The Cost of Advice

MEM62

It's appreciate that it might be a bit of a how long is a piece of string question but I am trying to get a feel for the cost of advice. 
I am 58 and my company pension provider has informed me that they are about to commence life-styling my pension investments.  This is not suitable for me as I will probably be going into drawdown when I retire.  I therefore thought that I was a good time to seek professional advice and have a proper review of where I stand.  I have a reasonable  level of understanding but am not an expert so I am happy to pay for advice.  An IFA has quoted £3.500 for a review, drawing up a plan and arranging to potentially consolidate my current pension pots.  We are talking about a combined value of £250K across all pots.  I have had an initial chat and feel comfortable with guy.  Are his fees in the right ball-park?           

tacpot12

Seems a lot to me, but then I'm a cheapskate. These days I would expect any IFA of a reasonable size to have a few ready-made portfolios that they would allocate new clients to, once they had established the client's risk appetite. So you are not paying for a bespoke portfolio, but you will have to pay some proportion of the cost of deciding what should be these ready-make portfolios. The larger the number of clients, the smaller the cost that you will pay as your proportion of the costs.
The work to consolidate existing pensions is admin work; the IFA that you meet won't do this work themselves. They will have an admin team who are being paid £15/hr to fill in the forms, check the money has arrived, move the money to the new platform, and invest it in accordance with the standard portfolio to which you have been assigned. So the total cost for all the transfer work should be less than £500. The advice has to be underwritten by insurance, but really I can't see why to the total cost shouldn't be more than £1,500. However, businesses can charge whatever they like. 

dunstonh

These days I would expect any IFA of a reasonable size to have a few ready-made portfolios that they would allocate new clients to, once they had established the client's risk appetite. So you are not paying for a bespoke portfolio, but you will have to pay some proportion of the cost of deciding what should be these ready-make portfolios

You would expect most to have ready made portfolios nowadays.  However, they would still be bespoke for that advice firm.  There will also be more than one to cater for different risk profiles and possibly timescales (for firms that adjust for length of time).  They will also have their ESG portfolios.    So, its not bespoke to the individual but you wont get the portfolio elsewhere.

The option to generally avoid is where they use a DFM. That is effectively an off-the-shelf solution that in most cases adds a layer of charges that is unnecessary for most people.    It will be fine for some.

The work to consolidate existing pensions is admin work; the IFA that you meet won't do this work themselves. They will have an admin team who are being paid £15/hr to fill in the forms, check the money has arrived, move the money to the new platform, and invest it in accordance with the standard portfolio to which you have been assigned.

A paraplanner (the admin you describe) typically costs around £30k to £50k. Some even more.   Most advice firms do not use paraplanners but may have an office worker who can do the basic stuff but the adviser wont be able to pass as much to them as a paraplanner and will need to do more themselves.

Most IFA firms are small localised firms with a handful of advisers.     The nationals and salesforces will have more support staff but you lack the independent side with those typically.

So the total cost for all the transfer work should be less than £500. 

Not viable in most cases at £500.

The advice has to be underwritten by insurance, but really I can't see why to the total cost shouldn't be more than £1,500.

£1500 may be possible to find.  £3500 is certainly not unreasonable and should be the upper end of what would be expected as ideal.    City located firms likely to cost more due to increased costs.

Albermarle

One point to watch is what the £3500 includes . Ideally it should include any pension transfers needed and there to be no hidden costs 
Also no doubt they will want to have you as an ongoing client and there will be a cost to this of around 0.7% .
If you seem a relatively straightforward client that they would like to deal with , then like all deals there should also be room for negotiation .

MEM62

Thank you for your input guys. 
@dunstonh, I have followed your posts on this site for a years and place great store in your opinion.  As I am comfortable with the advisor I will push back on the fee and see if he will negotiate.  I would like to think that my circumstances and my level of understanding mean that I should be a relatively straightforward client to deal with.
@Albermarle, The on-going servicing seems is priced at three different levels depending on the level of service that is required.  The top level, which includes things like quarterly valuations, six-monthly reviews, estate and tax planning is priced at 1%, mid-level is 0.5% and the lowest level is 0.25%.  The lowest level includes annual statements / valuations, access to an advisor and 'governance'.  I shall see where we are at the end of the initial process before making any decisions about on-going servicing.  However, I am sure that my needs are not complex enough to require top-tier servicing - more just periodic support.         

barnstar2077

Could you tell your works pension not to commence life-styling and spend a bit of time reading up on what to do next?  You seem clued up enough to at least make it worth doing your homework first before you decide to hand the keys over to someone else.

MEM62

barnstar2077 said:

Could you tell your works pension not to commence life-styling and spend a bit of time reading up on what to do next?  You seem clued up enough to at least make it worth doing your homework first before you decide to hand the keys over to someone else.

Fair point but I am at that stage where I am not too far from retirement and want professional advice.  I am happy to be an enthusiastic amateur to a certain point but there time comes when the decisions and planning a more critical and I think that is where I am in life. I negotiated on the rates and have been offered £3K initial fee and their top-level on-going servicing for 0.5%.  I'll run with that for a while and see how we go.   
Everyone's input has been much appreciated.