How to get truly accurate and independant pension advice?

Ryhs_Moggy

As I understand it, an IFA only makes money by recommending their clients to transfer / consolidate their pensions to a new product. If that is in fact the case, how could one actually get accurate IFA advice regarding consolidation to a client's existing workplace DC scheme for example?    Let me explain my own thinking behind this question. I have approx 4 or 5 old workplace pensions but most of them are worth more than £30k. Therefore, before I think about consolidating these myself into to my current workplace DC scheme, I am advised to seek financial advice. And here is the paradox, Why would an IFA carry out a free review and advise me to transfer old pensions into my workplace DC scheme if he will not earn commission for giving me that advice?!  I hope this question makes sense! 

NoMore

First off, you may be misunderstanding the Advice required for values above £30k rule, this only applies to Defined Benefit Pensions ( or other Pensions which may have a guaranteed payment). Are your old workplace pensions DB or DC ? If DC then you don't need advice no matter on their value.

Ryhs_Moggy

Aah ok, thanks for the clarification.  I do have one DB pension and a few DC pensions that are dormant/frozen. I think I will just search for an IFA pension healthcheck/review and see what advice comes from that. I am happy to pay a fee to an IFA for them to purely review and advise.  What I dont want is to be advised to take our a new plan if in fact that is not needed.  I thought IFA's earn commission from pushing clients to take new products. If that is no longer the case then I will feel happier.     

Marcon

Ryhs_Moggy said:

As I understand it, an IFA only makes money by recommending their clients to transfer / consolidate their pensions to a new product. 

You misunderstand it. Good explanation here: https://www.moneyadviceservice.org.uk/en/articles/Guide-to-financial-adviser-fees

Consolidation isn't always the best idea. See https://www.thisismoney.co.uk/money/pensions/article-3550085/STEVE-WEBB-merge-small-pension-pots.html


You might want to refresh your memory of the answers you got when you asked a similar question 18 months ago: https://forums.moneysavingexpert.com/discussion/5974902/pension-transfer-advice-options/p1

dunstonh

As I understand it, an IFA only makes money by recommending their clients to transfer / consolidate their pensions to a new product. 

For DB pensions, contingency charging is not allowed.  For DC pensions it is.  However, many firms will still charge irrespective of outcome or will have that option available if you prefer it.

If that is in fact the case, how could one actually get accurate IFA advice regarding consolidation to a client's existing workplace DC scheme for example?

Easily.  My own experience is around 1 in 5 is recommended as not to transfer when it comes to DC schemes.  

Therefore, before I think about consolidating these myself into to my current workplace DC scheme, I am advised to seek financial advice.

Most schemes will advise you to seek advice as a means to cover their backsides if you make a pigs ear of it. They can turn around and say they told you to seek advice.   However, unless there are safeguarded benefits or its a DB scheme, then you do not need advice.

 And here is the paradox, Why would an IFA carry out a free review and advise me to transfer old pensions into my workplace DC scheme if he will not earn commission for giving me that advice?

Commission hasn't existed on new business since the end of 2012.  So, don't worry about that.

Albermarle

Ryhs_Moggy said:

Aah ok, thanks for the clarification.  I do have one DB pension and a few DC pensions that are dormant/frozen. I think I will just search for an IFA pension healthcheck/review and see what advice comes from that. I am happy to pay a fee to an IFA for them to purely review and advise.  What I dont want is to be advised to take our a new plan if in fact that is not needed.  I thought IFA's earn commission from pushing clients to take new products. If that is no longer the case then I will feel happier.     

Although an IFA will not get commission for starting a new pension plan for you, they do tend to try and use the same provider(s) for all their clients , as this simplifies their admin and they know all the options with that provider inside out .
So I do not think they would be too keen to organise transfers into your workplace pension as far as I know.

dunstonh

Although an IFA will not get commission for starting a new pension plan for you, they do tend to try and use the same provider(s) for all their clients , as this simplifies their admin and they know all the options with that provider inside out .

Wealth management firms will often do that but general practitioner IFAs won't.  

So I do not think they would be too keen to organise transfers into your workplace pension as far as I know.

Rule RU64 requires the workplace pension to be included in the comparison.   In reality, very few go into workplace pensions as transactional individual pensions are usually cheaper than most workplace pensions (you are looking at 0.2x%-0.3% range nowadays for individual plans whereas workplace is more towards 0.5-0.75%.  A smaller number can be available around 0.3x%).   Larger fund values tend to be better served in better quality pensions and investments than a typical workplace pension. 

For example, I am finalising a case today that has an L&G workplace pension at 0.37% p.a. for the provider and invested in the L&G Multi Asset 3 fund at 0.13%.  So, 0.50%.  I could stick it in the same fund on a low cost platform and it would be cheaper or an alternative fund that is even cheaper.   However, neither option is comparable to the portfolio we are using.    If the individual wanted to insist on workplace pension or go with the transactional offering then fine. Really isn't a problem.

This is probably the main difference in a wealth management firm and a general practitioner firm.  The former really only want assets under management.   The latter do everything.

Albermarle

Wealth management firms will often do that but general practitioner IFAs won't.  

OK I must be mistaken , I thought IFA's would at least have some personal preference /familiarity with certain providers and put the majority of their clients with them just for ease of admin if nothing else.

dunstonh

Albermarle said:

Wealth management firms will often do that but general practitioner IFAs won't.  

OK I must be mistaken , I thought IFA's would at least have some personal preference /familiarity with certain providers and put the majority of their clients with them just for ease of admin if nothing else.

Generally, you find the number of platforms you use in any given period is limited. We have three that are typically used currently (although more available if they ever came out top on research)    Along with several other traditional options. However, over time, the platforms and providers change terms or change software and whoever is best today wont be best tomorrow.    So, you find some movement there as well.   The Wealth management firms, in my experience, tend to be far more rigid and want the lot on a single platform and rarely change from that.

There certainly isn't the variety today that there was 20 years ago.  There are not enough players in the market for that to be possible.

gm0

Work out if you and your spouse and depdendents need one off or ongoing advice at all.  Or one first and perhaps the other later  in retirement for some contingencies.

As in the thread - if fund management and platform costs 0.3% (example above) £375 average on a 250k fund at retirement to zero between 55-95.  Meanwhile ongoing advice costs another extra £625 pa average @ 0.5% on top of that (£25k to term).  Several years drawdown in advice charges over 40 years. Scale to taste and personal circumstances.

Mostly paying somebodys public indemnity insurer and then for professional time spent. It is totally worth it for the better portfolio, the annual review, the tracking legislative changes and the hand holding your approach to cashflow and risk + investment selection or it is a shameless and shocking rip off according to your perspective and outlook.  What is unarguable is that it is way harder than it used to be to make an honest living as an IFA in the current world of regulation and retrospective redefiniton of mis-selling when bad !!!!!! happens but people did send all the hard to understand letters required at the time.  Shoots the indemnity insurance right through the roof. 

The retail financial services industry have rather brought this situation down on their heads through prior lack of integrity in fleecing the punters.  It's not an IFA thing specifically but there have been advisor rogues (British Steel DB transfers, QROPs, Overseas property bonds in SIPPs etc. etc.). And they are definitely caught in the blowback.

And it's still expensive.  But you have to put the work in to get to "competent" if you DIY.  You have the time in retirement but you may not have the family interest or inclination.  Some pay up happily and skip off to do something interesting.  Others like a good spreadsheet and the markets as a hobby.  Others do a mainstream investment set and check it once a year and bank the DIY saving. It works or it doesn't. Takes all sorts.

Ryhs_Moggy

Is it common for IFA's to request non-refundable one off payment before commencing to contact pension companies on their clients behalf in order to then be able to make a recommendation to a client? (at which point one can decide to go with their IFA's recommendations or walk away?)  I am curious that's all....