DB Pension transfer - IFA costs

MarkCarnage

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).

I didn't really intend to ask for specifics of the strategy, so apologies if that is misconstrued. Only wanted to find out if you were intending to take natural yield from the portfolio, and maybe high level asset allocation.

For me, the IFA's work should be in this case to provide critical challenge, and seek to improve on your own proposition whilst taking account of your wider situation. My own IFA was comfortable with my proposal given that I have a large mainstay DB pension as underpin. He also suggested that what I put in writing as my portfolio 'ticked some boxes' in the full knowledge that I might then go away and change it . In practice, the main thing I did differently was keep a bit more liquidity as I wanted to move a bit into drawdown and take max TFLS.

bigadaj

ZingPowZing wrote: »

There is no possibility of either of my advisers being held liable by me. That's your latest mistake.
My shares are not all in tech. You have no clue about my history in investments. You have no idea how dramatically my pension has grown. Good going, four mistakes in two posts.

And then, drawing the conclusion that I'm the cause of the problem is kind of the icing on the cake.

Oh, and your fifth error, bigadaj, you have no idea of the limits of my tolerance for risk, and it certainly is not for you to judge. The best defence against market volatility and intolerance of risk is to bank significant gains in the good years, I'm surprised you don't realise that. Genesis 41:35

I give humble thanks every day that I acted against the advice of my first adviser and found another who came to the opposite conclusion.

You've misunderstood.

Your intentions or actions in claiming against your advisers are irrelevant, it's the risk of someone like you doing so that is the risk and consequentially the cost to the insurers and premiums to the adviser.

You stated on these forums that you had invested the whole of your DB pension transfer into four large cap firms and therefore had massively outperformed advisers and benchmarks, I am only going on what you have said.

What you do with your money is your affair but you come across as naive in many of your posts and my concern is that those posts could be taken seriously by readers of limited investing experience.

If you want to detail your investing history then please do so, you have posted that you only need to hold a few large cap firm before, if that is not your actual position then please clarify that.

Suemac2a

Understand now, Mark. One of the conundrums or ironies with asset allocation (and tax planning) within the context of this specific possible pension transfer is, that in addition to the CTEV in question we have another db scheme of sufficient value to assuage later life concerns, and will have a 7 figure cash sum from a property sale to invest imminently (creating inbalance on our current spread of cash, bonds, trackers and more high risk active managed and emerging markets and shares)
Its a nice problem to have but while the authorities are concerned that that transfer pot is wisely professionally invested to minimise litigable underperformance versus the final salary benefits, if we really want to apply professional advice where we need it the most we could be far more speculative and high risk with that transfer value pot. (On the assumption that we would be more capable of investing our other incoming cash on the zero to low risk spectrum without professional guidance). Whereas we will probably end up paying quite high fees to end up with a conservative vehicle that broadly mirrors the db aims but with more flexible drawdown - which we could of course 'repurpose' further down the line - and end up redeploying other 'safe' money to invest for greater growth ambitions. That is slightly tongue in cheek but does highlight that not all people actively seeking transfers want/need increased drawdown - they just don't want an annuity, want to maximise TFLS opportunities and want to eliminate a tangible risk of the solvency of the company provider. And to state the obvious while I welcome the overview of our situation I dont want to be terrified into whole portfolio management services. We shall see.

[Deleted User]

bigadaj wrote: »

You've misunderstood.

Your intentions or actions in claiming against your advisers are irrelevant, it's the risk of someone like you doing so that is the risk and consequentially the cost to the insurers and premiums to the adviser. Like many, the OP would happily sign a waiver. It's not irrelevant. It is a prime example of the prevailing attitude in the financial services industry: not only do they expect clients to defer to them in the matter of the client's best interest, make the client pay to insure them against the consequences of their own bad advice, regardless of what that advice may be; they then claim it is our fault, because they know how "people like us" are going to act in future.


You stated on these forums that you had invested the whole of your DB pension transfer into four large cap firms and therefore had massively outperformed advisers and benchmarks, I am only going on what you have said. Incorrect, that is not what I have said in relation to my pension.

What you do with your money is your affair but you come across as naive in many of your posts and my concern is that those posts could be taken seriously by readers of limited investing experience. The main concern I note from representatives of the financial services industry on this forum is to justify and normalise the practices of the financial services industry.

If you want to detail your investing history then please do so, you have posted that you only need to hold a few large cap firm before, if that is not your actual position then please clarify that.

That is indeed my position, and the subject of the ongoing thread.
My approach is not for everyone, but is often dismissed by posters who appear to have read plenty of books about investing. Of course there is more volatility; but that cuts both ways.
As I said in the last post, the best bulwark against volatility is to bank significant gains in the good years, and 2019 was exceptional. If there is now to be a sharp downturn, as seems quite likely, it helps to weather the storm. In any case, I will be responsible. To transfer a DB pension only to give it straight into the arms of strangers seems much riskier.
However, if you want to pursue the theme, rather than dropping the subject onto Suemac2a , you can post on the dedicated thread
https://forums.moneysavingexpert.com/discussion/6037441/zingpowzing-v-bowlhead-challenge
No hindsight, no aftertiming.

SonOf

If professional indemnity has truly escalated fees specifically for db pension transfers, I would expect it to be itemised separately in a quotation.

Some firms have reported increases of 500% in their annual premium.

The biggest problem for costs is that whilst the individual gets a one-off cost on transfer, the advising firm has to pay increased PI insurance for the rest of time. There is no doubt that this is being factored into some firms pricing.

There is absolutely no logic in PI costs to a firm being itemised to you in a quotation. a) it is impossible to do and b) that isnt how businesses price jobs in most walks of life.

fred246

SonOf wrote: »

£10k equates to the equivalent of around a week's potential volatility on the investments (£800k). So, in the scheme of things, it is a drop in the ocean.

This sums up exactly how IFAs work. Find a rich person. Dress up as a 'professional'. Take a lot of money for very little work. Charge as a percentage of the client's total wealth so it doesn't sound much. Hope the customer doesn't notice. The only other job I know that does this is estate agents. Percentage of house value and solicitor takes it off. Does it cost more to sell a bigger house? Maybe slightly. A good IFA would make sure that their paperwork would prevent any future claims. Would be interesting to know exactly how much their insurance is but as usual they won't say.

bigadaj

ZingPowZing wrote: »

That is indeed my position, and the subject of the ongoing thread.
My approach is not for everyone, but is often dismissed by posters who appear to have read plenty of books about investing. Of course there is more volatility; but that cuts both ways.
As I said in the last post, the best bulwark against volatility is to bank significant gains in the good years, and 2019 was exceptional. If there is now to be a sharp downturn, as seems quite likely, it helps to weather the storm. In any case, I will be responsible. To transfer a DB pension only to give it straight into the arms of strangers seems much riskier.
However, if you want to pursue the theme, rather than dropping the subject onto Suemac2a , you can post on the dedicated thread
https://forums.moneysavingexpert.com/discussion/6037441/zingpowzing-v-bowlhead-challenge
No hindsight, no aftertiming.

With regard to the issue on signing a waiver then it's not the industry that is the issue, it's the regulator and ultimately the courts that have found these waivers to be unenforceable. Peoples views on whether they want to make a financial claim often change over time when they are in straitened circumstances.

I'm no apologist for the financial services industry and in many ways it has done huge damage to the uk economy, in terms of excessive fees and profits and more importantly diversion of resources away from other sectors and industries that add better value and have longer term outlooks.

I don't and never have used an advisor, if people want or need to use one then that's up to them.

With regard to db pensions then the ability to transfer has only been in place for a few years. When people signed up to these schemes it was to receive a particular level of income at a particular point in time, there was no pot. Indeed it wasn't their money but held in trust to pay out that level of income at that particular point in time. So whilst people may complain of excessive fees then they are free to shop around, the cost of advice should be included in the transfer assessment, if it's too high then it may be best not to transfer. Also the reason so many transfers look so attractive is due to zero interest rates and extreme annuity rates.

bigadaj

SonOf wrote: »

Some firms have reported increases of 500% in their annual premium.

The biggest problem for costs is that whilst the individual gets a one-off cost on transfer, the advising firm has to pay increased PI insurance for the rest of time. There is no doubt that this is being factored into some firms pricing.

There is absolutely no logic in PI costs to a firm being itemised to you in a quotation. a) it is impossible to do and b) that isnt how businesses price jobs in most walks of life.

Interesting to see those premium increases and not surprising in many ways.

There's no particular reason why the PI costs couldn't be itemised, if it's included in the hourly rate then it must be able to be split out.

Having spent most of my career in consulting engineering then I'm familiar with some of the issues around PI and there were certainly jobs we turned down or proposed excessive fees for due to risk and not wanting the business, these are of course business contracts rather than consumer ones.

A colleague years ago once quoted a client around £1500 for making some minor changes to drawings on a job. Client complained that was excessive for a couple of hours CAD time, so colleague said he'd do it for £250 but would explicitly exclude design responsibility and PI cover, client paid the full fee.

xylophone

will have a 7 figure cash sum from a property sale to invest

Then why on earth not just leave your DB pensions in peace and "do your thing" with the above?

[Deleted User]

bigadaj wrote: »

I don't and never have used an advisor, if people want or need to use one then that's up to them.

In the context of this thread, that's quality.