SIPP - should I keep paying for ongoing advice?

MissBojangles

I am 55 and have a SIPP worth around £370k.  I am in draw down (£16k a year until state pension kicks in in 11 years then will take £8k a year).  

I paid the following charges in 2021 (when the SIPP was £400k):

Platform - £878 (0.22%)
Ongoing adviser charges - £3931 (0.98%)
Discretionary fund manager - £1409 (0.35%)
Investment charges - £474 (0.12%)
Total - £6692 (1.67%)

My question is - do I need to keep paying for all of these elements, or could/should I stop the ongoing adviser charges?  At the moment, I have a chat once a year where my situation is assessed and advice given but there is no other interaction with the adviser throughout the year.  Obviously I needed the advice up to now, as I approached drawdown, but is this still necessary?  The ongoing adviser charges are the equivalent of a quarter of my pension drawdown each year.

TIA

cloud_dog

Ouch!

Whether you need to keep taking advise on your investments is really a personal choice.  You obviously felt you needed to take advice previously, so what has changed to make you question that (other than the huge charges)?

You could switch to a transactional basis and undertake a review with an IFA periodically, but that would likely incur the full cost from the IFA on each occasion, rather than ongoing costs.  Having just said that, to my untrained eye these ongoing charges are quite eye watering, let alone as a one-off cost.  I'm sure there will be other more experienced posters along who might be able to put better context around this situation.

Joey_Soap

Wow. Those charges are seriously damaging your savings. It's a great reminder why anyone who can should absolutely educate themselves enough to be capable of looking after their own finances.

westv

I don't think the charges are that high really apart from perhaps the advisor charge at 1.06%. The others are about average. Platform 0.23% and fund charges 0.51%

cloud_dog

westv said:

I don't think the charges are that high really apart from perhaps the advisor charge at 1.06%. The others are about average. Platform 0.23% and fund charges 0.51%

I think the increase in costs is the combination of the IFA and the DFM, and whether you need the DFM, and if you do, why is the IFA taking such a reasonable chunk when offloading some of the decision making to the DFM?

MissBojangles

cloud_dog said:

westv said:

I don't think the charges are that high really apart from perhaps the advisor charge at 1.06%. The others are about average. Platform 0.23% and fund charges 0.51%

I think the increase in costs is the combination of the IFA and the DFM, and whether you need the DFM, and if you do, why is the IFA taking such a reasonable chunk when offloading some of the decision making to the DFM?

If I had to choose one, which should it be?  I assume the DFM is choosing where my money is invested but the IFA talks to me about my choices in terms of risk and advises me how long I can expect my fund to last under certain circumstances, etc.  In that case, I would keep the DFM, feeling confident that the right investment choices were being made, and, as long as my circumstances remain the same, do without the almost £4k eat into the fund for the advice (which is an hour long zoom call once a year).

Albermarle

cloud_dog said:

westv said:

I don't think the charges are that high really apart from perhaps the advisor charge at 1.06%. The others are about average. Platform 0.23% and fund charges 0.51%

I think the increase in costs is the combination of the IFA and the DFM, and whether you need the DFM, and if you do, why is the IFA taking such a reasonable chunk when offloading some of the decision making to the DFM?

I thought the same .

Platform costs are OK .
The investment charges look too low ( only just above 0.1%)
The IFA charge is on the high side

Maybe the DFM charge is for the investments ( and the 'investment charges' are some kind of add on )
And the actual DFM management charge is wrapped up in the IFA charge .

Probably for this kind of service the overall charge of just less than 2% is not that unusual.

Whether it is worth it or not , or whether the charge could be negotiated down is another matter.

MissBojangles

Sorry everyone, I have qualified my initial post with the fact the fund was £400k when I paid those costs - I have put the % against the fees.

BritishInvestor

Joey_Soap said:

Wow. Those charges are seriously damaging your savings. It's a great reminder why anyone who can should absolutely educate themselves enough to be capable of looking after their own finances.

The average investor probably does a worse job to be fair.

BritishInvestor

MissBojangles said:

cloud_dog said:

westv said:

I don't think the charges are that high really apart from perhaps the advisor charge at 1.06%. The others are about average. Platform 0.23% and fund charges 0.51%

I think the increase in costs is the combination of the IFA and the DFM, and whether you need the DFM, and if you do, why is the IFA taking such a reasonable chunk when offloading some of the decision making to the DFM?

If I had to choose one, which should it be?  I assume the DFM is choosing where my money is invested but the IFA talks to me about my choices in terms of risk and advises me how long I can expect my fund to last under certain circumstances, etc.  In that case, I would keep the DFM, feeling confident that the right investment choices were being made, and, as long as my circumstances remain the same, do without the almost £4k eat into the fund for the advice (which is an hour long zoom call once a year).

Given the low investment costs, it would seem the DFM is choosing a basket of passive funds. You'd have to wonder what the value add would be in this case.

1.67% total costs is probably about average given the pot size.

Linton

If you need an advisor  I think you should look for a local high street IFA who would do the complete job.  From many previous threads on this forum you should be able to fuind someone for significantly less than 0.98% you are currently paying.

Choice of specific funds does not matter much compared to other factors as long as you buy diversified mainstream funds appropriate for your situation.  More important is how you manage your money at the broader strategic level.  The person who best understands your situation, can advise you on all matters financial and knows what type of funds would be appropriate would be an IFA.