IFA Fees

smartpicture

What are reasonable IFA fees? I have a SIPP with a large pot, which charges 0.49% fees to manage both it and an ISA and GIA, it, which seems fine. But on top of this, I have an IFA, who charges 0.75% for his services, which seems a lot.

The services he provides are an annual meeting with various fancy data, graphs etc on how my finances are doing, if I need money I ask him and he sorts out a lump sum from the SIPP, he does regular reviews of my attitude to risk etc and rebalances my investments accordingly, and he is available to ask any finance questions I might have. Last year his fees were over £11,500 and I'm struggling to see the benefit of that. Although I can't correlate the 0.75% with the £11,500 either, as 0.75% of my whole pot would be much higher, so not sure what it's 0.75% of.

 Years ago, my finances were a lot more complicated and he did a lot more for the money, but now I'm retired and have nothing but this one pot, it seems excessive, but I've struggled to find out what other IFAs charge without giving away a lot of information. Does this seem reasonable? I'm very happy with his services, don't get me wrong, but now that my earnings have fully stopped I'm trying to re-evaluate all my outgoings and this is a large one. Thank you.

[Deleted User]

Dunstonh and Albermarle will be along in a minute..

dunstonh

What are reasonable IFA fees? I have a SIPP with a large pot, which charges 0.49% fees to manage both it and an ISA and GIA, it, which seems fine. But on top of this, I have an IFA, who charges 0.75% for his services, which seems a lot.

Unless your value is very low, platform charges tend to be in the 0.1x to 0.2x range nowadays.  So, 0.49% is high.  Unless that also includes the fund charges, in which case it becomes very low.

An IFA charge of 0.75% is typical on medium sized values.  (typically you see the range as 0.5% to 1.0% nowadays - larger values getting towards the 0.5%)

 Although I can't correlate the 0.75% with the £11,500 either, as 0.75% of my whole pot would be much higher, so not sure what it's 0.75% of.

Are you perhaps mixing charges up?   In its cleanest form, you should have:

platform charge:

adviser charge:

investment charge:

If the adviser is not controlling the investment strategy and using a discretionary investment manager then they have their charges on top.  If the adviser is controlling it then its within their adviser charge.  Its unclear which charges you have fall under which.  

 Last year his fees were over £11,500 and I'm struggling to see the benefit of that. 

If that is the IFA only fees, then you would expect at least 0.5%.

 Years ago, my finances were a lot more complicated and he did a lot more for the money, but now I'm retired and have nothing but this one pot, it seems excessive, but I've struggled to find out what other IFAs charge without giving away a lot of information. Does this seem reasonable?

What is your value?

Albermarle

I have a SIPP with a large pot, which charges 0.49% fees to manage both it and an ISA and GIA, it, which seems fine

A SIPP does not manage anything , it only provides an administrative service . Somebody either you or your advisor has to manage it /choose the investments .

Dunstonh and Albermarle will be along in a minute..

Maybe I am getting as predictable as ZPZ, which is worrying .....

[Deleted User]

Ok 
Both dunstonh and Albermarle putting in their daily long shifts on behalf of the IFA interest.
smartpicture, you are paying over £200 per week to your IFA. That is more than many couples have to live on.
Albeit you can afford it, given that the IFA's job is not to maximise your returns but rather massage your expectations: how do you justify that expense?

Cus

Firstly, completely identify what you paying. IFA v platform v funds v discretionary manager etc.
Then based on that, you can make more informed opinions.

[Deleted User]

Cus said:

Firstly, completely identify what you paying. IFA v platform v funds v discretionary manager etc.
Then based on that, you can make more informed opinions.

smartpicture has already done this in the OP but to recap:
Three quarters of one percent to his IFA and half a percent elsewhere.

smartpicture is already paying a substantial amount to those who manage his investments. 
The mystery is why he is paying a bigger sum to his Independent Financial Adviser.

Cus

I saw the OP couldn't correlate the 0.75% versus £11500 which wasn't 0.75% of the funds, and I also thought the 0.49% might be confusing as it seems high for a platform, but low if you include fund costs, but is it managed funds etc etc
But anyway, your point is valid. The OP should understand what they are exactly getting for this £11500 to an IFA.

smartpicture

Thank you, you're all helping to clarify things. I've been doing some investigations and here is some more detail on the charges, hopefully you can tell me if these are reasonable. To be clear, I'm happy to pay an IFA, I don't want to manage any of this myself (because I wouldn't), I'm assuming he will get me the best return (or better than I would get myself), I just want to make sure the charges are reasonable or whether I should look at other IFAs and/or discuss further with him.

SIPP 950kish with AJ Bell:
AJ Bell Custody Charge 0.17% = £1598 last year
IFA Fee 0.75% = £7030
Investment Funds Annual Management Charge 0.35% = £3857 (not clear who gets this money??)
ISA/GIA 420k ish with AJ Bell:
AJ Bell Custody Charge 0.17% = £697 last year
IFA Fee 0.75% = £3031
Investment Funds Annual Management Charge 0.35% = £1664 (not clear who gets this money??)

So about £18,000 annual fees. Additional small dealing charges notified once a year when fund is rebalanced.
IFA Fees were 1% until 3yrs ago when various investments were amalgamated onto one platform, now 0.75%.
Does this all look ok? Thank you.

Cus

How often does the IFA change the fund choices?
How often does the IFA tune the amounts in the funds, and what types of funds have they selected?

AlanP_2

It doesn't sound totally unreasonable to me although you could probably get it down a bit if you shopped around.

The Investment Funds Annual Management Charge is the internal charges for each fund to cover their costs and is "paid" within the unit price and allowed for before the fund profit / loss (annual return) is calculated and published in the Fund Factsheet / KIID etc. so you don't explicitly pay this.

0.17 fee for the platform admin provided by A J Bell is possibly a bit high (a DIY investor would pay 0.25% on <£250k then 0.1% on next £750k and 0.05% on £1m to £2m so ~0.1125% for £1.4m).

That leaves 0.75% IFA fee which on £1.4m is possibly a bit on the high side but not outlandishly so from what we see quoted on herev sometimes.