DB Pension transfer - IFA costs

bigadaj

TN1984 wrote: »

FFor all they know you might go and put the whole lot in a single share your mate at the pub recommended and lose it all.

I can't see anyone on this thread doing something so stupid as to say invest in four shares with the whole of their pension pot;)

[Deleted User]

bigadaj wrote: »

I can't see anyone on this thread doing something so stupid as to say invest in four shares with the whole of their pension pot;)

https://forums.moneysavingexpert.com/discussion/6037441/zingpowzing-v-bowlhead-challenge

Daniel54

ZingPowZing wrote: »

https://forums.moneysavingexpert.com/discussion/6037441/zingpowzing-v-bowlhead-challenge

Yikes - a great exampl of why to invest in a spread portfolio.

Most of my money is is in funds but I hold a low cost of individual shares.Intersting and high risk.

Which is something you would never,ever,put your pension into (long term Sipp and Isa are all in funds)

Suemac2a

Today I also learned you get logged out composing long replies ��.

Wjr4. i meant commission only as synonym for % fee.
I probably (definitely) exaggerated total fee bill but understand 3% of transfer values is not unheard of. My point is that it will be a substantial amount by all accounts so I get that appointing an IFA should be a very considered purchase in its own right.
I have good investment experience and my partner was a corporate accountant.
However we have little (nil) experience of finding and appointing an appropriate IFA to give mandatory advice for a potential pension transfer. Hence this post.

TN1984 thank you, and what you say makes sense. The role and control exerted by some IFAs seems beyond scope of original intention and I can appreciate the impact of professional indemnity. Would be more straightforward if you could sign a legally binding waiver.

And yes you are right a 3% fee gets lost within the overall scheme of things but I dont think it unreasonable to want to understand the actual value of that service, otherwise it feels like a tax. Our decision will be based on what meets our lifestyle objectives but also irritation/hassle, and the more I read the more I understand this will not be an easy choice to pursue and execute well. There is a vague feeling that this isnt really 'our' money but money institutions will let us have some of, on their terms.

Which leads me neatly to Zing, thank you for posting and I have read your own frustrating experience, which strikes a chord. The industry seems to be predicated by hindsight and opacity and clients knowing miraculously to ask the right questions, doesn't it. If we do go down the IFA process ourselves it will be interesting to see if we do get a recommendation to transfer or not as we believe its clear cut ..... but duly note your own experience. Thank you.

Daniel, I was looking at a low risk SIPP spread portfolio with focus on income generation but like you we have other investments and other risk profiles so we would work out a balance. Early stages. In our case we would be transferring not because we have a need or gap in existing investments but because we feel there is higher risk staying versus transferring.


i appreciate everyone who has taken time to respond, thank you.

Suemac2a

Thrugelmir

In a nutshell no. Long track record of personal responsibility.
One of only three people in UK (possibly ��) that didnt try to claim ppi compensation.
Would be happy to sign legal waiver.
Root of my suspicion on actual value of professional advice is very probably fact that I had my own portfolio of investments reviewed and I was terrified into reducing my emerging markets exposure and dramatically increasing my defensive UK stocks - banking, pharma. I think you can guess what happened 6 months later.
We dont need the transfer value pot to do much so low risk.

bigadaj

Suemac2a wrote: »

Thrugelmir

In a nutshell no. Long track record of personal responsibility.
One of only three people in UK (possibly ��) that didnt try to claim ppi compensation.
Would be happy to sign legal waiver.
Root of my suspicion on actual value of professional advice is very probably fact that I had my own portfolio of investments reviewed and I was terrified into reducing my emerging markets exposure and dramatically increasing my defensive UK stocks - banking, pharma. I think you can guess what happened 6 months later.
We dont need the transfer value pot to do much so low risk.

The problem is that as you are not formally qualified a legal waiver signed by you would hold no weight and the adviser would still be potentially liable. Cases like those have still been found in favour of the client, who has signed to take responsibility but made a claim that was subsequently successful and paid for by the adviser or his insurers.

Like many areas things swing too far one way and then too far the other. Objectively the ability to transfer a db pension is a privilege rather than a right, and the compelling reasons for doing so in recent terms are still a consequence of the gfc, with risk being skewed and the perceived cost of guarantees being radically increased beyond what would have been historically the case.

ZPZ is an interesting case in that you have someone who has seemingly no knowledge or investment experience benefiting dramatically by investing well beyond their risk tolerance. It's cases like that which mean that logical and experienced investors struggle to transfer when they would make a far better job of it.

Thrugelmir

Suemac2a wrote: »

In a nutshell no. Long track record of personal responsibility.
One of only three people in UK (possibly ��) that didnt try to claim ppi compensation.
Would be happy to sign legal waiver.

If you lived through the events of 1992. Then you should be at least be battle scarred and wiser.

Make it 4. Having an inside view of the commissions being paid. I avoided all such products.

Not that easy to absolve responsibility unfortunately.

I was looking at a low risk SIPP spread portfolio with focus on income generation

Everybody wants to have their cake and eat it. Such assets will naturally be in demand and highly priced as a result. As Warren Buffett once said "if making money were that easy everyone would be a librarian".

MarkCarnage

Some additional points.....

I checked how much my advice costs were. Total of a little over £5k in 2016/17, but £750 of this was for separate advice on LTA planning. The advice for DB transfers was for two separate transfers, and was transactional, with no contingent fee as my adviser rightly said this would be conflicted. However he did say after our initial chat that he was fairly sure the advice would be positive based on my wider situation and my professional investment knowledge, subject only to the CETV numbers being reasonable, which I already knew they were. There was no ongoing adviser fee as I transferred it to a SIPP. This is what caused the problem with the FCA at a late stage as they seemed unhappy that I was going to be managing it and hadn't given 'enough' detail of the investment strategy. They were factually incorrect. All nonsense anyway as I could have told them one thing and then done another.

Therefore I think that the estimate of £5k given above is probably reasonable, particularly if it's a single transfer with no ongoing advice costs.

There are plenty of threads on here and on the S&I board which show that there are many people who have a worryingly low level of investment knowledge and risk for what they propose to do or have done, and that is probably what worries the regulator. A good IFA is a necessity for these people and even then it's questionable whether a DB transfer is right for them.

The British Steel pension fund issue has catalysed regulatory action here, and it was a slow train crash watched for far too long by the regulator as it was manifestly clear that a small number of 'advisers' acted unscrupulously at best, offering deeply flawed 'advice' and moving money to some scandalously unsuitable investments. This has meant that the pendulum has probably swung too far the wrong way, and you may or may not be a victim of that.

I do take issue with the FCA premise that only around 1 in 10 cases are likely to justify transfer, and the presumption that because the actual number is higher that is a problem. This is flawed on two grounds. Firstly, a lot of advisers operate a 'triage' system at much more modest cost, which will screen out manifestly unsuitable cases before they get to the full advice stage which is what the regulator measures. Secondly, the consequences of QE combined with the rational behaviour of DB pension fund Trustees in the context of their own constraints, has opened up a wider subset of cases where transfer is likely to be a viable and rational option for individuals with a different set of constraints from these pension funds,and where the advantages of varying income to manage tax, and preserving capital in their pension fund are also significant, and the regulator has not taken account of that in its view of the proportion of viable transfers.

The advice costs are probably now at a level which act as a natural screening out of transfers of less than £100k or so (I generalise a bit), and there are people who may rightly feel aggrieved whose CETV falls in the £30-100k level, but it is what it is.

You state that you have a lot of experience of managing your own ISA, but don't go into a lot of detail. Managing a portfolio in drawdown, which is essentially like managing the capital on a variable annuity without the risk pooling which reduces mortality risk,is a different skill set from managing an investment portfolio which may have very different constraints. Your other portfolios may well give you some cushion to make mistakes here, but it's still worth testing the SIPP portfolio quite rigorously for stress scenarios and the online calculators offered by many providers don't really pick up on some of the path risks involved. You mention that it is intended to be 'low risk' with a focus on income generation. What level of income generation is being targetted and do you expect to confine withdrawals to the natural yield of the portfolio?

ZPZ clearly feels he has had a raw deal, and tars advisers with a brush accordingly. Many disagree with him on here, and the Ombudsman did too.

[Deleted User]

bigadaj wrote: »

ZPZ is an interesting case in that you have someone who has seemingly no knowledge or investment experience benefiting dramatically by investing well beyond their risk tolerance. It's cases like that which mean that logical and experienced investors struggle to transfer when they would make a far better job of it.

What does that even mean?

Suemac2a

MarkCarnage
Thank you for confirming your specific costs which with other sources have given me a much better idea of what the IFA analysis itself should cost.

I would agree that very few people would not benefit from independent professional financial advice and we have routinely used advisers in the past. My scepticism is confined to the bundling of fee quotations and the risk of being tied into an advisers services beyond the actual requirement - which may not be in our interests.

This query was really preparation for shortlisting IFAs and I am much clearer in the questions we must ask up front so has been hugely useful. Zings experience is wholly relatable regardless of whether you agree HL is a villain of the piece - my takeaway is to make sure we know the courses of action open to us through the process.

You ask for more specifics about investment strategy of the transfer value should we proceed. The correct answer surely is (regardless of what we currently think) this is exactly what the IFAs analysis should direct based on our broader assets and income and tax requirements, irrespective of our own calculations and preferences (`which are absolutely a work in progress following this CETV curveball).