2nd Opinion please.

andrejuan

I have just turned 61, about nine years ago I was advised to combine my pensions and have a sipp . A reputable wealth management company did this for me, and have managed it since with reasonable success for my risk level. I put in 10k a year.
  I am charged 1% which I believe is reasonable, however the charges this year were 6.5k on my funds which are 400k  (Covid has dented this temporarily) This is due to (I am told) other charges from the platform supplier.  I am finding it hard to understand that 6.5k of my 10k investment has gone each year before it is even invested.  My knee jerk reaction is to stop all contributions and divert the money to my workplace pension, then take out the maximum tax free lump sum and get my isa allowance used up, put some in bank accounts to achieve the maximum tax free interest, and whatever is left over, give it to my other half to get some tax free interest. It seems to me, when I retire, the lions share of the pot will continue to go in charges and reduce the funds quite quickly even if I take only £1,500 a month to live on?   Am I being unreasonable?

El_Torro

£6.5k annual charge on a £400k pot is 1.625%. It's relatively high for an IFA (or FA) charge plus platform charge plus fund charge, but if you feel the pot is doing what you want it to do and you are happy with the advice given then it's OK.

It seems you aren't happy with the charges though. You can certainly find cheaper providers. If you're not using a Financial Advisor you could probably pay 0.50% in platform plus fund charges, especially if you're happy to use tracker funds rather than managed funds.

Shoving as much as possible into Cash ISAs and bank accounts does not seem like a good idea to me. Sure, you won't have the same charges, but the interest rate will be so low you'll actually be losing out in the long run.

You shouldn't just look at the fees you are paying, you need to look at how the pot is growing over the long term, net of fees. You should find, assuming you are invested appropriately, that you are signficantly beating interest on cash savings.

dunstonh

A reputable wealth management company did this for me, and have managed it since with reasonable success for my risk level. I put in 10k a year.

The term "wealth management company" is one that will turn a lot of people off.  Generally speaking (and it is a generalisation) is that "wealth management" companies are not independent, expensive and usually end up with lower returns than much simpler options or a portfolio built by an IFA.

 I am charged 1% which I believe is reasonable,

1% is typical at the smaller value end of the scale.  You tend to find that tapers to 0.5% for higher values.

 my funds which are 400k

You should be looking to get towards 0.5% ideally then.

(Covid has dented this temporarily) 

It shouldn't have.  You should be above or thereabouts what you were before COVID. 

This is due to (I am told) other charges from the platform supplier.  

Platforms on £400k would tend to be in the 0.1x% to 0.2x% range nowadays (for IFAs - wealth management companies probably double that).   It shouldn't be a dent.  Picking 0.25% would see your charges for platform being about £1,000 a year.   

AnotherJoe

In the phrase "wealth management company" the word "wealth" refers to their wealth, not their clients. 

Who is this renowned company ? SJP ?

Pound to a penny anyway  the funds they use are in-house , where "in-house" means "poorly performing and expensive". 

In any case, get yourself over either to an IFA,  or DIY. 

MaxiRobriguez

Agree with other comments.  You're not paying £6,500 based on £10,000 of contribution but on the total pot which is £400k.

You have enough wealth to warrant speaking to an IFA, who will likely save you money on your fees cost, and may be of use by initiating changes to your portfolio to prepare you for your later years.

Go see an IFA - it'll be worth it. Good luck!

Albermarle

It looks like you are paying 1 % for financial advice ( as said above on the high side for size of pot) then 0.625% for the actual pension/investments .
If this 0.625% includes platform and fund costs , then that is not too bad, depending on what funds are used. You can get lower charges but I would say this charge was not out of the ordinary.
So the real question is are you getting what you want for the 1% ?
which are 400k  (Covid has dented this temporarily
As already mentioned most pension pots  are at least back where they were on Jan 1st . Exceptions to this could be high risk/high equity/too high UK % portfolios or just a bad portfolio. Have you checked the very latest valuation? and are not looking at one a couple of months out of date ?

andrejuan

Thank you for commenting (and everyone else)  I have checked the Jan. valuation which was just shy of 430k, As of today the value is 405k. At my review meeting this was put down to the uncertainty caused by the pandemic. I am happy to try and renegotiate the 1% as it was mentioned that the fund value may now warrant this?  A fact I wasn't aware of before posting. 

Albermarle

Yes something around 0.75% to 0.5% would be the going rate for an IFA for that size pot.
Your pot is 6% down , which although not a disaster , its not great either . So I think you need a better explanation of why that is and not be brushed off with ' it is related to Covid' Do you know what your risk level is ? I
Could be interesting to compare this with your workplace pension since January 1st.

steampowered

I wouldn't start moving money into bank accounts. That would be "throwing out the baby with the bathwater". 

The average return generated by the stock markets over the long term is generally around 6-7% per year. If you are paying a fee of 1%, that's still a return of 5-6% per year, which is still far more than you'd get in a bank account.

I don't think you should be worried by the fact that your pot has dropped from 430k to 405k. That's a natural part of investing. Global stock markets have dropped for obvious reasons. When you are invested over a number of years, some years you will do well and some years will do badly - it's the long term average that counts. If you had put your money into a bank account rather than in investments your 405k pot might only be 200k !

As others have said, the fees you are paying are quite high. You could consider educating yourself on funds / investments and going DIY. Otherwise you could consider negotiating the fees you pay or (a better option) moving to a whole-of-market IFA who is willing to charge a lower fee.

Audaxer

andrejuan said:

It seems to me, when I retire, the lions share of the pot will continue to go in charges and reduce the funds quite quickly even if I take only £1,500 a month to live on?   Am I being unreasonable?

If you take £1,500 per month to live on (£18k per year) from £400k that is a 4.5% withdrawal rate, which is unlikely to be a safe withdrawal rate, if the £18k increasing with inflation, is the planned withdrawal rate for a potentially long retirement. That would probably be the case even if costs were much lower than £6.5k per year, 

AnotherJoe

steampowered said:

I wouldn't start moving money into bank accounts. That would be "throwing out the baby with the bathwater". 

The average return generated by the stock markets over the long term is generally around 6-7% per year. If you are paying a fee of 1%, that's still a return of 5-6% per year, which is still far more than you'd get in a bank account.

I don't think you should be worried by the fact that your pot has dropped from 430k to 405k. That's a natural part of investing. Global stock markets have dropped for obvious reasons. When you are invested over a number of years, some years you will do well and some years will do badly - it's the long term average that counts. If you had put your money into a bank account rather than in investments your 405k pot might only be 200k !

As others have said, the fees you are paying are quite high. You could consider educating yourself on funds / investments and going DIY. Otherwise you could consider negotiating the fees you pay or (a better option) moving to a whole-of-market IFA who is willing to charge a lower fee.

I would be. Given OP is paying so much for someone to "look after it' Surely they should do better than an index? Would be interesting to see the funds OP? 
My very dull SIPP, 100% equities, two funds one a global index, is above where it Was start of the year.  £420K -> £431K
That includes all charges extracted over that period. 

Which are roughly. £2k a year. TBF I'm On a very good rate 0.4% all in due to it retaining my ex employers rate but even double that, I'd still be up.