IFA charges - what is reasonable for initial planning and ongoing reviews?

dunstonh

I have more confidence (trust?) in those IFAs with a cap.  As an example, one had high % charges for the initial engagement, but a (circa) £12k cap.

A good number have that cap much lower.  Or a fixed fee around the £2500-£3000 range.
The problem is that most IFAs are small localised firms with 1-5 advisers.  Most of them are running at or near capacity and don't need to advertise or do anything to attract business as they get natural growth.  So, they don't appear on unbiased or any other lead generation or marketing site that needs paying for.   I had lunch with the owners of 4 other IFA firms the other day.   None of them appear on any of the marketing sites. All of them have caps between £2500 and £5000 or a fixed single fee for everything on initial.   This typically leaves only the saleforces or national firms with their larger fees appearing on the marketing sites.  In our area, not one independent IFA appears on unbiased for example.    Only the regional and national IFAs, a bunch of FAs and a networked IFA.

The only way to find those firms is to know someone that uses them or use google.

City firms tend to cost more than rural.  Those office locations in large towns and cities can be very expensive.  If you want a firm with plush offices and a bit of prestige attached, it will cost more than an office where they run out of an old barn or shop using their office printer and a handful of staff.    

Also agree with comments about the need for annual reviews.  At the moment I don't have the confidence, so am looking at a longer term engagement.  If however, the annual reviews are nothing more than a nice meeting over a coffee once a year, then I can always discontinue and/or pay for further advice if/when required.

Ongoing servicing can mean different things with different firms.  

The 0.75%-1.00% annual fees don't include the platform or fund fees, whereas the 1.8% one does.  Not sure if this suddenly makes the 0.75% look bad and the 1.8% look good.

Since 2013, it has been a requirement for all fees to be unbundled.   The exception is tied salesforces using old fashioned products.   So, if its an IFA, they should be disclosing charges as (for ongoing)

Adviser charge
Platform charge
Fund OCF
Fund TC
Fund IC
Total

The tied salesforces using old fashioned products have a single charge (which everyone is paid out of) and dont have to follow the full disclosures (so you dont see TC & IC quoted).  They exist but are not disclosed as they are outside the scope of MIFIDII that required them to be disclosed on products inside the scope of MIFIDII.    I have seen sales reps from the salesforces using those differences to make them appear cheaper than they are.  Sometimes they have even used the decades out of date method of AMC only.

You should not be using a sales rep with a single charge product as it will be the most expensive way.   An expensive IFA could be expensive as well but a good value IFA would be a lot cheaper.

Albermarle

BritishInvestor said:

Albermarle said:

The 0.75%-1.00% annual fees don't include the platform or fund fees, whereas the 1.8% one does.  Not sure if this suddenly makes the 0.75% look bad and the 1.8% look good.

Something to look out for is that some IFA's delegate the actual investment strategy to what is known as a DFM ( discretionary fund manager ) and they have a charge as well.  That might be included in the 0.75% to 1 % because they are high just for a IFA charge . Typically you should see something like the following for ongoing charges

IFA - 0.5%

DFM ( if there is one ) 0.4%?

Pension platform charge - 0.2% 

Funds charges - from 0.2% to 1.2 % ( can vary a lot depending on the portfolio constructed - passive funds are much cheaper than active ones for example ) 

So IFA with no DFM and a mixed portfolio should be no more than say 1.3% all in. That's my estimate anyway.

With a pot that size you can certainly do better than 0.2% on the platform and 0.5% for the IFA. 

If you are going to use a DFM, there are some decently priced offerings out there - no need to spend 0.4% on something that is commoditised.

https://www.betafolio.co.uk/

Also, no reason for funds to be more than 0.2-0.3% pa.

I'll go for 0.7-0.8% pa all in.

That would be a nice target for the OP . I was maybe  taking into account that there are two separate pots /clients /LTA issues to manage and things like ESG funds might be requested etc .
For sure anything in a range from 0.7% to 1.3% ( all in ) will be cheaper than they have been quoted already .

Because_I_Can

On a previous thread a couple of weeks ago, I’d mentioned I’d recently approached an IFA about taking on my existing FA/DFM managed portfolio.  Their costs (which covered all elements such as platform, fund, etc) were:

1. Full DFM (1.38%)
2. Model Portfolio DFM (0.96%)
3. Advised Portfolio (0.95%)
4. All above excluding additional adviser charges of 0.5%

This was for a pot size of SIPP £1.6m and ISAs £400k.

At the moment, following a review with my existing FA (who can also operate as an IFA off plan), we are now looking to move my existing DFM managed arrangement (current charge 1.3% plus adviser charge of 0.35%) to a more simplistic hybrid model (predominately passives), which should bring down costs to around 1% all in, including the adviser fee.

Posted to give you another insight into fees out there.

dunstonh

At the moment, following a review with my existing FA (who can also operate as an IFA off plan), we are now looking to move my existing DFM managed arrangement (current charge 1.3% plus adviser charge of 0.35%) to a more simplistic hybrid model (predominately passives), which should bring down costs to around 1% all in, including the adviser fee.

Hybrid is an increasingly popular method with total charges of 1% or under a common bottom line.

wjr4

dunstonh said:

I have more confidence (trust?) in those IFAs with a cap.  As an example, one had high % charges for the initial engagement, but a (circa) £12k cap.

A good number have that cap much lower.  Or a fixed fee around the £2500-£3000 range.
The problem is that most IFAs are small localised firms with 1-5 advisers.  Most of them are running at or near capacity and don't need to advertise or do anything to attract business as they get natural growth.  So, they don't appear on unbiased or any other lead generation or marketing site that needs paying for.   I had lunch with the owners of 4 other IFA firms the other day.   None of them appear on any of the marketing sites. All of them have caps between £2500 and £5000 or a fixed single fee for everything on initial.   This typically leaves only the saleforces or national firms with their larger fees appearing on the marketing sites.  In our area, not one independent IFA appears on unbiased for example.    Only the regional and national IFAs, a bunch of FAs and a networked IFA.

The only way to find those firms is to know someone that uses them or use google.

City firms tend to cost more than rural.  Those office locations in large towns and cities can be very expensive.  If you want a firm with plush offices and a bit of prestige attached, it will cost more than an office where they run out of an old barn or shop using their office printer and a handful of staff.    

Also agree with comments about the need for annual reviews.  At the moment I don't have the confidence, so am looking at a longer term engagement.  If however, the annual reviews are nothing more than a nice meeting over a coffee once a year, then I can always discontinue and/or pay for further advice if/when required.

Ongoing servicing can mean different things with different firms.  

The 0.75%-1.00% annual fees don't include the platform or fund fees, whereas the 1.8% one does.  Not sure if this suddenly makes the 0.75% look bad and the 1.8% look good.

Since 2013, it has been a requirement for all fees to be unbundled.   The exception is tied salesforces using old fashioned products.   So, if its an IFA, they should be disclosing charges as (for ongoing)

Adviser charge
Platform charge
Fund OCF
Fund TC
Fund IC
Total

The tied salesforces using old fashioned products have a single charge (which everyone is paid out of) and dont have to follow the full disclosures (so you dont see TC & IC quoted).  They exist but are not disclosed as they are outside the scope of MIFIDII that required them to be disclosed on products inside the scope of MIFIDII.    I have seen sales reps from the salesforces using those differences to make them appear cheaper than they are.  Sometimes they have even used the decades out of date method of AMC only.

You should not be using a sales rep with a single charge product as it will be the most expensive way.   An expensive IFA could be expensive as well but a good value IFA would be a lot cheaper.

I know you are a very successful IFA but please can you stop saying unbiased is full of salesforces. It also has advisers who are building their client book eg new advisers or ones who change companies and have to leave their clients behind. Yes, there are sales forces on there but there are also genuine advisers who care. Not everyone has an existing firm at capacity. 

Ibrahim5

Maybe you could set some pensions up for the dregs and then dump them later when you get some better clients.

dunstonh

wjr4 said:

dunstonh said:

I have more confidence (trust?) in those IFAs with a cap.  As an example, one had high % charges for the initial engagement, but a (circa) £12k cap.

A good number have that cap much lower.  Or a fixed fee around the £2500-£3000 range.
The problem is that most IFAs are small localised firms with 1-5 advisers.  Most of them are running at or near capacity and don't need to advertise or do anything to attract business as they get natural growth.  So, they don't appear on unbiased or any other lead generation or marketing site that needs paying for.   I had lunch with the owners of 4 other IFA firms the other day.   None of them appear on any of the marketing sites. All of them have caps between £2500 and £5000 or a fixed single fee for everything on initial.   This typically leaves only the saleforces or national firms with their larger fees appearing on the marketing sites.  In our area, not one independent IFA appears on unbiased for example.    Only the regional and national IFAs, a bunch of FAs and a networked IFA.

The only way to find those firms is to know someone that uses them or use google.

City firms tend to cost more than rural.  Those office locations in large towns and cities can be very expensive.  If you want a firm with plush offices and a bit of prestige attached, it will cost more than an office where they run out of an old barn or shop using their office printer and a handful of staff.    

Also agree with comments about the need for annual reviews.  At the moment I don't have the confidence, so am looking at a longer term engagement.  If however, the annual reviews are nothing more than a nice meeting over a coffee once a year, then I can always discontinue and/or pay for further advice if/when required.

Ongoing servicing can mean different things with different firms.  

The 0.75%-1.00% annual fees don't include the platform or fund fees, whereas the 1.8% one does.  Not sure if this suddenly makes the 0.75% look bad and the 1.8% look good.

Since 2013, it has been a requirement for all fees to be unbundled.   The exception is tied salesforces using old fashioned products.   So, if its an IFA, they should be disclosing charges as (for ongoing)

Adviser charge
Platform charge
Fund OCF
Fund TC
Fund IC
Total

The tied salesforces using old fashioned products have a single charge (which everyone is paid out of) and dont have to follow the full disclosures (so you dont see TC & IC quoted).  They exist but are not disclosed as they are outside the scope of MIFIDII that required them to be disclosed on products inside the scope of MIFIDII.    I have seen sales reps from the salesforces using those differences to make them appear cheaper than they are.  Sometimes they have even used the decades out of date method of AMC only.

You should not be using a sales rep with a single charge product as it will be the most expensive way.   An expensive IFA could be expensive as well but a good value IFA would be a lot cheaper.

I know you are a very successful IFA but please can you stop saying unbiased is full of salesforces. It also has advisers who are building their client book eg new advisers or ones who change companies and have to leave their clients behind. Yes, there are sales forces on there but there are also genuine advisers who care. Not everyone has an existing firm at capacity. 

I did say in our area that was the case.   But you are right, new qualified advisers starting out will typically appear on unbiased and the like.   Unbiased is not the directory it used to be.

Ibrahim5

The older IFAs will be sat around lunching paid for by the ongoing fees scandal.

cfw1994

Ibrahim5 said:

The older IFAs will be sat around lunching paid for by the ongoing fees scandal.

Fred/Ibrahim - your relentless battering of FAs, based on your father having some bad advice back in the mists of time, is a bit embarrassing now.  Maybe calm down, or provide some recent, up to date, real-world information 🤷‍♂️

Yes, this board can help people avoid being taken for a ride by unscrupulous FAs, but we should not paint all IFAs with those same brush….

I too chose to eschew their services, and (as many on a board like this) instead chose to DIY…..but we are a very small minority of the population. 
Better fiscal education could help people be more confident with money…but we are where we are.

I also realise there are those with zero interest or indeed confidence with money, so their goal has to be to fine a truly independent financial advisor with reasonable fees.

Yes, those of us with time on our hands can always point out how “it isn’t rocket science, follow a broadly low cost passive path for reasonable return, watch half a dozen short videos like these to see why, you can save a lot of money DIY”, but that won’t catch everyone….& indeed some who DIY badly would clearly be worse off 👀

There are some regulars here who do use advisors, and are clearly happy with that 👍
The following illustrates what those might aim for: I think Albermarle nails it in a nutshell:

Albermarle said:

BritishInvestor said:

Albermarle said:

The 0.75%-1.00% annual fees don't include the platform or fund fees, whereas the 1.8% one does.  Not sure if this suddenly makes the 0.75% look bad and the 1.8% look good.

Something to look out for is that some IFA's delegate the actual investment strategy to what is known as a DFM ( discretionary fund manager ) and they have a charge as well.  That might be included in the 0.75% to 1 % because they are high just for a IFA charge . Typically you should see something like the following for ongoing charges

IFA - 0.5%

DFM ( if there is one ) 0.4%?

Pension platform charge - 0.2% 

Funds charges - from 0.2% to 1.2 % ( can vary a lot depending on the portfolio constructed - passive funds are much cheaper than active ones for example ) 

So IFA with no DFM and a mixed portfolio should be no more than say 1.3% all in. That's my estimate anyway.

With a pot that size you can certainly do better than 0.2% on the platform and 0.5% for the IFA. 

If you are going to use a DFM, there are some decently priced offerings out there - no need to spend 0.4% on something that is commoditised.

https://www.betafolio.co.uk/

Also, no reason for funds to be more than 0.2-0.3% pa.

I'll go for 0.7-0.8% pa all in.

That would be a nice target for the OP . I was maybe  taking into account that there are two separate pots /clients /LTA issues to manage and things like ESG funds might be requested etc .
For sure anything in a range from 0.7% to 1.3% ( all in ) will be cheaper than they have been quoted already .

noalibi

Deleted_User said:

noalibi said:

Thank you for the comments so far.  Many touch on things I have considered myself - especially the comments about % charges given the amount of work doesn't necessarily increase with the size of the portfolio.  I have more confidence (trust?) in those IFAs with a cap.  As an example, one had high % charges for the initial engagement, but a (circa) £12k cap.

Also agree with comments about the need for annual reviews.  At the moment I don't have the confidence, so am looking at a longer term engagement.  If however, the annual reviews are nothing more than a nice meeting over a coffee once a year, then I can always discontinue and/or pay for further advice if/when required.

The 0.75%-1.00% annual fees don't include the platform or fund fees, whereas the 1.8% one does.  Not sure if this suddenly makes the 0.75% look bad and the 1.8% look good.

You amassed a decent amount if money over the years.  Was it from investments or did the money just land in your account? 

Although it would have been nice for it to land in our account, it was actually from a combination of starting early (I started when I was 24) and increasing my contribution by 1% whenever I was lucky enough to have a pay review.  I encouraged my OH to do the same.  My logic was always that it would be easier to reduce contributions in the future than it would be to play catch-up.  I also avoid default funds.  In hindsight, I would have paid more interest into which funds I'd invested (i.e. understanding charges and reviewing performance) as many of my older schemes would have done better had I only paid a little more attention.  Note to my younger self - read (and lookup the bits you don't understand) the annual statements.  They are boring, but once you become familiar with them you can make much better decisions.