Financial Advise draw down pension fees

zagfles

lisyloo said:

zagfles said:

lisyloo said:

Albermarle said:

I Overall I am 9.5% down, so maybe would be less effort ( but not as interesting) to just be in a default fund 

Thanks for confirming.
I’m a tad under 7% down after charges and hollistic advice so happy it’s (IFA) the right thing for me/us at the moment.
I think it’s making us better off not worse off. through better decisions rather than direct nominal performance if you like - but that’s not looking too bad relatively speaking either.

 

Or a DIY investor who was 100% in cash would easily win, they'd be up, at least in nominal terms, as they'd have no capital loss and have earnt some interest Doesn't mean being 100% in cash was a better portfolio!

I agree, but we'd both agree they would be down (quite a lot) over the long term.
So 3 of us agree on that.
it was just a rough and ready to show it CAN be better an isn't right to assume it's NEVER beneficial.

Anything CAN be better in some circumstances. Betting on the 100-1 shot in the 3:30 at Kempton Park CAN sometimes be better, doesn't mean it was a sensible investment strategy. During some periods being in crypto would have beaten anything. But arguments that "bitcoin beat a sensible balanced portfolio in 2021" isn't an argument to invest in bitcoin

zagfles

lisyloo said:

Albermarle said:

lisyloo said:

Albermarle said:

I Overall I am 9.5% down, so maybe would be less effort ( but not as interesting) to just be in a default fund 

Thanks for confirming.
I’m a tad under 7% down after charges and hollistic advice so happy it’s (IFA) the right thing for me/us at the moment.
I think it’s making us better off not worse off. through better decisions rather than direct nominal performance if you like - but that’s not looking too bad relatively speaking either.

 

To be more scientific, you would need to look at longer term performance and no doubt our risk tolerance and objectives will not be the same.
As is known from the  many threads on IFA value, it is difficult/almost impossible to prove or disprove, at least from an investment performance angle.

I totally agree - it's very ad-hoc, rough and ready as an example that there CAN be a gain.
I just don't agree with a blanket - "they aren't adding any value whatsoever" because it's "hard to quantify".

I would totally agree with monitoring the return over the longer term to make sure it's value for money (which we have done).

As an aside I have friends who have done DB transfers who have benefitted enormously from having professionals advise them when to transfer (we're talking double bubble).

I'm sure I could find many examples of people who've lost everything through being scammed by sophisticated QROPS scams etc.
I know nothing like that can happen with mine because when I want to do anything it's tax checked, advice checked, AML checked etc.

You seem to be constructing strawmen to argue against. Has anyone said "they aren't adding any value whatsoever"? Getting individially tailor clothes adds value. Flying first class adds value. They question is, how much and is it worth it.

Re scams and DB transfers, financial advice is compulsory for DB transfers, including to QROPS. Getting advice doesn't guarantee you won't be scammed.

zagfles

bostonerimus said:

lisyloo said:

bostonerimus said:

Right now people just retiring into falling markets are having to pay financial services fees are in nasty position as sequence of returns risk is going to be compounded by the drag of the fees.

yes but as you just saw with real figures mine is reducing my losses.

So as I said before I agree with the charges being a line item 
but lets also have the benefits as a line item

The most recent comparison we've just done shows I'm 2.6% up and that's after charges.
obviously that's one single ad-hoc anecdote, but the point is we need to include both the benefits of the advice/fund management as well as the costs.

What is your basis of comparison? It's fiendishly difficult to assess the value of advice because you don't have a control for comparison. So what does the "2.6% up" refer to?
Over what time scale and what is your asset allocation? Maybe you should be up more...

I think it's compared to Albermarle's from the start of the year. She seems to be arguing against the strawman that using an IFA can NEVER beat "DIY". Well, that strawman is knocked over!

BritishInvestor

bostonerimus said:

Right now people just retiring into falling markets are having to pay financial services fees are in nasty position as sequence of returns risk is going to be compounded by the drag of the fees.

Anyone whose retirement plan is challenged by sequence of returns risk in the current market doesn't have a robust plan - whether they pay x pa to an adviser or DIY.

A bigger drag for some is that some of their funds are down 20-50% YTD. Financial services fees are a rounding error in comparison.

lisyloo

zagfles said:

lisyloo said:

zagfles said:

Linton said:

zagfles said:

Linton said:

zagfles said:

BritishInvestor said:

zagfles said:

BritishInvestor said:

bostonerimus said:

Yep if you have a 5% annual drawdown and fees are 1% you end up with only 4% and you've just spent 1/5th of your income on financial fees. That could easily to be your largest single cost in retirement. Financial advisors will argue that if your drawdown goes up each year with inflation then their fees as a percentage of your drawdown will decrease as you get older. They don't often say that in a down market their fees will continue to eat into your pot at the worst of times. Ongoing financial fees are a real drag on your retirement spending.

The average DIY investor would probably be quite happy (probably ecstatic) to only trail the market by 1% pa.

Many think nothing of paying a fund manager 1% per year, so fees don't seem to be that important to some.

But the fund fees are on top! As we've seen here, some people pay over 2% inc advice, fund and platform fees. 2% will be a serious drag on any portfolio. In bostonerimus's method of calculating it, 2/5th of the drawdown, or mine, about 30% of your portfolio. Whichever, massive.

If you believe that paying more to get better performance is worth it, then at least those who pay an active fund manager are paying the right person. It's the fund manager's job it is to outperform the market, not an IFAs.

Of course many will argue that it's impossible to predict which fund manager will do best and that most don't outperform the market anyway, so go passive where you can. But those who believe that you can pay for better performance should be seeking out the best fund managers, not the best IFAs.

The "best" IFAs tend towards boring passives in my experience. 

What do you think the average DIY pot is down this year (inc Crypto)? 25%? That's a serious drag, and as you say, massive.

The sort of people who invest in crypto etc aren't going to consider using an IFA. So a pointless comparison. Boring passives with and without the drag of IFA fees would be a better comparison.

What do you think the average pension holder knows about active or passive, let alone diversification or risk management?  They are far more likely to lose out by over-cautious investing because they dont want to take any risks and failing  to meet their retirement objectives or investing in the best performing funds/shares pushed on social media and lose out when they sell everything in a panic in the middle of the next crash.

Compared to those sorts of losses fees are next to irrelevent.

They don't. And they don't need to, most people with DC pensions use workplace DC schemes or robo pensions like pensionbee etc.

Most people whose only investments are employer DC schemes are unlikely to need or want external advice until perhaps they approach retirement.  So they are irrelevent to the discussion.  No-one is suggesting that they would benefit from paying for advice, nor I guess would it be particularly worthwhile for IFAs.

PensionBee has charges and offers a much reduced service compared with that from a paid-for advisor.

So, provide a scheme where there's a sensible but limited range of options and defaults (eg a workplace DC scheme) and people are "unlikely to need or want external advice". If only such a thing existed outside workplace pensions. Oh, wait https://www.fool.co.uk/personal-finance/share-dealing/investing-solutions/

If everyone was looking in the right place and implementing the right advice, there would never be anyone losing their life savings through scams.
Unfortunately it's an imaginary construct of people wanting to win arguments and does not reflect real life (sadly).

What's an "imaginary construct", workplace pensions or robo advisors? Don't they exist in "real life"? Or are they scams? Sorry, struggling to follow your argument here.

Workplace pensions aren't always brilliant.
Sometimes you need advice on when to keep and when to transfer.
it's not always that easy to work out on your own (I tried and the advice I was given here was insufficient).

A robo advisor could absolutely be scam - of course it could.

Yes of course people can use these tools effectively or ineffectively.

I just don't agree that everyone can 100% use the appropriate tool at the right time 100% of the time.

zagfles

BritishInvestor said:

bostonerimus said:

Right now people just retiring into falling markets are having to pay financial services fees are in nasty position as sequence of returns risk is going to be compounded by the drag of the fees.

Anyone whose retirement plan is challenged by sequence of returns risk in the current market doesn't have a robust plan - whether they pay x pa to an adviser or DIY.

A bigger drag for some is that some of their funds are down 20-50% YTD. Financial services fees are a rounding error in comparison.

Anyone whose fund is down 50% YTD isn't an investor, they're a gambler. May as well include people in the local bookies as "DIY investors" if it helps your point.

lisyloo

bostonerimus said:

lisyloo said:

bostonerimus said:

Right now people just retiring into falling markets are having to pay financial services fees are in nasty position as sequence of returns risk is going to be compounded by the drag of the fees.

yes but as you just saw with real figures mine is reducing my losses.

So as I said before I agree with the charges being a line item 
but lets also have the benefits as a line item

The most recent comparison we've just done shows I'm 2.6% up and that's after charges.
obviously that's one single ad-hoc anecdote, but the point is we need to include both the benefits of the advice/fund management as well as the costs.

What is your basis of comparison? It's fiendishly difficult to assess the value of advice because you don't have a control for comparison. So what does the "2.6% up" refer to?
Over what time scale and what is your asset allocation? Maybe you should be up more...

It was albermarle YTD compared to mine.
Why is it fiendishly difficult to compare one portfolio with another? (I'm seriously genuinely interested in that)
2.6% is the difference after the IFA fees.

I don't believe that I personally could do better (I'm not saying someone else couldn't do better).

Are you saying advice is NEVER of value.

What if a professional advises someone to transfer a DB pensions at the right time and the transfer value doubles?
Is that worthwhile advice?

lisyloo

zagfles said:

lisyloo said:

Albermarle said:

lisyloo said:

Albermarle said:

I Overall I am 9.5% down, so maybe would be less effort ( but not as interesting) to just be in a default fund 

Thanks for confirming.
I’m a tad under 7% down after charges and hollistic advice so happy it’s (IFA) the right thing for me/us at the moment.
I think it’s making us better off not worse off. through better decisions rather than direct nominal performance if you like - but that’s not looking too bad relatively speaking either.

 

To be more scientific, you would need to look at longer term performance and no doubt our risk tolerance and objectives will not be the same.
As is known from the  many threads on IFA value, it is difficult/almost impossible to prove or disprove, at least from an investment performance angle.

I totally agree - it's very ad-hoc, rough and ready as an example that there CAN be a gain.
I just don't agree with a blanket - "they aren't adding any value whatsoever" because it's "hard to quantify".

I would totally agree with monitoring the return over the longer term to make sure it's value for money (which we have done).

As an aside I have friends who have done DB transfers who have benefitted enormously from having professionals advise them when to transfer (we're talking double bubble).

I'm sure I could find many examples of people who've lost everything through being scammed by sophisticated QROPS scams etc.
I know nothing like that can happen with mine because when I want to do anything it's tax checked, advice checked, AML checked etc.

You seem to be constructing strawmen to argue against. Has anyone said "they aren't adding any value whatsoever"? Getting individially tailor clothes adds value. Flying first class adds value. They question is, how much and is it worth it.

Re scams and DB transfers, financial advice is compulsory for DB transfers, including to QROPS. Getting advice doesn't guarantee you won't be scammed.

The point there was a bona fide IFA acting for you would avoid scammers.
Agree there's a difference between execution and advice.

zagfles

lisyloo said:

zagfles said:

lisyloo said:

zagfles said:

Linton said:

zagfles said:

Linton said:

zagfles said:

BritishInvestor said:

zagfles said:

BritishInvestor said:

bostonerimus said:

Yep if you have a 5% annual drawdown and fees are 1% you end up with only 4% and you've just spent 1/5th of your income on financial fees. That could easily to be your largest single cost in retirement. Financial advisors will argue that if your drawdown goes up each year with inflation then their fees as a percentage of your drawdown will decrease as you get older. They don't often say that in a down market their fees will continue to eat into your pot at the worst of times. Ongoing financial fees are a real drag on your retirement spending.

The average DIY investor would probably be quite happy (probably ecstatic) to only trail the market by 1% pa.

Many think nothing of paying a fund manager 1% per year, so fees don't seem to be that important to some.

But the fund fees are on top! As we've seen here, some people pay over 2% inc advice, fund and platform fees. 2% will be a serious drag on any portfolio. In bostonerimus's method of calculating it, 2/5th of the drawdown, or mine, about 30% of your portfolio. Whichever, massive.

If you believe that paying more to get better performance is worth it, then at least those who pay an active fund manager are paying the right person. It's the fund manager's job it is to outperform the market, not an IFAs.

Of course many will argue that it's impossible to predict which fund manager will do best and that most don't outperform the market anyway, so go passive where you can. But those who believe that you can pay for better performance should be seeking out the best fund managers, not the best IFAs.

The "best" IFAs tend towards boring passives in my experience. 

What do you think the average DIY pot is down this year (inc Crypto)? 25%? That's a serious drag, and as you say, massive.

The sort of people who invest in crypto etc aren't going to consider using an IFA. So a pointless comparison. Boring passives with and without the drag of IFA fees would be a better comparison.

What do you think the average pension holder knows about active or passive, let alone diversification or risk management?  They are far more likely to lose out by over-cautious investing because they dont want to take any risks and failing  to meet their retirement objectives or investing in the best performing funds/shares pushed on social media and lose out when they sell everything in a panic in the middle of the next crash.

Compared to those sorts of losses fees are next to irrelevent.

They don't. And they don't need to, most people with DC pensions use workplace DC schemes or robo pensions like pensionbee etc.

Most people whose only investments are employer DC schemes are unlikely to need or want external advice until perhaps they approach retirement.  So they are irrelevent to the discussion.  No-one is suggesting that they would benefit from paying for advice, nor I guess would it be particularly worthwhile for IFAs.

PensionBee has charges and offers a much reduced service compared with that from a paid-for advisor.

So, provide a scheme where there's a sensible but limited range of options and defaults (eg a workplace DC scheme) and people are "unlikely to need or want external advice". If only such a thing existed outside workplace pensions. Oh, wait https://www.fool.co.uk/personal-finance/share-dealing/investing-solutions/

If everyone was looking in the right place and implementing the right advice, there would never be anyone losing their life savings through scams.
Unfortunately it's an imaginary construct of people wanting to win arguments and does not reflect real life (sadly).

What's an "imaginary construct", workplace pensions or robo advisors? Don't they exist in "real life"? Or are they scams? Sorry, struggling to follow your argument here.

Workplace pensions aren't always brilliant.
Sometimes you need advice on when to keep and when to transfer.
it's not always that easy to work out on your own (I tried and the advice I was given here was insufficient).

A robo advisor could absolutely be scam - of course it could.

Yes of course people can use these tools effectively or ineffectively.

I just don't agree that everyone can 100% use the appropriate tool at the right time 100% of the time.

Argue against someone who is saying that then.

Someone I know was thinking of using a IFA, I looked them up on the FO site

https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions , and they had a string of upheld complaints against them for stuff like Cape Verde property investments.

zagfles

lisyloo said:

zagfles said:

lisyloo said:

Albermarle said:

lisyloo said:

Albermarle said:

I Overall I am 9.5% down, so maybe would be less effort ( but not as interesting) to just be in a default fund 

Thanks for confirming.
I’m a tad under 7% down after charges and hollistic advice so happy it’s (IFA) the right thing for me/us at the moment.
I think it’s making us better off not worse off. through better decisions rather than direct nominal performance if you like - but that’s not looking too bad relatively speaking either.

 

To be more scientific, you would need to look at longer term performance and no doubt our risk tolerance and objectives will not be the same.
As is known from the  many threads on IFA value, it is difficult/almost impossible to prove or disprove, at least from an investment performance angle.

I totally agree - it's very ad-hoc, rough and ready as an example that there CAN be a gain.
I just don't agree with a blanket - "they aren't adding any value whatsoever" because it's "hard to quantify".

I would totally agree with monitoring the return over the longer term to make sure it's value for money (which we have done).

As an aside I have friends who have done DB transfers who have benefitted enormously from having professionals advise them when to transfer (we're talking double bubble).

I'm sure I could find many examples of people who've lost everything through being scammed by sophisticated QROPS scams etc.
I know nothing like that can happen with mine because when I want to do anything it's tax checked, advice checked, AML checked etc.

You seem to be constructing strawmen to argue against. Has anyone said "they aren't adding any value whatsoever"? Getting individially tailor clothes adds value. Flying first class adds value. They question is, how much and is it worth it.

Re scams and DB transfers, financial advice is compulsory for DB transfers, including to QROPS. Getting advice doesn't guarantee you won't be scammed.

The point there was a bona fide IFA acting for you would avoid scammers.

How do you think QROPS scams work?