Recent DB Transfer: Ongoing Fees for Dedicated IM and FA

BritishInvestor

Because_I_Can said:

dunstonh said:

1) In terms of fees, I’ll be paying the FA 0.35% per year - does that seem reasonable for a pot this size?

The fee is reasonable and its less than what I would charge, for example.  However, it is probably cheaper as its using off the shelf basic options that require virtually no ongoing investment decisions.  They are passing those to the DFM.   

Advisers the pass the investment decisions to DFMS often reduce their charge (the greedy ones often don't).

2) In year one, the DIM AMC will be 0.65% (+0.13% VAT) and together with the other costs (stamp duty, collective fund costs, currency, etc), you’re looking at around 1.34%.  For subsequent years, the overall charge will be around 1.11%.  Again, does this feel reasonable?

That is expensive for a DFM.    

but the sheer volume of assets feels quite large (close to 100, accepting there’s quite a few single shares in all that).

DFMs will often use direct assets and shares as well as funds.   Where direct assets are held, rather than funds, you would expect a larger range of assets

Is this just down to the personal strategic approach / preference of the DIM or does this seem OTT?

The DFM controls the investment strategy.  There should be governance reports etc available to you.  These will detail the structure and process.  So, you should ask for those.

4) Finally, I’ve read some genuine, well thought out responses and advice to many people via this forum and just wondering if there’s anything anyone would like to comment or challenge on the above?

FAs are limited on what they can offer.  The general consensus is that you should either DIY or use an IFA.  Not an FA.

I think 1.7% in total is about normal for FA + Investment manager + fund /SIPP costs .    

About right for an FA.   Too high for an IFA though.    0.9-1.2% all in would be the IFA ballpark (although there are IFAs that would have higher charges and may even use similar solutions).

 

Thank you for your response donstonh, it’s much appreciated.

Yeah, the FA charge was originally 0.5% but I managed to negotiate a reduction to 0.35% and I imagine he was happy to do so for the reason you state.  I also imagine he may ask for the rate to be increased once I move away from the DFM.

Appreciate your thoughts re the DFM charges.  Whilst I expected to have to pay for things like stamp duty, fund charges, currency conversion, etc, I knew the AMC was the element that perhaps I needed to negotiate a bit harder on - the 0.65% +VAT is discounted but perhaps I need to revisit.  I take it the size of the pot should be my going in position - what is a reasonable % to pay for a DFM would you suggest (I do believe in paying a fair going rate)?

I have seen many recommendations outlining the value of an IFA over an FA.  Whilst I don’t feel confident enough to DIY, I will take some time to explore how an IFA would take over such a relatively new investment portfolio above.  Whilst I’d be keen to avoid another batch of charges, it feels like this could be beneficial in the longer term.

Again, thank you for taking the time to respond.

Regarding paying an additional batch of fees, I appreciate it's not ideal, but if it gives you a far better service and costs after Year 1 are far lower it could be worth considering (Year 1 costs may not be much more either if the initial fee is reasonable.

What is a reasonable charge to pay for a DFM? If you believe that investment management is effectively commoditised, the harsh answer is however much the adviser is reducing his fee by to outsource to a DFM.

There is a least one DFM out there offering flat fees (including on that charges £20 a month and invests in a similar style to Tim Hale's book - factors etc )

Just to add (and it's very much a personal belief), I would be wary of an adviser discounting their fees to win your business - why weren't they offering their clients the reduced rate in the first place?

Because_I_Can

dunstonh said:

he 0.65% +VAT is discounted but perhaps I need to revisit.

I rarely use a DFM as I don't believe they add value apart from certain circumstances where the client goes missing for very long periods and investment decisions need to be made without their permission.     For context, you are seeing figures on the IFA side of 0.275% for DFMs.     

 take it the size of the pot should be my going in position - what is a reasonable % to pay for a DFM would you suggest (I do believe in paying a fair going rate)?

I would question whether you need a DFM.  For most, its just an extra layer of charges for little benefit.   So, unless you plan to go missing, you may prefer to not use a DFM at all.

I have seen many recommendations outlining the value of an IFA over an FA.  Whilst I don’t feel confident enough to DIY, I will take some time to explore how an IFA would take over such a relatively new investment portfolio above

The OMW platform is used by IFAs.   Not as much as it used to be as its not that good value any more.  However, it would be as simple as an agency change internally with OMW to get it allocated to an IFA.      The IFA then may look to move it to a lower cost platform with better functionality.

Whilst I’d be keen to avoid another batch of charges, it feels like this could be beneficial in the longer term.

You may well find a number of IFAs willing to take it on with little or no initial charge because of the value.  

Thanks again dunstonh.  I actually have a catch up with my FA this week and will bring the overall DFM position up with him, revisiting the recommendation, benefits and expected value.  Whilst the FA’s Suitability Report (for the DB transfer) does highlight the advantages and disadvantages of using a DFM as well as the fact the company (Quilter Cheviot) were selected after comprehensive due diligence was carried out by the Quilter Group, the fact the FA works for a company who are an appointed representative of the aforementioned did raise a little flag which I didn’t perhaps follow up on.   

cfw1994

Not sure I would agree with the positive recommendation on Paul Armson’s book:
“ This book can be an eye-opener for someone working with a "traditional" adviser.
https://www.amazon.co.uk/Enough-Much-Money-Need-Rest/dp/1530800552/ref=sr_1_1?9&sr=8-1”
What did you find good about it?

Got given a copy at an IFA seminar.  I’m astonished it gets so many good reviews.  Maybe some of them are shills.  

I did read it....found it disappointing.   

Checking some negative reviews, I think the following summed it up:
“Some good fundamentals about financial planning, which do make you think.  However these could have been summarised in a few pages.
The whole book is written in a quite irritating style; pretty much every sentence has some words in CAPITALS for no good reason and ends with an exclamation mark!
The big issue I have is that you are never actually told how to work out how much is "enough" - which is the fundamental premise of the book; instead, the second half of the book is basically an extended pitch for his "Envison Your Money" software, which promises to do that for you. So I finished the book feeling a bit cheated.
To be fair, financial planning can be quite complicated and probably does need some software to to it properly, but there's very little detail on how to do any of the calculations or anything.”

And another agreed:

“A few interesting anecdotes. Some reasonably sound advice.
The bulk of the book though is an extended advert for his website where all the secrets will be revealed. For a price.
Sign up now for a special, limited, discount.
If I'd set up a scam like this I'd be able to afford to spend half my time sailing. Well played sir.

Don't buy it if you want hard advice.“

Because_I_Can

BritishInvestor said:

Because_I_Can said:

Hi, I recently completed a transfer of my DB pension which now sits in a SIPP with InvestAcc with the monies being invested by a Quilter Cheviot Dedicated Investment Manager.  This income and growth portfolio approach was a recommendation from my FA who works for a company that is an appointed representative of Quilter Financial Limited.  I don’t anticipate needing access to the money for at least 5 years and once I do, the FA has recommended a couple of other fund options which we’ll explore nearer the time, e.g. Prufund and Scottish Widows for example.  My willingness to accept risk is rated as medium with my ability to bear loss at moderate.  Whilst I’m not a novice investor, any exposure has been more equity focused and given the future LTA position, I believe the services of an expert Is warranted. 

I’ve listed below details of our financial position and it’s really just a couple of points that keep niggling away (listed below).

Age: 53 in Oct
OH: 48
No children
DB Transfer Value: £1.3m
Other Savings & Investments: Circa £350k (70% in cash savings - various accounts)
OH just accepted VR (£109k) and has a DB pension (£30k at aged 60) plus AVC pot of £200k
Both have no plans to work again, just doing voluntary work
Own our house, no mortgage, house worth about £375k
Retirement all worked out assuming we’d need £40-50k each year (pre Covid!!)

1) In terms of fees, I’ll be paying the FA 0.35% per year - does that seem reasonable for a pot this size?
2) In year one, the DIM AMC will be 0.65% (+0.13% VAT) and together with the other costs (stamp duty, collective fund costs, currency, etc), you’re looking at around 1.34%.  For subsequent years, the overall charge will be around 1.11%.  Again, does this feel reasonable?
3) Over the last month or so, the majority of the monies have been drip fed into the market.  The portfolio appears to be well diversified in terms of asset mix, sectors, regions and markets but the sheer volume of assets feels quite large (close to 100, accepting there’s quite a few single shares in all that).  Is this just down to the personal strategic approach / preference of the DIM or does this seem OTT?
4) Finally, I’ve read some genuine, well thought out responses and advice to many people via this forum and just wondering if there’s anything anyone would like to comment or challenge on the above?  Whilst I’m not unduly concerned, this would be a big help in building up my knowledge - I’m also half way through the excellent book Smarter Investing.

Thanks for reading and listening!

1.
0.35% is reasonable for someone that is providing you with comprehensive retirement planning, whereas paying someone 0.35% to meet once a year to discuss fund performance is expensive, IMO.

This book can be an eye-opener for someone working with a "traditional" adviser.
https://www.amazon.co.uk/Enough-Much-Money-Need-Rest/dp/1530800552/ref=sr_1_1?9&sr=8-1

2.
There are many ways that your returns can be reduced vs the returns that the market is giving you and you must be happy that each part of the chain is delivering value - below are ballpark figures for:
A). Adviser fees
. Platform (used to hold investments etc)
C). Fund manager + transaction costs (+DFM)

A: We've discussed adviser fees already circa 0.35%
B on a pot of your size a platform can be had for 0.1%
C as you will discover in Tim's book, you can buy the world these days (his examples are a few years out of date ) for around 0.2% with 0.1% transaction costs.

All in well under 1% per annum

C is where your costs seem to be mounting. Again, as you will read in Tim's book, it's extraordinarily difficult for a fund manager to beat the market on a consistent basis, and equally difficult to identify those managers ahead of time. I'm not sure what the remit is for the DIM you are using but I've not seen many (I am being polite ) that can achieve market returns after costs.

You will therefore need to be happy they are giving value for money.

As an aside, if the DIM had a genuine "edge" you would expect them to do something far more lucrative - it's important to understand the people they are "competing" with
https://www.amazon.co.uk/Man-Who-Solved-Market-SHORTLISTED/dp/0241422159/ref=sr_1_1?


3) I'm not sure what the upside to holding individual shares might be. One could argue that it's in the DIM's interest to make something appear complex to justify their fees, but as you are reading, investing can, and one could argue should be straightforward. You can buy a fund that has global exposure and holds 10000 shares. What does holding individual shares add to this?

4) . I think there's a lot for you to consider

Enjoy Tim's book - it's one I've enjoyed reading. Tim is a really nice chap and his firm (Albion) is well respected among the financial planning profession. If you have any questions on the book please feel free to post.

You might also enjoy this. Abraham has an equally high reputation and his retirement planning tool is becoming more widespread. 
https://www.amazon.co.uk/Beyond-4-Rule-retirement-portfolios/dp/1985721643/ref=sr_1_1?

Thank you for taking the time to respond BritishInvestor.  As you can see from my response above to dunstonh, I’m catching up with my FA this week and the topic of why a DFM will definitively be on the agenda.  Also appreciate signposting the additional books and other information which I’ll certainly take a look at over the coming weeks. 

[Deleted User]

While in my opinion the vehicles are not perfect, that’s not a problem. Losing a percent here and there on fees won’t undermine this particular portfolio. And asset allocation come investment strategy would have to be spectacularly bad to destroy it. Possible but even then the OP isn’t going to end up begging in the street. 

The main tricks here are a) minimizing tax b) ensuring withdrawal strategy is sustainable c) not leaving too much in the pot when its time to say good bye.

I still think that a balanced DIY tracker portfolio is the best return/risk combination for a “risk averse” investor, but it does not matter in this case. 

BritishInvestor

Because_I_Can said:

BritishInvestor said:

Because_I_Can said:

Hi, I recently completed a transfer of my DB pension which now sits in a SIPP with InvestAcc with the monies being invested by a Quilter Cheviot Dedicated Investment Manager.  This income and growth portfolio approach was a recommendation from my FA who works for a company that is an appointed representative of Quilter Financial Limited.  I don’t anticipate needing access to the money for at least 5 years and once I do, the FA has recommended a couple of other fund options which we’ll explore nearer the time, e.g. Prufund and Scottish Widows for example.  My willingness to accept risk is rated as medium with my ability to bear loss at moderate.  Whilst I’m not a novice investor, any exposure has been more equity focused and given the future LTA position, I believe the services of an expert Is warranted. 

I’ve listed below details of our financial position and it’s really just a couple of points that keep niggling away (listed below).

Age: 53 in Oct
OH: 48
No children
DB Transfer Value: £1.3m
Other Savings & Investments: Circa £350k (70% in cash savings - various accounts)
OH just accepted VR (£109k) and has a DB pension (£30k at aged 60) plus AVC pot of £200k
Both have no plans to work again, just doing voluntary work
Own our house, no mortgage, house worth about £375k
Retirement all worked out assuming we’d need £40-50k each year (pre Covid!!)

1) In terms of fees, I’ll be paying the FA 0.35% per year - does that seem reasonable for a pot this size?
2) In year one, the DIM AMC will be 0.65% (+0.13% VAT) and together with the other costs (stamp duty, collective fund costs, currency, etc), you’re looking at around 1.34%.  For subsequent years, the overall charge will be around 1.11%.  Again, does this feel reasonable?
3) Over the last month or so, the majority of the monies have been drip fed into the market.  The portfolio appears to be well diversified in terms of asset mix, sectors, regions and markets but the sheer volume of assets feels quite large (close to 100, accepting there’s quite a few single shares in all that).  Is this just down to the personal strategic approach / preference of the DIM or does this seem OTT?
4) Finally, I’ve read some genuine, well thought out responses and advice to many people via this forum and just wondering if there’s anything anyone would like to comment or challenge on the above?  Whilst I’m not unduly concerned, this would be a big help in building up my knowledge - I’m also half way through the excellent book Smarter Investing.

Thanks for reading and listening!

1.
0.35% is reasonable for someone that is providing you with comprehensive retirement planning, whereas paying someone 0.35% to meet once a year to discuss fund performance is expensive, IMO.

This book can be an eye-opener for someone working with a "traditional" adviser.
https://www.amazon.co.uk/Enough-Much-Money-Need-Rest/dp/1530800552/ref=sr_1_1?9&sr=8-1

2.
There are many ways that your returns can be reduced vs the returns that the market is giving you and you must be happy that each part of the chain is delivering value - below are ballpark figures for:
A). Adviser fees
. Platform (used to hold investments etc)
C). Fund manager + transaction costs (+DFM)

A: We've discussed adviser fees already circa 0.35%
B on a pot of your size a platform can be had for 0.1%
C as you will discover in Tim's book, you can buy the world these days (his examples are a few years out of date ) for around 0.2% with 0.1% transaction costs.

All in well under 1% per annum

C is where your costs seem to be mounting. Again, as you will read in Tim's book, it's extraordinarily difficult for a fund manager to beat the market on a consistent basis, and equally difficult to identify those managers ahead of time. I'm not sure what the remit is for the DIM you are using but I've not seen many (I am being polite ) that can achieve market returns after costs.

You will therefore need to be happy they are giving value for money.

As an aside, if the DIM had a genuine "edge" you would expect them to do something far more lucrative - it's important to understand the people they are "competing" with
https://www.amazon.co.uk/Man-Who-Solved-Market-SHORTLISTED/dp/0241422159/ref=sr_1_1?


3) I'm not sure what the upside to holding individual shares might be. One could argue that it's in the DIM's interest to make something appear complex to justify their fees, but as you are reading, investing can, and one could argue should be straightforward. You can buy a fund that has global exposure and holds 10000 shares. What does holding individual shares add to this?

4) . I think there's a lot for you to consider

Enjoy Tim's book - it's one I've enjoyed reading. Tim is a really nice chap and his firm (Albion) is well respected among the financial planning profession. If you have any questions on the book please feel free to post.

You might also enjoy this. Abraham has an equally high reputation and his retirement planning tool is becoming more widespread. 
https://www.amazon.co.uk/Beyond-4-Rule-retirement-portfolios/dp/1985721643/ref=sr_1_1?

Thank you for taking the time to respond BritishInvestor.  As you can see from my response above to dunstonh, I’m catching up with my FA this week and the topic of why a DFM will definitively be on the agenda.  Also appreciate signposting the additional books and other information which I’ll certainly take a look at over the coming weeks. 

Morkdo makes a couple of key points which needs emphasising. 
b) ensuring withdrawal strategy is sustainable c) not leaving too much in the pot when its time to say goodbye.

You mentioned risk:
"My willingness to accept risk is rated as medium with my ability to bear loss at moderate."

But this is only of the picture. It's key to bear in mind how much risk you need to take. I've seen many cases of people with a large pot of money relative to their planned expenditure taking far too much "risk" (risk, in this case being equity exposure) than they need to which means they have to suffer much larger falls in their portfolio when volatile markets occur - unnecessary suffering .

If you are paying for advice your adviser should be giving you the confidence to spend your retirement pot without fear of it running out prematurely, and ideally with your final cheque to the undertaker bouncing

Because_I_Can

BritishInvestor said:

Because_I_Can said:

BritishInvestor said:

Because_I_Can said:

Hi, I recently completed a transfer of my DB pension which now sits in a SIPP with InvestAcc with the monies being invested by a Quilter Cheviot Dedicated Investment Manager.  This income and growth portfolio approach was a recommendation from my FA who works for a company that is an appointed representative of Quilter Financial Limited.  I don’t anticipate needing access to the money for at least 5 years and once I do, the FA has recommended a couple of other fund options which we’ll explore nearer the time, e.g. Prufund and Scottish Widows for example.  My willingness to accept risk is rated as medium with my ability to bear loss at moderate.  Whilst I’m not a novice investor, any exposure has been more equity focused and given the future LTA position, I believe the services of an expert Is warranted. 

I’ve listed below details of our financial position and it’s really just a couple of points that keep niggling away (listed below).

Age: 53 in Oct
OH: 48
No children
DB Transfer Value: £1.3m
Other Savings & Investments: Circa £350k (70% in cash savings - various accounts)
OH just accepted VR (£109k) and has a DB pension (£30k at aged 60) plus AVC pot of £200k
Both have no plans to work again, just doing voluntary work
Own our house, no mortgage, house worth about £375k
Retirement all worked out assuming we’d need £40-50k each year (pre Covid!!)

1) In terms of fees, I’ll be paying the FA 0.35% per year - does that seem reasonable for a pot this size?
2) In year one, the DIM AMC will be 0.65% (+0.13% VAT) and together with the other costs (stamp duty, collective fund costs, currency, etc), you’re looking at around 1.34%.  For subsequent years, the overall charge will be around 1.11%.  Again, does this feel reasonable?
3) Over the last month or so, the majority of the monies have been drip fed into the market.  The portfolio appears to be well diversified in terms of asset mix, sectors, regions and markets but the sheer volume of assets feels quite large (close to 100, accepting there’s quite a few single shares in all that).  Is this just down to the personal strategic approach / preference of the DIM or does this seem OTT?
4) Finally, I’ve read some genuine, well thought out responses and advice to many people via this forum and just wondering if there’s anything anyone would like to comment or challenge on the above?  Whilst I’m not unduly concerned, this would be a big help in building up my knowledge - I’m also half way through the excellent book Smarter Investing.

Thanks for reading and listening!

1.
0.35% is reasonable for someone that is providing you with comprehensive retirement planning, whereas paying someone 0.35% to meet once a year to discuss fund performance is expensive, IMO.

This book can be an eye-opener for someone working with a "traditional" adviser.
https://www.amazon.co.uk/Enough-Much-Money-Need-Rest/dp/1530800552/ref=sr_1_1?9&sr=8-1

2.
There are many ways that your returns can be reduced vs the returns that the market is giving you and you must be happy that each part of the chain is delivering value - below are ballpark figures for:
A). Adviser fees
. Platform (used to hold investments etc)
C). Fund manager + transaction costs (+DFM)

A: We've discussed adviser fees already circa 0.35%
B on a pot of your size a platform can be had for 0.1%
C as you will discover in Tim's book, you can buy the world these days (his examples are a few years out of date ) for around 0.2% with 0.1% transaction costs.

All in well under 1% per annum

C is where your costs seem to be mounting. Again, as you will read in Tim's book, it's extraordinarily difficult for a fund manager to beat the market on a consistent basis, and equally difficult to identify those managers ahead of time. I'm not sure what the remit is for the DIM you are using but I've not seen many (I am being polite ) that can achieve market returns after costs.

You will therefore need to be happy they are giving value for money.

As an aside, if the DIM had a genuine "edge" you would expect them to do something far more lucrative - it's important to understand the people they are "competing" with
https://www.amazon.co.uk/Man-Who-Solved-Market-SHORTLISTED/dp/0241422159/ref=sr_1_1?


3) I'm not sure what the upside to holding individual shares might be. One could argue that it's in the DIM's interest to make something appear complex to justify their fees, but as you are reading, investing can, and one could argue should be straightforward. You can buy a fund that has global exposure and holds 10000 shares. What does holding individual shares add to this?

4) . I think there's a lot for you to consider

Enjoy Tim's book - it's one I've enjoyed reading. Tim is a really nice chap and his firm (Albion) is well respected among the financial planning profession. If you have any questions on the book please feel free to post.

You might also enjoy this. Abraham has an equally high reputation and his retirement planning tool is becoming more widespread. 
https://www.amazon.co.uk/Beyond-4-Rule-retirement-portfolios/dp/1985721643/ref=sr_1_1?

Thank you for taking the time to respond BritishInvestor.  As you can see from my response above to dunstonh, I’m catching up with my FA this week and the topic of why a DFM will definitively be on the agenda.  Also appreciate signposting the additional books and other information which I’ll certainly take a look at over the coming weeks. 

Morkdo makes a couple of key points which needs emphasising. 
b) ensuring withdrawal strategy is sustainable c) not leaving too much in the pot when its time to say goodbye.

You mentioned risk:
"My willingness to accept risk is rated as medium with my ability to bear loss at moderate."

But this is only of the picture. It's key to bear in mind how much risk you need to take. I've seen many cases of people with a large pot of money relative to their planned expenditure taking far too much "risk" (risk, in this case being equity exposure) than they need to which means they have to suffer much larger falls in their portfolio when volatile markets occur - unnecessary suffering .

If you are paying for advice your adviser should be giving you the confidence to spend your retirement pot without fear of it running out prematurely, and ideally with your final cheque to the undertaker bouncing

Thanks again BritishInvestor and Morkdo as well.  In terms of withdrawal strategy and leaving too much in the pot when we both croak, our ideal scenario would be to leave this green earth with not a penny in the pot remaining (anything left goes to charity - recently updated our wills to this effect as we have no dependants).  That includes the house as well, i.e. in the unlikely event we needed more cash, that would be used.  That doesn’t mean we’re going to go mad in splashing the cash, but we do plan to enjoy life whilst we’re both young and then settle into a more ‘standard’ routine in our 70’s.  Given we’ll have my OH’s DB pension plus both full SP’s, living expenses plus extras should be well catered for.  I’m aware this feels like a very fortunate position to be in and it’s one we’ve both worked very hard to attain.  The plan to enjoy ourselves and at the same time give something back via voluntary work Is certainly something we’re both looking forward to.