Safe withdrawal rates query

sheslookinhot

zagfles said:

BritishInvestor said:

lisyloo said:

Thrugelmir said:

lisyloo said:

i understand that swr is around 4% (some people say it should be less but I’m talking ball park at the moment).
Our investments have done 9% over a long period so we tend to work on an expectation of 6%.

so the question is why the gap?

Are you comparing apples with oranges?
What are you defining as a long period? 
How many years have you been managing your own investments? 

We don’t manage our own investments. We have an IFA that we’re very happy with.
i am sure his advice will be closer to the consensus 4% and he will take a holistic view of our other assets and lack of requirement to leave anything e.g. we could equity release.
Yes I’m sure it’s incorrect, it’s having a better understanding of why is the aim.

You'd need to adjust your SWR for costs - typically 0.5% reduction per 1% cost. Typical all in IFA fees are 2%.

If you're paying 2% in charges you really need to look at your fees as it'll have a big drag on your portfolio. You might not notice it when returns are 10-15% as they have been recently, but you will if the stockmarket stagnates or falls.

What would be a reasonable annual fee for an IFA to manage a DC pension for an individual ?

BritishInvestor

sheslookinhot said:

zagfles said:

BritishInvestor said:

lisyloo said:

Thrugelmir said:

lisyloo said:

i understand that swr is around 4% (some people say it should be less but I’m talking ball park at the moment).
Our investments have done 9% over a long period so we tend to work on an expectation of 6%.

so the question is why the gap?

Are you comparing apples with oranges?
What are you defining as a long period? 
How many years have you been managing your own investments? 

We don’t manage our own investments. We have an IFA that we’re very happy with.
i am sure his advice will be closer to the consensus 4% and he will take a holistic view of our other assets and lack of requirement to leave anything e.g. we could equity release.
Yes I’m sure it’s incorrect, it’s having a better understanding of why is the aim.

You'd need to adjust your SWR for costs - typically 0.5% reduction per 1% cost. Typical all in IFA fees are 2%.

If you're paying 2% in charges you really need to look at your fees as it'll have a big drag on your portfolio. You might not notice it when returns are 10-15% as they have been recently, but you will if the stockmarket stagnates or falls.

What would be a reasonable annual fee for an IFA to manage a DC pension for an individual ?

Depends what they are doing for you. It can range from meeting you once a year to discuss fund performance and any fund switches (which is of zero to negative value) to genuine financial planning. 

zagfles

sheslookinhot said:

zagfles said:

BritishInvestor said:

lisyloo said:

Thrugelmir said:

lisyloo said:

i understand that swr is around 4% (some people say it should be less but I’m talking ball park at the moment).
Our investments have done 9% over a long period so we tend to work on an expectation of 6%.

so the question is why the gap?

Are you comparing apples with oranges?
What are you defining as a long period? 
How many years have you been managing your own investments? 

We don’t manage our own investments. We have an IFA that we’re very happy with.
i am sure his advice will be closer to the consensus 4% and he will take a holistic view of our other assets and lack of requirement to leave anything e.g. we could equity release.
Yes I’m sure it’s incorrect, it’s having a better understanding of why is the aim.

You'd need to adjust your SWR for costs - typically 0.5% reduction per 1% cost. Typical all in IFA fees are 2%.

If you're paying 2% in charges you really need to look at your fees as it'll have a big drag on your portfolio. You might not notice it when returns are 10-15% as they have been recently, but you will if the stockmarket stagnates or falls.

What would be a reasonable annual fee for an IFA to manage a DC pension for an individual ?

I don't and never will use one, but IMO maybe couple of hundred or so! But then that's what I think flying first class on a plane should cost

But I've heard (mainly here) that 0.5% is typical. So even with typical fund and platform fees the total should be well under 2%.

Albermarle

sheslookinhot said:

zagfles said:

BritishInvestor said:

lisyloo said:

Thrugelmir said:

lisyloo said:

i understand that swr is around 4% (some people say it should be less but I’m talking ball park at the moment).
Our investments have done 9% over a long period so we tend to work on an expectation of 6%.

so the question is why the gap?

Are you comparing apples with oranges?
What are you defining as a long period? 
How many years have you been managing your own investments? 

We don’t manage our own investments. We have an IFA that we’re very happy with.
i am sure his advice will be closer to the consensus 4% and he will take a holistic view of our other assets and lack of requirement to leave anything e.g. we could equity release.
Yes I’m sure it’s incorrect, it’s having a better understanding of why is the aim.

You'd need to adjust your SWR for costs - typically 0.5% reduction per 1% cost. Typical all in IFA fees are 2%.

If you're paying 2% in charges you really need to look at your fees as it'll have a big drag on your portfolio. You might not notice it when returns are 10-15% as they have been recently, but you will if the stockmarket stagnates or falls.

What would be a reasonable annual fee for an IFA to manage a DC pension for an individual ?

The IFA charge will depend on the size of your funds . I have a friend who has around £250K in a simple DC pension.
His IFA charges 0.7% and the pension costs 0.4% . So 1.1 % all in . There was an initial charge as well .

lisyloo

zagfles said:

BritishInvestor said:

lisyloo said:

Thrugelmir said:

lisyloo said:

i understand that swr is around 4% (some people say it should be less but I’m talking ball park at the moment).
Our investments have done 9% over a long period so we tend to work on an expectation of 6%.

so the question is why the gap?

Are you comparing apples with oranges?
What are you defining as a long period? 
How many years have you been managing your own investments? 

We don’t manage our own investments. We have an IFA that we’re very happy with.
i am sure his advice will be closer to the consensus 4% and he will take a holistic view of our other assets and lack of requirement to leave anything e.g. we could equity release.
Yes I’m sure it’s incorrect, it’s having a better understanding of why is the aim.

You'd need to adjust your SWR for costs - typically 0.5% reduction per 1% cost. Typical all in IFA fees are 2%.

If you're paying 2% in charges you really need to look at your fees as it'll have a big drag on your portfolio. You might not notice it when returns are 10-15% as they have been recently, but you will if the stockmarket stagnates or falls.

We are paying 0.5%.
pretty happy so far, but would consider dropping it if no perceived value.
we think they can earn more than the 0.5 for us (I am aware that some don’t agree but I don’t subscribe to replacing their expertise with “a couple of books”).
The question is - can they do 0.5% better than us and I think the answer is yes, so it’s not strictly a cost if they pay their own way by higher returns than we would get on our own.

they don’t only manage our portfolios.
they give us “hollistic” advice on estate planning, Ltd company tax mitigation, other assets, LTA mitigation, maximising state pensions -  I could get A book for that one - the point is it’s not looking at one investment type in isolation.

it’s pointless arguing this one as people are entitled to different views.

I accept the point that the costs need to be factored in.

zagfles

lisyloo said:

zagfles said:

BritishInvestor said:

lisyloo said:

Thrugelmir said:

lisyloo said:

i understand that swr is around 4% (some people say it should be less but I’m talking ball park at the moment).
Our investments have done 9% over a long period so we tend to work on an expectation of 6%.

so the question is why the gap?

Are you comparing apples with oranges?
What are you defining as a long period? 
How many years have you been managing your own investments? 

We don’t manage our own investments. We have an IFA that we’re very happy with.
i am sure his advice will be closer to the consensus 4% and he will take a holistic view of our other assets and lack of requirement to leave anything e.g. we could equity release.
Yes I’m sure it’s incorrect, it’s having a better understanding of why is the aim.

You'd need to adjust your SWR for costs - typically 0.5% reduction per 1% cost. Typical all in IFA fees are 2%.

If you're paying 2% in charges you really need to look at your fees as it'll have a big drag on your portfolio. You might not notice it when returns are 10-15% as they have been recently, but you will if the stockmarket stagnates or falls.

We are paying 0.5%.
pretty happy so far, but would consider dropping it if no perceived value.
we think they can earn more than the 0.5 for us (I am aware that some don’t agree but I don’t subscribe to replacing their expertise with “a couple of books”).
The question is - can they do 0.5% better than us and I think the answer is yes, so it’s not strictly a cost if they pay their own way by higher returns than we would get on our own.

they don’t only manage our portfolios.
they give us “hollistic” advice on estate planning, Ltd company tax mitigation, other assets, LTA mitigation, maximising state pensions -  I could get A book for that one - the point is it’s not looking at one investment type in isolation.

it’s pointless arguing this one as people are entitled to different views.

I accept the point that the costs need to be factored in.

Why are you trying to argue something which you say is pointless arguing

Just one point though, IFAs aren't fund managers, that's not their job. They will likely recommend investments which are managed by fund managers, it's the fund managers job to deliver investment performance, not IFAs, and you pay the fund managers (through fund charges) on top of IFA fees. That plus platform charges might get you towards the 2% mentioned when charges are high.

The holistic stuff you mention is what IFAs are useful for. But that stuff is fairly straightforwards, I've never read a book on it in my life let alone a "couple", never worked in financial services, just hung around on this forum, and I got 86% when I had a go at the R04 exam (diploma in financial planning - pensions and retirement planning). I think many of the regulars here could easily pass it. So I can't see why the cost of providing that sort of service should be in the thousands for anyone with a big portfolio. Although it's probably mainly nanny state regulation and bureaucracy etc

Sorry I forgot it's pointless arguing, so i don't expect a reply

lisyloo

Just answering the questions wrt charges,

It’s really good if you and others on here have the skills confidence and desire to do DIY.
not everyone is as capable - for example the nurse in the headlines.
 who was scammed out of £45k recently.
I don’t think the regulars on here are the same as your average Person. I think they represent an certain intellectual percentile. Most people don’t want to engage at all.

personally I don’t have the desire to do it myself.
There are other areas I save money compared with others e.g. the £250 car I bought 9 years ago, but this is just something I want to outsource.

I don’t think discussing the pros and cons is pointless if someone can benefit but arguing what you wish to do with your life and what I wish to do with my life is a bit pointless as we’ve both made up our minds on the managing investment front.

you don’t know me so how can you know I’d make even a half decent job of it or not lose the lot in a scam? I do think it’s dangerous for some people TBH and there’s plenty of evidence to back up that statement.

michaels

0.5%,1%,,,even 2% doesn't sound very much:

£5,000 - £20,000 per year managing a £1m pot for 40 years is £200,000 - £800,000 or between 20% and 80% of the amount of retirement income the retiree will spend....

zagfles

lisyloo said:

Just answering the questions wrt charges,

It’s really good if you and others on here have the skills confidence and desire to do DIY.
not everyone is as capable - for example the nurse in the headlines.
 who was scammed out of £45k recently.
I don’t think the regulars on here are the same as your average Person. I think they represent an certain intellectual percentile. Most people don’t want to engage at all.

personally I don’t have the desire to do it myself.
There are other areas I save money compared with others e.g. the £250 car I bought 9 years ago, but this is just something I want to outsource.

I don’t think discussing the pros and cons is pointless if someone can benefit but arguing what you wish to do with your life and what I wish to do with my life is a bit pointless as we’ve both made up our minds on the managing investment front.

you don’t know me so how can you know I’d make even a half decent job of it or not lose the lot in a scam? I do think it’s dangerous for some people TBH and there’s plenty of evidence to back up that statement.

My point wasn't that you (or the average person) should necessarily be doing it themselves. It was that the cost is (IMO) excessive for what isn't really a high skill service, as evidenced by an untrained amateur like me being able to easily pass the main pension and retirement planning exam. 

lisyloo

zagfles said:

lisyloo said:

Just answering the questions wrt charges,

It’s really good if you and others on here have the skills confidence and desire to do DIY.
not everyone is as capable - for example the nurse in the headlines.
 who was scammed out of £45k recently.
I don’t think the regulars on here are the same as your average Person. I think they represent an certain intellectual percentile. Most people don’t want to engage at all.

personally I don’t have the desire to do it myself.
There are other areas I save money compared with others e.g. the £250 car I bought 9 years ago, but this is just something I want to outsource.

I don’t think discussing the pros and cons is pointless if someone can benefit but arguing what you wish to do with your life and what I wish to do with my life is a bit pointless as we’ve both made up our minds on the managing investment front.

you don’t know me so how can you know I’d make even a half decent job of it or not lose the lot in a scam? I do think it’s dangerous for some people TBH and there’s plenty of evidence to back up that statement.

My point wasn't that you (or the average person) should necessarily be doing it themselves. It was that the cost is (IMO) excessive for what isn't really a high skill service, as evidenced by an untrained amateur like me being able to easily pass the main pension and retirement planning exam. 

I don’t agree.
An average person can do ironing, service their car, put up solar panels, probably build an extension, some of us choose not to.
if I felt the cost was excessive for service I received I wouldn’t pay it.
if you think I’m clever enough to pass the exams then I’m clever enough to work out whether I want to pay this fee.
I think I can decide for myself.

here’s news of hundreds of people who’ve lost the lot

https://news.sky.com/video/it-will-affect-me-until-im-gone-nhs-nurse-loses-45-000-to-scammers-12596134

I think I’m making a better decision than them.

we’ll just have to disagree but it’s fact that some lose everything and I definitely won’t (I can’t access the money myself).

I accept the fees are excessive for YOU but everyone else can do what they want.