IFA fees to manage Pension - worth it?

[Deleted User]

1. Chasing performance is a bad strategy.
2. 3-year return isn’t much of a record. Is that all you have? How about 2008? Long term performance against benchmarks?

3. The charges are still high and damaging.
4. Do you understand the funds being offered? What is being held under the bonnet, what are the actual assets?  Do you understand Risk? Volatility? 

Prism

Interesting article here from last year comparing St James Place, widely known to have very high fees for a FA managed service, and Hargreaves Lansdown, the UKs most popular DIY platform and pretty cheap if you select the right funds. It seems that St James place easily beats the average DIY investor probably on investor behaviour alone.

SJP vs Hargreaves: Which offers more bang for clients’ bucks? - Citywire

I think the comparisons are a bit flawed but the general point holds true - many (not all) people mess up their own investments and would be better with an advisor. It seems that people don't do what is suggested, but in fact buy the wrong stuff and the wrong time, regardless of how much free information is out their.

Btw, I am not remotely suggesting people should use SJP.

coyrls

From what

Prism said:

Interesting article here from last year comparing St James Place, widely known to have very high fees for a FA managed service, and Hargreaves Lansdown, the UKs most popular DIY platform and pretty cheap if you select the right funds. It seems that St James place easily beats the average DIY investor probably on investor behaviour alone.

SJP vs Hargreaves: Which offers more bang for clients’ bucks? - Citywire

I think the comparisons are a bit flawed but the general point holds true - many (not all) people mess up their own investments and would be better with an advisor. It seems that people don't do what is suggested, but in fact buy the wrong stuff and the wrong time, regardless of how much free information is out their.

Btw, I am not remotely suggesting people should use SJP.

From what I can gather they are comparing an advised Hargreaves Lansdown client investing in HL's multi manager funds with an SJP client investing in SJP funds.  It is nothing to do with DIY vs advised.

Thrugelmir

Traktor_4 said:

dunstonh said:

Traktor_4 said:

dunstonh said:

Or, to say the same, in different words: 'No. However, there are a number of times that it does.' I guess we're talking about a fee of 1%/year resulting in a return more favourable by 1%/year than obtainable without an on-going advisor fee.

It would be interesting if the OP returned and confirmed the charges.   From how its written it could be 1% all in or 1% adviser charge.  An adviser charge at 1% on £800k is expensive and there are plenty of alternative advice firms out there that charge half that.

The current pensions have a 0.3% Management Charge - the proposed scheme ongoing charge together with adviser fee is 1%.  I will clarify whether that includes any platform fee as that was not discussed.  

In which case, 1% is far too expensive on £800k.    Fund charges are right in the ballpark.  
Advisers are required to split the charges down by
providers/platform/product charge (not all pensions a charge here)
OCF (or TER if no OCF or AMC if using insured funds)
Transaction charges*
Incidental charges (other)*
Adviser charge.
Total.

*most investors take no notice of the transaction charges and incidental charges and you rarely see them mentioned on sites like this.   However, advisers are required to include them even though they are flawed figures.   Advisers, like experienced investors, will usually downplay the TC/IC in discussion but they will be documented.

The portfolio has performed at 16% average over the past 3years.

The portfolio could lose that entire gain tomorrow.  

Prism

coyrls said:

From what

Prism said:

Interesting article here from last year comparing St James Place, widely known to have very high fees for a FA managed service, and Hargreaves Lansdown, the UKs most popular DIY platform and pretty cheap if you select the right funds. It seems that St James place easily beats the average DIY investor probably on investor behaviour alone.

SJP vs Hargreaves: Which offers more bang for clients’ bucks? - Citywire

I think the comparisons are a bit flawed but the general point holds true - many (not all) people mess up their own investments and would be better with an advisor. It seems that people don't do what is suggested, but in fact buy the wrong stuff and the wrong time, regardless of how much free information is out their.

Btw, I am not remotely suggesting people should use SJP.

From what I can gather they are comparing an advised Hargreaves Lansdown client investing in HL's multi manager funds with an SJP client investing in SJP funds.  It is nothing to do with DIY vs advised.

What makes you think that? They mention DIY Hargreaves Lansdown SIPP through the report.

coyrls

Prism said:

Interesting article here from last year comparing St James Place, widely known to have very high fees for a FA managed service, and Hargreaves Lansdown, the UKs most popular DIY platform and pretty cheap if you select the right funds. It seems that St James place easily beats the average DIY investor probably on investor behaviour alone.

SJP vs Hargreaves: Which offers more bang for clients’ bucks? - Citywire

I think the comparisons are a bit flawed but the general point holds true - many (not all) people mess up their own investments and would be better with an advisor. It seems that people don't do what is suggested, but in fact buy the wrong stuff and the wrong time, regardless of how much free information is out their.

Btw, I am not remotely suggesting people should use SJP.

The whole paper is dubious.  They do a comparison of "theoretical" returns of ishares UK Equity Index and Blackrock Consensus 85, neither of which have been around for 10 years.  It's difficult to check their theoretical returns for the Blackrock fund but the iShares one is an FTSE All Share tracker, a terrible choice for 100% of your pension.  Nevertheless, Trustnet tells me that the 10 year Annualised Return of the FTSE All Share Index is 6.2% with dividends reinvested.  The report doesn't calculate an annualised return but an average of the annual returns, which is a pretty meaningless statistic but the figure they report is 3.4%, which they compare with an average annual return from SJP of 3.9% (HL's figure from their managed funds I think is 2.9%).  So how do they get to an average annual return from the iShares UK Equity Index of 3.4%, when the actual annualised return over the same period for the index that the fund is tracking is 6.2%?

Prism

coyrls said:

Prism said:

Interesting article here from last year comparing St James Place, widely known to have very high fees for a FA managed service, and Hargreaves Lansdown, the UKs most popular DIY platform and pretty cheap if you select the right funds. It seems that St James place easily beats the average DIY investor probably on investor behaviour alone.

SJP vs Hargreaves: Which offers more bang for clients’ bucks? - Citywire

I think the comparisons are a bit flawed but the general point holds true - many (not all) people mess up their own investments and would be better with an advisor. It seems that people don't do what is suggested, but in fact buy the wrong stuff and the wrong time, regardless of how much free information is out their.

Btw, I am not remotely suggesting people should use SJP.

The whole paper is dubious.  They do a comparison of "theoretical" returns of ishares UK Equity Index and Blackrock Consensus 85, neither of which have been around for 10 years.  It's difficult to check their theoretical returns for the Blackrock fund but the iShares one is an FTSE All Share tracker, a terrible choice for 100% of your pension.  Nevertheless, Trustnet tells me that the 10 year Annualised Return of the FTSE All Share Index is 6.2% with dividends reinvested.  The report doesn't calculate an annualised return but an average of the annual returns, which is a pretty meaningless statistic but the figure they report is 3.4%, which they compare with an average annual return from SJP of 3.9% (HL's figure from their managed funds I think is 2.9%).  So how do they get to an average annual return from the iShares UK Equity Index of 3.4%, when the actual annualised return over the same period for the index that the fund is tracking is 6.2%?

Both of those funds were launched in 2005. I don't think there is anything wrong with the figures - they date range used was Jun 2010 to Jun 2020 by the look of the charts so may explain their lower figures.

coyrls

Prism said:

coyrls said:

Prism said:

Interesting article here from last year comparing St James Place, widely known to have very high fees for a FA managed service, and Hargreaves Lansdown, the UKs most popular DIY platform and pretty cheap if you select the right funds. It seems that St James place easily beats the average DIY investor probably on investor behaviour alone.

SJP vs Hargreaves: Which offers more bang for clients’ bucks? - Citywire

I think the comparisons are a bit flawed but the general point holds true - many (not all) people mess up their own investments and would be better with an advisor. It seems that people don't do what is suggested, but in fact buy the wrong stuff and the wrong time, regardless of how much free information is out their.

Btw, I am not remotely suggesting people should use SJP.

The whole paper is dubious.  They do a comparison of "theoretical" returns of ishares UK Equity Index and Blackrock Consensus 85, neither of which have been around for 10 years.  It's difficult to check their theoretical returns for the Blackrock fund but the iShares one is an FTSE All Share tracker, a terrible choice for 100% of your pension.  Nevertheless, Trustnet tells me that the 10 year Annualised Return of the FTSE All Share Index is 6.2% with dividends reinvested.  The report doesn't calculate an annualised return but an average of the annual returns, which is a pretty meaningless statistic but the figure they report is 3.4%, which they compare with an average annual return from SJP of 3.9% (HL's figure from their managed funds I think is 2.9%).  So how do they get to an average annual return from the iShares UK Equity Index of 3.4%, when the actual annualised return over the same period for the index that the fund is tracking is 6.2%?

Both of those funds were launched in 2005. I don't think there is anything wrong with the figures - they date range used was Jun 2010 to Jun 2020 by the look of the charts so may explain their lower figures.

I don't think it's the dates, it looks like the index return over the 10 years from June 2010 to June 2020 is about 82% which equates to an annualised return of about 6.17%.  It's hard to compare that to their claimed average annual return of 3.4% for the fund because theirs is a nonsense calculation.  Also it's a ridiculous comparison because it's not a realistic DIY benchmark to assume a 100% investment in the FTSE All Share Index.

Your original post implies that they were using actual average returns of HL's SIPP investors, which they are not.  I don't believe for a second that HL make those figures available.

michaels

Traktor_4 said:

dunstonh said:

Traktor_4 said:

dunstonh said:

Or, to say the same, in different words: 'No. However, there are a number of times that it does.' I guess we're talking about a fee of 1%/year resulting in a return more favourable by 1%/year than obtainable without an on-going advisor fee.

It would be interesting if the OP returned and confirmed the charges.   From how its written it could be 1% all in or 1% adviser charge.  An adviser charge at 1% on £800k is expensive and there are plenty of alternative advice firms out there that charge half that.

The current pensions have a 0.3% Management Charge - the proposed scheme ongoing charge together with adviser fee is 1%.  I will clarify whether that includes any platform fee as that was not discussed.  

In which case, 1% is far too expensive on £800k.    Fund charges are right in the ballpark.  
Advisers are required to split the charges down by
providers/platform/product charge (not all pensions a charge here)
OCF (or TER if no OCF or AMC if using insured funds)
Transaction charges*
Incidental charges (other)*
Adviser charge.
Total.

*most investors take no notice of the transaction charges and incidental charges and you rarely see them mentioned on sites like this.   However, advisers are required to include them even though they are flawed figures.   Advisers, like experienced investors, will usually downplay the TC/IC in discussion but they will be documented.

To confirm, the proposal is to consolidate two company pensions (Scottish widows, total £800k) into a portfolio of funds, based on my risk profile, managed on the IFA only platform.  The portfolio has performed at 16% average over the past 3years.
The charge to move the pensions into the new platform and portfolio investment is £5k.
The ongoing fund charge is 0.28% and the total annual management charge is 1% (ongoing fund +IFA charge).

I moved my SW legacy pension into an ii sipp
Transfer charges = £0
Ongoing annual charges (platform and funds) = 0.15% = £1200 on £800,000

Saving in fees over 40 years of retirement = £277,000 before any adjustments for fund growth

Prism

coyrls said:

Prism said:

coyrls said:

Prism said:

Interesting article here from last year comparing St James Place, widely known to have very high fees for a FA managed service, and Hargreaves Lansdown, the UKs most popular DIY platform and pretty cheap if you select the right funds. It seems that St James place easily beats the average DIY investor probably on investor behaviour alone.

SJP vs Hargreaves: Which offers more bang for clients’ bucks? - Citywire

I think the comparisons are a bit flawed but the general point holds true - many (not all) people mess up their own investments and would be better with an advisor. It seems that people don't do what is suggested, but in fact buy the wrong stuff and the wrong time, regardless of how much free information is out their.

Btw, I am not remotely suggesting people should use SJP.

The whole paper is dubious.  They do a comparison of "theoretical" returns of ishares UK Equity Index and Blackrock Consensus 85, neither of which have been around for 10 years.  It's difficult to check their theoretical returns for the Blackrock fund but the iShares one is an FTSE All Share tracker, a terrible choice for 100% of your pension.  Nevertheless, Trustnet tells me that the 10 year Annualised Return of the FTSE All Share Index is 6.2% with dividends reinvested.  The report doesn't calculate an annualised return but an average of the annual returns, which is a pretty meaningless statistic but the figure they report is 3.4%, which they compare with an average annual return from SJP of 3.9% (HL's figure from their managed funds I think is 2.9%).  So how do they get to an average annual return from the iShares UK Equity Index of 3.4%, when the actual annualised return over the same period for the index that the fund is tracking is 6.2%?

Both of those funds were launched in 2005. I don't think there is anything wrong with the figures - they date range used was Jun 2010 to Jun 2020 by the look of the charts so may explain their lower figures.

I don't think it's the dates, it looks like the index return over the 10 years from June 2010 to June 2020 is about 82% which equates to an annualised return of about 6.17%.  It's hard to compare that to their claimed average annual return of 3.4% for the fund because theirs is a nonsense calculation.  Also it's a ridiculous comparison because it's not a realistic DIY benchmark to assume a 100% investment in the FTSE All Share Index.

Your original post implies that they were using actual average returns of HL's SIPP investors, which they are not.  I don't believe for a second that HL make those figures available.

In the article it states that the annualized returns for iShares UK equity index over the time period was 6.1% and Consensus 85 was 6.9%. I am not sure where you get 3.4% from.

I have no idea where Numis got their SJP and HL figures from but they are confident enough in them to publish and article and Citywire is confident to publish it. Its still up so I assume SJP and HL have no dispute with the results.

Besides, other research including Dalbar's 1994 report on investor behaviour suggests that DIY investors on average are pretty poor.