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Financial Advise draw down pension fees
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I was comparing non-IFAs (albermarles figure) with my IFA after costsas right now that's the only figures I have.zagfles said:
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!bostonerimus said:
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?lisyloo said:
yes but as you just saw with real figures mine is reducing my losses.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.
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.
Over what time scale and what is your asset allocation? Maybe you should be up more...
I don't understand including the costs but not the benefits which could be quantified over time.
It is possible (for example) to construct 2 dummy portfolios and compare them.
This could be done over the long term.
I would expect there would be some studies on it.0 -
So you should manage your own health and legal needs? Look up medical and solicitor malpractice cases.zagfles said:lisyloo said:
Workplace pensions aren't always brilliant.zagfles said:
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.lisyloo said:
If everyone was looking in the right place and implementing the right advice, there would never be anyone losing their life savings through scams.zagfles said:
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/Linton said:
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.zagfles said:Linton said:
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.zagfles said:BritishInvestor said:zagfles said:BritishInvestor said:
The average DIY investor would probably be quite happy (probably ecstatic) to only trail the market by 1% pa.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.
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.
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.
PensionBee has charges and offers a much reduced service compared with that from a paid-for advisor.
Unfortunately it's an imaginary construct of people wanting to win arguments and does not reflect real life (sadly).
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 sitehttps://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.0 -
zagfles said:
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.BritishInvestor said:
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.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.
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.Top 10 most-popular investment funds: February 2021
https://www.ii.co.uk/analysis-commentary/top-10-most-popular-investment-funds-february-2021-ii5152901 Baillie Gifford American
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Linton said:
So you should manage your own health and legal needs? Look up medical and solicitor malpractice cases.zagfles said:lisyloo said:
Workplace pensions aren't always brilliant.zagfles said:
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.lisyloo said:
If everyone was looking in the right place and implementing the right advice, there would never be anyone losing their life savings through scams.zagfles said:
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/Linton said:
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.zagfles said:Linton said:
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.zagfles said:BritishInvestor said:zagfles said:BritishInvestor said:
The average DIY investor would probably be quite happy (probably ecstatic) to only trail the market by 1% pa.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.
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.
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.
PensionBee has charges and offers a much reduced service compared with that from a paid-for advisor.
Unfortunately it's an imaginary construct of people wanting to win arguments and does not reflect real life (sadly).
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 sitehttps://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.She seems to be assuming using an IFA means your safe from scams. And that anything else, you're vunerable to them. That was the point.
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And? Anyone invested 100% in that fund is a gambler. I doubt many have though, it's not the most popular fund held, it's the most popular fund bought that month. Those who have boring old passives like VLS or HSBC All World tend to hold long term so won't register at all as they're not buying anything that month. Those who switch funds every month to the flavour of the month will make up most of the buy stats, but they're probably a tiny minority. And even they're unlikley to be 100% in a single highly volatile narrow fund.BritishInvestor said:zagfles said:
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.BritishInvestor said:
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.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.
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.Top 10 most-popular investment funds: February 2021
https://www.ii.co.uk/analysis-commentary/top-10-most-popular-investment-funds-february-2021-ii5152901 Baillie Gifford American
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The bad bit is having to pay the fees when the markets are down. The markets will hopefully recover, but the extra amount paid in fees at the worst possible time will affect your portfolio and income for many years.BritishInvestor said:
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.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.
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.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
On the the hand someone with little investing knowledge paying for advice would probably be rather more sensibly invested than to lose 20%-50% of their assets shortly after starting retirement than if they had chosen their own strategy and investments. And less likely to cash out the lot in panic.bostonerimus said:
The bad bit is having to pay the fees when the markets are down. The markets will hopefully recover, but the extra amount paid in fees at the worst possible time will affect your portfolio and income for many years.BritishInvestor said:
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.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.
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.0 -
OK so it's YTD. It is easy to compare portfolios, it's difficult to compare them sensibly and tease out the actual value of advice or active management. I'm down 15% this year, but I have a high equity percentage in my invested portfolio, I'm assuming that with a 2.6% gain you do not. So the value your IFA might have provided is in a low risk portfolio matched to your requirements. I can see that as good if you don't feel comfortable DIYing, but I'm less convinced that ongoing fees provide value if the initial strategic set up was good. Has your IFA or fund managers done anything tactical in the current market?lisyloo said:
It was albermarle YTD compared to mine.bostonerimus said:
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?lisyloo said:
yes but as you just saw with real figures mine is reducing my losses.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.
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.
Over what time scale and what is your asset allocation? Maybe you should be up more...
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?“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
It was an example of a 50% faller. Many others have fallen 20%+. In the real world, many DIY investors do not have an understanding of risk, diversification nor when someone is selling them a story too good to be true. It's a shame.zagfles said:
And? Anyone invested 100% in that fund is a gambler. I doubt many have though, it's not the most popular fund held, it's the most popular fund bought that month. Those who have boring old passives like VLS or HSBC All World tend to hold long term so won't register at all as they're not buying anything that month. Those who switch funds every month to the flavour of the month will make up most of the buy stats, but they're probably a tiny minority. And even they're unlikley to be 100% in a single highly volatile narrow fund.BritishInvestor said:zagfles said:
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.BritishInvestor said:
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.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.
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.Top 10 most-popular investment funds: February 2021
https://www.ii.co.uk/analysis-commentary/top-10-most-popular-investment-funds-february-2021-ii5152901 Baillie Gifford American 1 -
There may be some confusion between execution and advice.zagfles said:Linton said:
So you should manage your own health and legal needs? Look up medical and solicitor malpractice cases.zagfles said:lisyloo said:
Workplace pensions aren't always brilliant.zagfles said:
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.lisyloo said:
If everyone was looking in the right place and implementing the right advice, there would never be anyone losing their life savings through scams.zagfles said:
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/Linton said:
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.zagfles said:Linton said:
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.zagfles said:BritishInvestor said:zagfles said:BritishInvestor said:
The average DIY investor would probably be quite happy (probably ecstatic) to only trail the market by 1% pa.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.
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.
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.
PensionBee has charges and offers a much reduced service compared with that from a paid-for advisor.
Unfortunately it's an imaginary construct of people wanting to win arguments and does not reflect real life (sadly).
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 sitehttps://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.She seems to be assuming using an IFA means your safe from scams. And that anything else, you're vunerable to them. That was the point.
if your execution is being done by a firm authorised and regulated by the uks financial conduct authority then you should be safe from scams.
An IFA who is regulated and authorised by the IFA won’t be advising on scams.
please advise where the issue/confusion is.0
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