the better of me and I should just pay an FA to do it all for me.


Thanks,


Tom

Marcon

What sort of amounts are we looking at? Sometimes IFAs can get better rates and that alone can be worthwhile.

SonOf

I guess the question I'm asking is do you really a financial advisor for your pension?

Its the same as any job in life. If you can DIY well, you can avoid using an adviser and save money. If you DIY badly, it can be a costly mistake.

However, you should not use a financial adviser. You should only consider an independent financial adviser. The "I" is important.

That's the first step, the FAs want up to £10k just to do that!?

Most IFAs will be a lot cheaper than that. In monetary terms, money purchase transfers will be a few thousand.

However.......

I would do some research and pick a dozen or so lost cost passive funds in line with low risk profile.

....That makes you high risk for the adviser and creates an extra workload that many will price themselves out of intentionally. i.e the fee is high to act as a passive blocker as they dont really want to deal with you.

That's the second step, again the FA want loads of money on a per annum basis to do this for me as part of their wealth management services?!

When giving investment advice, the FCA would expect the recommendation for the investments to be suitable. A portfolio of single sector funds built to match the adviser's due diligence and research criteria and asset weightings would need rebalancing and reviews. If you dont want ongoing servicing, then a multi-asset fund would typically be used in its place.

Again, I can run past my draw down plan past a FA as piecemeal work to make sure I'm not paying extra taxes!

By the time the IFA has obtained the details and run it through their software and then given you advice, it ceases to be piecemeal.

Whilst many IFAs will act as a sounding board for ongoing servicing clients, it is less likely they would do so for a transactional (one off) client. It is just too much work when the person is only expecting to pay piecemeal pricing. Plus, there is the regulatory risk that it would be classed as advice and therefore be expected to meet all the requirements of advice. It ceases to be piecemeal in that case.

Hopefully that sounds sensible and money saving but please let me know if my naivety is getting the better of me and I should just pay an FA to do it all for me.

Money saving isnt about avoiding paying fees if the outcome is not satisfactory. Money saving is about value for money.

So, its back to the earlier point. DIY or IFA (not FA). If you want to DIY then do that. If you are not comfortable going DIY then use an IFA (not FA).

Linton

From their websites both the IFAs you have chosen appear to be relatively large up market companies with plush offices. You would probably get a better deal from a small local IFA.


The main role of an IFA is to put together a portfolio appropriate for your objectives and help ensure it is managed in line with those possibly changing objectives. For example:
- you say you want a dozen passive funds to provide a cautious portfolio. 12 funds seems a lot unless you have a large pot and want detailed control over the allocations to asset type/geography/company size etc . Why have you chosen this number? Do you have a stategy that calls for it?
- Do you know which set of passive funds will provide a portfolio that meets your "cautious" requirement? Passive on its own does not imply cautious.
- A cautious portfolio implies one with reduced returns. What returns do you need to provide the standard of living you require in your retirement? Are you likely to get them with your chosen portfolio?
- How much do you need to drawdown each year to optimise your tax? If it is a very large pension are there tax avoidance mechanisms you could use? WIll you be in danger of exceeding your lifetime allowance at some stage?
- How will you manage your money year-on-year? Annual rebalancing, reassessment of investments, review against target etc etc?


If you can answer these sort of questions with some level of confidence, especially if the pot is relatively small, say < £100K then I suggest that an IFA may not provide sufficient extra assistance to be worth the costs. If they leave you baffled and you have a large pot to invest paying an IFA may well be a worthwhile investment.

[Deleted User]

In my opinion, financial advisors can be very useful to help develop a financial plan to achieve a particular goal as well as tax, insurance or inheritance strategies. Obviously they are only useful for people who need that kind of thing, who do not have experience in these areas and need handholding.

When does one need an advisor to build an investment portfolio? Hardly ever. In particular IFAs who charge ongoing fees are incentivesed in a way that isn’t aligned with the interests of their clients and invariably design unnecessarily complex and expensive portfolios. They also tend to lack education to properly understand simple statistical concepts and risks.

cfw1994

OP, you sound pretty clued up on this kind of thing which does lean you towards DIY versus managed.

Is there any urgency to crack on with this?
If I were in your shoes, I would strongly consider investigating the Vanguard Pension scheme when it is available next year: likely to be very low cost, offering well known passive tracker options (as well as some others if you wanted to "gamble" with some of your pot by putting some in other funds).

As others have said, 12 funds sounds a lot.
Just as an example, my "main pot" is with Aviva, and seeing as I am close to 'retiring' from the day job, I have currently got the funds spread about like this (loosely from lower risk to higher risk):

• Pre-retirement Fixed Interest, fund holding 10%
• BlackRock Over 15 Year Corporate Bond Index Tracker FP, fund holding 15%
• BlackRock Over 15 Year Gilt Index Tracker FP, fund holding 15%
• BlackRock World ex UK Equity Index Tracker FP, fund holding 30%
• North American FP, fund holding 30%
  

As SonOf suggests, IFAs may not be overly interested in 'piecemeal' work - which I personally feel is a great shame - I feel there is a huge market for people with maybe 50-500k pots who just want a nudge in the right direction rather than having their funds managed at a cost that risks depleting the gains....but such is the world we live in, and thankfully we have forums like this (& Monevator, Pistonheads, MMM etc) to be able to bat around ideas with others.

Good luck!

Ciprico

I recently amalgamated 2 pensions onto Interactive Investor, for 2 main reasons

1/ I was paying several thousand pounds pa to each of the pension companies for doing (as I saw it) very little.

II have a flat fee SIPP of about £120pa

Other companies may be cheaper, but I already had an account II and positive dealings with them.


2/ I didn't have time (or ability) to analyse all the funds being offered by the pension companies, (there were potentially 100s). I am comfortable with Vanguard VLS60, along with a few other investments and quite enjoy researching and learning about investments/pensions


(3/) There is a "transfer in" bonus at the moment for II - I missed out on this, maybe not a reason to use them, but if you are already decided, why not take advantage if it!

[Deleted User]

If I were in your shoes, I would strongly consider investigating the Vanguard Pension scheme when it is available next year: likely to be very low cost, offering well known passive tracker options (as well as some others if you wanted to "gamble" with some of your pot by putting some in other funds).

I like Vanguard and hold Vanguards ETFs, but their SIPP appears to be targeted at people just starting on their investment paths.

They did advertise several neat features, like no-cost withdrawals and an option to buy/sell ETFs without commissions. Suspect their entry into the SIPP market will push others to lower fees and offer similar features

Malthusian

cfw1994 wrote: »

As SonOf suggests, IFAs may not be overly interested in 'piecemeal' work - which I personally feel is a great shame - I feel there is a huge market for people with maybe 50-500k pots who just want a nudge in the right direction rather than having their funds managed at a cost that risks depleting the gains....but such is the world we live in, and thankfully we have forums like this (& Monevator, Pistonheads, MMM etc) to be able to bat around ideas with others.

There are plenty of IFAs who are very happy to provide transactional advice. The market is not huge because most people who want to hire an IFA to make sure X happens would want them to review their situation again in at least a year to make sure X still happens.

Most financial affairs that might require professional advice should be reviewed at least once a year. Either you hire a professional to do that review or you DIY it. (Or you don't bother, which is DIYing it very badly.)

If someone was happy to DIY their own pensions and investments from time T+1 onwards they would probably be happy to DIY at time T. The market for transactional advice (i.e. people who want to DIY their pensions and investments but not today) is therefore limited.

You kinda answered your own question. For those just want a "nudge in the right direction" but want to remain liable for their own decisions, there are myriad forums, money columns in the newspapers, books, etc.

Albermarle

II have a flat fee SIPP of about £120pa

The £120 is for a non SIPP account . A SIPP costs double that and a SIPP in drawdown minimum £360 a year.
This is still competitive , especially for larger sums , but not the very cheapest.

, I would strongly consider investigating the Vanguard Pension scheme when it is available next year: likely to be very low cost,

Although this will be a competitive offering , it is not that different in cost from SIPPs you can get today , so no point hanging around for it and you can always transfer at a later date.