Moving to drawdown - costs reasonable?

Albermarle

There a lot of different platforms that cater well for the DIY market . The best known but the most expensive is Hargreaves Landsdown . You also have interactive investor, AJ Bell , Fidelity and many others . The charging structures are all a bit different . Some charge a % and some a flat fee which is better for bigger portfolios . On the other hand the cheaper ones often have extra fees for SIPP and drawdown .
https://monevator.com/compare-uk-cheapest-online-brokers/
The above website is also useful for general investing info .
As per GMo ' post , if you are very cost driven and willing to be an active monitor of investments ( and trust yourself ) you can get the whole cost down to as little as maybe 0.2% . That probably is not typical though, even for most DIYers, and the usual mix of trackers , low cost multi asset funds + some active funds + platform cost is usually around 0.4% to 1 % .

scdandem

Albermarle said:

There a lot of different platforms that cater well for the DIY market . The best known but the most expensive is Hargreaves Landsdown . You also have interactive investor, AJ Bell , Fidelity and many others . The charging structures are all a bit different . Some charge a % and some a flat fee which is better for bigger portfolios . On the other hand the cheaper ones often have extra fees for SIPP and drawdown .
https://monevator.com/compare-uk-cheapest-online-brokers/
The above website is also useful for general investing info .
As per GMo ' post , if you are very cost driven and willing to be an active monitor of investments ( and trust yourself ) you can get the whole cost down to as little as maybe 0.2% . That probably is not typical though, even for most DIYers, and the usual mix of trackers , low cost multi asset funds + some active funds + platform cost is usually around 0.4% to 1 % .

Thank you, that’s really helpful.

OldMusicGuy

scdandem said:

Perhaps DIY is looking more appealing. Are there courses / particular reading on the subject you know of? Silly question I expect!

Not a silly question at all. DIY is not hard at all once you get past the mindset of "IFAs are experts, I couldn't possibly do this". They are not investment managers and don't know any better than you or I when it comes to making investment choices. They do have more knowledge than most on the mechanics of pensions and the investment choices out there. So most of us on here would recommend you do a bit of reading and research to understand more.

Start with "DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning" by John Edwards, go to Lars Kroijer's website and watch his videos. PensionCraft is also a good website. 

Even if you decide not to DIY, it is much better to choose IFAs from a position of knowledge rather than just accepting what appears to be a very expensive option without comparing it to alternatives. 

scdandem

OldMusicGuy said:

scdandem said:

Perhaps DIY is looking more appealing. Are there courses / particular reading on the subject you know of? Silly question I expect!

Not a silly question at all. DIY is not hard at all once you get past the mindset of "IFAs are experts, I couldn't possibly do this". They are not investment managers and don't know any better than you or I when it comes to making investment choices. They do have more knowledge than most on the mechanics of pensions and the investment choices out there. So most of us on here would recommend you do a bit of reading and research to understand more.

Start with "DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning" by John Edwards, go to Lars Kroijer's website and watch his videos. PensionCraft is also a good website. 

Even if you decide not to DIY, it is much better to choose IFAs from a position of knowledge rather than just accepting what appears to be a very expensive option without comparing it to alternatives. 

Thank you so much for that! 🙏🏻

Albermarle

scdandem said:

OldMusicGuy said:

scdandem said:

Perhaps DIY is looking more appealing. Are there courses / particular reading on the subject you know of? Silly question I expect!

Not a silly question at all. DIY is not hard at all once you get past the mindset of "IFAs are experts, I couldn't possibly do this". They are not investment managers and don't know any better than you or I when it comes to making investment choices. They do have more knowledge than most on the mechanics of pensions and the investment choices out there. So most of us on here would recommend you do a bit of reading and research to understand more.

Start with "DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning" by John Edwards, go to Lars Kroijer's website and watch his videos. PensionCraft is also a good website. 

Even if you decide not to DIY, it is much better to choose IFAs from a position of knowledge rather than just accepting what appears to be a very expensive option without comparing it to alternatives. 

Thank you so much for that! 🙏🏻

 but it seems you have to be an expert yourself to avoid being ripped off! 
In many walks of life, knowledge is power. You can have a much more sensible conversation with a car mechanic , if you know something about cars . Same in financial services . Then if you learn enough you can DIY . Although always a question if you really save any money or not in the end . Often understanding the tax system around pensions is almost as important as the investments.
Depends also if you like tinkering with cars , or reading investments fund factsheets , or whether you would just prefer someone did it for you .

zagfles

Snowman's spreadsheet is useful to compare platform charges based on what you're invested in, amounts etc:

https://forums.moneysavingexpert.com/discussion/5583030/coolly-comparing-investment-platform-charges-snowmans-spreadsheet

Also if you're considering staying advised but want to switch IFAs, worth checking them for ombudsman claims, apparently only about 15% have claims against them so could be a warning sign if they have any, I checked an IFA for a relative recently and they had about 9 complaints in a single year! You can search here

https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions

(worth checking for any previous incarnation of the firm as well, if you search their address you might find a previous name)

MK62

As you said you'll be fine even if you lost the entire DC pension (though you'd either have to do something very reckless or else the world would have gone into financial armageddon for that to happen tbh), then your personal "risk" is a  lower than many others, who would be well up the creek if they lost all their's........this arguably makes you more of a DIY candidate than many others, despite you having to play catchup on the subject.

If you started off with a single global multi-asset fund, tailored to your personal view of volatility and the risk of losses, on a cost-effective, but easy to use DIY platform, you probably won't go far wrong overall.

If the "itch" needs scratching, you can start tinkering once you've built up some knowledge and experience......the basics are really not that hard.....you just need to accept that you'll never be an expert in the field (very few DIY investors are), but as long as you realise that, and stay within your comfort zone, you don't need to be.

On the flip side, if you feel particularly uneasy about this (though almost everyone feels some trepidation at first)....then the IFA route is always an option.........sleeping at night is a priority (at least for me anyway), so only you can decide how much fretting you'd do, if any, if you went DIY.

dunstonh

Is the adviser an FA or IFA?   Old Mutual Wealth is available to IFAs but Old Mutual Wealth (or Quilter as its being renamed) also operate their own salesforce.  
I’m assured he’s an IFA but all the funds are in fact Quilter. I will double check!       

That would put me on guard.   Own brand solutions are rarely the best option.    If you check the adviser letterhead/footer, it should say   "adviser firm name" is authorised and regulated by the FCA" if they are a directly authorised IFA.      If it says "adviser firm name" is an appointed representative of Intrinsic.... then that makes them part of the quilter companies.  In that case, you have the adviser, platform and investments all part of the same company.

I questioned whether there were other options but he said he had used OM for numerous years and it was the biggest and the best. 

They are no longer the biggest and best is always an individual opinion.  The platform originates from around 2003 and was called Selestia back then.  It probably had the best software of the lot back then.   It was later bought by Skandia, who were the biggest platform at the time.   Skandia decided Selestia's software was better so they migrated their account holders onto Selestia's platform and rebranded it as Skandia.   Skandia was bought by Old Mutual Wealth and rebranded.    The current software is still the same as it was in 2003 bar minor tweaks.     OMW carved up its UK operations and this is why its being rebranded to Quilter as its no longer part of OMW.   

The software they are moving to this month is used by many other platforms and has a good backend but until we are on it, we don't know who good the front end is going to be and we dont know what configuration options are going to be in place.   Aviva moved to the same software two years ago and have the front end quite limited in functionality compared to someone like Standard Life who have been running that software for many many year.  Aviva  pricing comes in around 0.15% to 0.25%.   You have an existing Aviva plan so they would offer discounted terms as a retention deal.  You are probably looking at around 0.16% platform charge.      So, to me, you have the unknown of OMW at a higher price than both Aviva (cheap but slightly limited configuration) and Standard Life Elevate (slightly more expensive around 0.25% but better overall).   So, why would you pick OMW in that scenario? - this is my point of view anyway.

 I’m paying him for advice so to then question it seems rude.

It's not.   if it's an FA, then you are seeing the limitations of that.  If its an IFA, then the recommendation should be suitable and match the client objectives.  Our own factfind asks about your religious beliefs in terms of investing, your ethical/sustainable beliefs and if you are returns focused or charges focused or have any other directives we should consider.   An IFA can recommend a portfolio to fit your views if you have such views. 

How can you guarantee the best advice! Someone else might give you answers you prefer to hear, but is that necessarily the best advice? That’s why I’m here I suppose.

I disagree with the opinions with some of the answers you have been given. Some of those will disagree with what I say.   investing is about opinion.   There is no best option.  There are plenty of wrong options though.  

For context, we operate a passive only portfolio, an active only portfolio, a hybrid portfolio and an ESG portfolio (sustainable/ethical). There are also bespoke portfolios and multi-asset funds.    The active only exists only on paper nowadays.  It has stopped being offered. Too expensive and worst returns of the lot.   Passive only is cheapest but behind the ESG and hybrid.   If there was one best option there wouldn't be a need for all these.    We could simplify the lot and put it in a single VLS fund but the ESG and hybrid portfolios have outperformed VLS.   Yet despite that, we have certain clients in VLS.      Then you have people that have specific investment views and you go bespoke for them, as long as their views are reasonable. 
There is no best option for everyone.

Can I ask whilst I’m on? One thing I’m dubious about is whether there’s a need to move from Royal London to OM and set the drawdown up right now, when we’re not going to be needing it for at least 2 years (my husband) and me probably much longer? We’re currently paying 0.45% to RL with no other fees (although I now suspect from what I’ve learned there will be Asset Management Fees built into that), whereas if we move to OM now we will start paying the 0.33% platform fee plus 0.5% to the IFA and a further 1.5% of the funds transferred. I suppose if we wait a couple of years then my own pot will have increased by about £30k (so another £400+ fees for transferring). Am I missing something? I can’t help but worry that that is only in the IFA’s interests, to get the business under his belt now? Perhaps I need to question him on this...

We have used RL for transactional clients with low investment knowledge and low internet skills who may want to transact directly (such as ad-hoc UFPLS withdrawals).  RL is cheap and you get the mutual bonus.  It is simple and structured.  However, the returns are pretty much middle of the road.  RL is a mono charged traditional personal pension.  It is not an investment platform.  So, the 0.45% will be your total. 
If you are cost focused, it is a good option.  If you are returns focused, it is not.  We have found returns, net of charges, have been consistently better than the RL governed portfolios with the more expensive portfolios.    And this is the problem if you become too cost focused.     Not sure I would switch RL for the quilter funds though.    I prefer the returns focus but value for money style approach.  

JohnWinder

JohnWinder said:

There is a justifiably held view that the more you pay in fund fees the worse your returns will be (clearly the association won't be perfect and may not be entirely causal). .........a suitable portfolio, a simple cheap one - so likely to get better returns,

dunstonh said:

Some people on this forum focus on cost before investment selection.  ...    Being returns focused or cost-focused is a personal choice.  Cheap doesn't mean better.  Expensive doesn't mean better.  .... 

 Compromising too much on cost can reduce your returns.

From just this page, and there are others to spin one's head, here are several plausible comments on fees and returns, usually generalisations because the hard truth can be difficult to nail down when it’s either not known (by anyone) or difficult to express at speed in short bites. None of it makes it easier for the enquirer, other than they learn that the area is contested ground layered with uncertainty. Time to get a bit more specific perhaps, with some quotes:

'Gruber (1996) drew attention to the puzzle that investors buy actively managed equity mutual funds, even though on average such funds underperform index funds. We uncover another puzzling fact about the market for equity mutual funds: Funds with worse before‐fee performance charge higher fees. This negative relation between fees and performance is robust and can be explained as the outcome of strategic fee‐setting by mutual funds in the presence of investors with different degrees of sensitivity to performance.'

https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.2009.01497.x

'In this study, we provide extensive evidence on the performance and characteristics of 1,779 U.S. domestic, actively managed retail equity mutual funds. We find that expense ratios differ widely among Morningstar categories. Overall, our results indicate that funds with low expense ratios outperform those with higher expense ratios. ...  Consistent with previous studies, we find strong evidence that the average actively managed mutual fund fails to outperform its benchmark after expenses. Furthermore, the probability of a fund achieving a positive risk-adjusted return increases as its expense ratio decreases.'

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1155776

'For example, in U.S. equity funds, the cheapest quintile had a total-return success rate of 62% compared with 48% for the second-cheapest quintile, then 39% for the middle quintile, 30% for the second-priciest quintile, and 20% for the priciest quintile. So, the cheaper the quintile, the better your chances. All told, cheapest-quintile funds were 3 times as likely to succeed as the priciest quintile.'

https://sg.morningstar.com/sg/news/154499/how-fund-fees-are-the-best-predictor-of-returns.aspx

These won't be the whole truth, as yet unknown, but they point in a clear direction and allow some useful generalisations to be made to help us make decisions with some confidence.

In god we trust; all others can bring data.

gm0

There is a shell game at work in UK Financial Services on product and charging structure.  Fund creation and destruction (obscure history over time) and investment and product restructuring and relabelling to obfuscate are rampant.  Let's take a look at charge types.

Charge type  DIY  IFA Advised   FA advised

Platform        Yes  Yes                 Yes (all the same but may bundle it up differently)

Admin           Rare No                  Some (e.g. for drawdown/payment setup etc). Disappearing into platform fee or IFA fee.

Funds            Yes Yes                 Yes (based on choice and assets from tiny to 1%+ - fund management + trading costs)

Performance Rare   Rare            Sometimes -  a choice (there are products and a few funds with performance fees on upside).

Exit               No   No                  Yes (SJP most infamously)

Entry            No   Sometimes     Often  (Setup costs are real - time, professional liability insured time for advised)*

DFM            No   Rare                Often (Another layer of discretionary management on top of Fund Mgt underneath advice)

*Entry fees as %pot AUM can be a bargain or a rip off depending upon the pension or pensions being gathered or transferred. So situational.  I will doubtless have missed some categories out.  Talking about subsets of these and creating a favourable (false) impression but not technically a lie in the maze of definitions and small print is a sales stock in trade for the UK FA.  IFAs are generally more careful of their reputation.  But not always.  Caveat Emptor is the only possible approach.  Be only as pushy as you need to be to get clear answers. It's not rude. But it is essential.

And do remember that the adviser only has to justify the advice to stick your funds with them is "not inappropriate" to the fact discovery done about your goals and risk appetite.  It doesn't have to be "best for you" or "cheapest for you" though those things are taken into account to varying degrees which is where the sleight of hand arises.  Legally appropriate, risk appetite appropriate, defendable to the regulator.  Existing product is cheaper. Ah but my (similar investment) is "better" in returns potential.  Compliance paperwork done.  Prepare a story based on "events" for the mediocre net fees performance. 
Where it starts to get insulting is when your risk gets dialed up by the product manager/FA to get back to "about market return" (geese must not hiss or leave) net fees.  Most people do this rarely in a lifetime so it is fairly easy to get away with it.  With decent entrepreneurial spirit and good admin they can winkle you off a lower cost platform onto *similar* (but not labelled the same) investments - that just happen to make them a turn each year.  No guarantee of improved net fees performance for you.  Guaranteed income for them.  So incentive alignment issues clearly exist.  It is what it is.  Outsource it or don't.  If they are clear open and honest it could be valuable and professional relationship.

Know the game. Ask the questions. Read the documents.