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Sacking our IFA
BarbaraG2000
Posts: 55 Forumite
TLDR: We’re fed up with the impersonal service we’ve been receiving from a large national chain of IFA’s. We’ve concluded that for the next phase of our life, ongoing financial advice is not necessary. So we are going to save the 0.5% commission, and find a new IFA in a few years’ time.
The detail:
In 2008, my husband and I engaged an IFA, who managed things for us very well until 2021 - when he retired, just a few months before we did ourselves. He was originally in a small local partnership - just him and one other - but sold out to a big national firm in 2019. He continued to look after us as their employee. From our point of view, nothing changed except his email address and the branding on the paperwork.The detail:
When we took him on, we were early/mid forties and both had a hotchpotch of different personal pensions (husband had 8!) and several ISA’s, I also had a deferred defined benefit pension and we were both contributing to a defined benefit scheme with our new employer. We had both made a career change into a vocational, and much lower paying, occupation.
The IFA consolidated everything, but left one of husband’s pensions which had a guaranteed element where it was. He reviewed things regularly; he met us twice a year, showed us how our investments were performing in relation to the market, he occasionally advised us to move one pot or another to a different fund or provider because either returns were better or chargers lower. When my husband inherited from his parents, after we’d each had a new car he advised us to make a payment into each of our personal pensions and then invest the rest with a discretionary portfolio manager. The latter systematically moved all the money into ISA’s over the years. We also had regular contact with the portfolio manager and feel that we know him. The two of them were in contact with one another about our portfolio in between their meetings with us.
The first hint of a problem came in early 2021 when, in anticipation of our retirement later that year, we wanted to talk about income for the first phase of our (early) retirement. The plan was to leave the defined benefit pensions until normal pension age and take an income from elsewhere. It transpired that in order to set up a drawdown facility from our personal pension pots, the advice would cost thousands. This was because of the scale of fees of the national firm. I believe that if he had still been independent - and given that we had been paying commission on a total portfolio of close to £1m for more than a decade - he would have done it for much less, or even rolled it in as part of the service. But his hands were tied by his then employer.
Before anything was definitely decided, we went on holiday for a week. We came back to a succession of missed calls from our IFA, but when I tried to call back, the number was out of service. Shortly afterwards, we received a letter from the national firm, saying that our guy had retired and introducing his replacement. My interpretation is that our guy’s retirement had happened somewhat precipitately, and I bear him no ill will for that.
So we started to get to know the new assigned person, who approached things slightly differently, and suggested that we initially take an income from our ISA’s and leave the personal pensions alone for now. That made some sense in our circumstances, so that was all set up - although not without some teething problems. All was calm.
3 months ago, we got an email from our portfolio manager. He said he had been trying unsuccessfully to contact our IFA, and had learned that she had left the company. He had been given the name of somebody else, who was apparently now our IFA. You would have thought the firm would have informed us of this - but no.
Wind forward to today. We had a review pack from the new new IFA - information for us to read and check before our annual review with him. No “let me introduce myself”, no word that the previous woman ever existed. We don’t like it. A while ago I’d had a conversation with a friend who is semi-retired from the financial services industry and asked him - fully understanding and accepting that he is not and would not give us financial advice - whether we need to have an IFA. I was under the impression that you’re not allowed to access pension funds without taking financial advice.
Our friend said that’s not technically true, but in practical terms it is, because the pension providers don’t like setting up annuities or drawdowns if someone hasn’t had financial advice. But if we’re not planning on accessing our pensions for several years, all we are gaining is someone writing us a report every 6 months to tell us what we can already see for ourselves online. When the time does come, we can decide whether we want to pay an hourly rate for a one-off review and advice, or an ongoing arrangement with commission.
So, we have decided - we are sacking our IFA. We will maintain a relationship with our portfolio manager. The ISA’s from which we currently take our monthly income are all visible online, they will just continue invested in the existing broad-based ethical funds, we can keep an eye on the balance and compare performance, we can give instructions to change payments or move funds directly to the ISA provider. Our pensions can stay where they are - and we can likewise keep an eye on their performance. And if and when we feel we want to change these arrangements, we can find an IFA locally who we can get to know. And decide then whether we want one-off advice, or an ongoing relationship.
Meanwhile, that’s 0.5% of our portfolio not going in commission.
The IFA consolidated everything, but left one of husband’s pensions which had a guaranteed element where it was. He reviewed things regularly; he met us twice a year, showed us how our investments were performing in relation to the market, he occasionally advised us to move one pot or another to a different fund or provider because either returns were better or chargers lower. When my husband inherited from his parents, after we’d each had a new car he advised us to make a payment into each of our personal pensions and then invest the rest with a discretionary portfolio manager. The latter systematically moved all the money into ISA’s over the years. We also had regular contact with the portfolio manager and feel that we know him. The two of them were in contact with one another about our portfolio in between their meetings with us.
The first hint of a problem came in early 2021 when, in anticipation of our retirement later that year, we wanted to talk about income for the first phase of our (early) retirement. The plan was to leave the defined benefit pensions until normal pension age and take an income from elsewhere. It transpired that in order to set up a drawdown facility from our personal pension pots, the advice would cost thousands. This was because of the scale of fees of the national firm. I believe that if he had still been independent - and given that we had been paying commission on a total portfolio of close to £1m for more than a decade - he would have done it for much less, or even rolled it in as part of the service. But his hands were tied by his then employer.
Before anything was definitely decided, we went on holiday for a week. We came back to a succession of missed calls from our IFA, but when I tried to call back, the number was out of service. Shortly afterwards, we received a letter from the national firm, saying that our guy had retired and introducing his replacement. My interpretation is that our guy’s retirement had happened somewhat precipitately, and I bear him no ill will for that.
So we started to get to know the new assigned person, who approached things slightly differently, and suggested that we initially take an income from our ISA’s and leave the personal pensions alone for now. That made some sense in our circumstances, so that was all set up - although not without some teething problems. All was calm.
3 months ago, we got an email from our portfolio manager. He said he had been trying unsuccessfully to contact our IFA, and had learned that she had left the company. He had been given the name of somebody else, who was apparently now our IFA. You would have thought the firm would have informed us of this - but no.
Wind forward to today. We had a review pack from the new new IFA - information for us to read and check before our annual review with him. No “let me introduce myself”, no word that the previous woman ever existed. We don’t like it. A while ago I’d had a conversation with a friend who is semi-retired from the financial services industry and asked him - fully understanding and accepting that he is not and would not give us financial advice - whether we need to have an IFA. I was under the impression that you’re not allowed to access pension funds without taking financial advice.
Our friend said that’s not technically true, but in practical terms it is, because the pension providers don’t like setting up annuities or drawdowns if someone hasn’t had financial advice. But if we’re not planning on accessing our pensions for several years, all we are gaining is someone writing us a report every 6 months to tell us what we can already see for ourselves online. When the time does come, we can decide whether we want to pay an hourly rate for a one-off review and advice, or an ongoing arrangement with commission.
So, we have decided - we are sacking our IFA. We will maintain a relationship with our portfolio manager. The ISA’s from which we currently take our monthly income are all visible online, they will just continue invested in the existing broad-based ethical funds, we can keep an eye on the balance and compare performance, we can give instructions to change payments or move funds directly to the ISA provider. Our pensions can stay where they are - and we can likewise keep an eye on their performance. And if and when we feel we want to change these arrangements, we can find an IFA locally who we can get to know. And decide then whether we want one-off advice, or an ongoing relationship.
Meanwhile, that’s 0.5% of our portfolio not going in commission.
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Comments
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Our friend said that’s not technically true, but in practical terms it is, because the pension providers don’t like setting up annuities or drawdowns if someone hasn’t had financial advice.
I don’t know their likes or dislikes but surely in practical terms its irrelevant. If they allow a drawdown then you can do it.
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Our friend said that’s not technically true, but in practical terms it is, because the pension providers don’t like setting up annuities or drawdowns if someone hasn’t had financial advice.
All pension providers are not the same.
For some moving to drawdown is just an extension of the current pension arrangements. Some like to move you to a new 'drawdown product' Some insist that you take financial advice.
They will all 'advise' you to take financial advice as it covers their backside, and even without financial advice, they will probably insist on talking you through the options and making sure you understand what you are doing. ( So at least they have a recorded conversation, so they are covered if you go back 10 years later saying you never knew your pot could run out etc ).
For annuities most people either just go with their pension provider, or go to another provider, with or without financial advice.
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Exactly as @Deleted_User says having just done it twice in 2022. Pensions into drawdown. No advice. Two different platforms.
If you are unadvised - they are keen on you having been to Pensionwise and like to log that it happened in their own consumer handling audit trail for FCA.
One of the two - Fidelity also wanted me to chat to their "guidance team" as well as an unadvised client. Free.
But you don't have to have taken formal paid advice from an IFA. Or buy theirs.
The confusion arises because of the legal mandate and restrictions on advice for DB transfers and other valuable terms - GARs etc.
For basic DC - this is not prohibited or particularly obstructed beyond a bit of audit trail keeping so they can keep themselves happy for their FCA statistical returns.2 -
I don’t understand why people use IFAs or managed funds.
The only three things IFAs have done for me is convince me to contract-out of the state second pension, miss-sell me an endowment mortgage and con the company I later worked for into paying them extravagent commission in return for poorly performing managed funds.
I had a few work pensions invested in a few different managed funds and they performed so badly I decided I would sack the fund managers too as I knew I could do better myself. Remember three quarters of all managed funds perform worse than an index tracker.
So I moved them all to a SIPP and “manage” it all myself - it’s easy to do and I’ve added more than a zero to the end of the balance.
2 -
Presumably because they lack either the knowledge, time or confidence to manage their own investments.ader42 said:I don’t understand why people use IFAs or managed funds.
I understand the general principles of risk/reward, spreading risk, investments may fall as well as rise etc. But it’s quite a big step from there to making all those decisions myself.
Our managed portfolio has consistently outperformed the relevant indices. It does occur to me that if we moved the personal pensions into a SIPP with low fees, we could duplicate the investment mix from the managed portfolio elsewhere with lower fees, and the same with the ISA’s we are currently taking our income from - which is already on a platform that we could manage ourselves if we choose to. The managed portfolio is roughly 45% of our total.0 -
That’s very helpful, thank you.gm0 said:Exactly as @Deleted_User says having just done it twice in 2022. Pensions into drawdown. No advice. Two different platforms.
If you are unadvised - they are keen on you having been to Pensionwise and like to log that it happened in their own consumer handling audit trail for FCA.
One of the two - Fidelity also wanted me to chat to their "guidance team" as well as an unadvised client. Free.
But you don't have to have taken formal paid advice from an IFA. Or buy theirs.
The confusion arises because of the legal mandate and restrictions on advice for DB transfers and other valuable terms - GARs etc.
For basic DC - this is not prohibited or particularly obstructed beyond a bit of audit trail keeping so they can keep themselves happy for their FCA statistical returns.
The total income we will have in due course from DB’s plus state pensions is slightly more than what we are currently taking from the ISA’s, and there is enough in the ISA’s to bridge the gap until that time, and to spare. The DC pensions are icing on the cake, not what we are relying on for basic cost of living. The managed portfolio is our “if we have to go into residential care, we want it to be a good one” money. That gives us a fair bit of freedom.0 -
OP, you seem to have received some sensible advice...whether you got value for money is debatable because, frankly, it's all just common sense and could be implemented by any numerate person with the desire to do a bit of research. However, many people who are not confident in their own financial abilities or just don't want the small amount of bother involved with managing their own finances like having an IFA.
You are in a good position with DB pensions and presumably SP to come. Have you done a budget and do you understand the various income streams you have coming in? Take some time to understand how your money is invested by the portfolio manager and I'm sure you can say goodbye to them too. Personal finances can seem complicated, but that's mostly because of the way it is explained by many financial professionals and the massive replication of choice in things like funds and platforms. Good Luck! with a little research, some common sense and a simple plan, you won't need it.
“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
Yeah, that’s very similar to my experience. Thankfully didn’t use them for very long.ader42 said:I don’t understand why people use IFAs or managed funds.
The only three things IFAs have done for me is convince me to contract-out of the state second pension, miss-sell me an endowment mortgage and con the company I later worked for into paying them extravagent commission in return for poorly performing managed funds.
I had a few work pensions invested in a few different managed funds and they performed so badly I decided I would sack the fund managers too as I knew I could do better myself. Remember three quarters of all managed funds perform worse than an index tracker.
So I moved them all to a SIPP and “manage” it all myself - it’s easy to do and I’ve added more than a zero to the end of the balance.I can understand using specialist advice on specific complex issues on a one-off fee for service basis. The “pay me while I sleep” model for routine retirement investments is awesome but not for the poor sod who is paying.One of the justifications I’ve seen people use is “you never know when I might need advice so I’ll happily pay a retainer to the IFA so he would give me “free” advice when I actually need it. OP illustrated the basic flaw with this claim.1 -
A quick note to say commission stopped in 2012, you’ve been paying an ongoing fee.I am an Independent Financial Adviser (IFA). Any posts on here are for information and discussion purposes only and should not be seen as financial advice.0
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AFAIK there are some providers, who will only move you to their drawdown product if you pay a fee to their own in house advisors. The Pru crops up in a number of posts, insisting on a fee of 3%.gm0 said:Exactly as @Deleted_User says having just done it twice in 2022. Pensions into drawdown. No advice. Two different platforms.
If you are unadvised - they are keen on you having been to Pensionwise and like to log that it happened in their own consumer handling audit trail for FCA.
One of the two - Fidelity also wanted me to chat to their "guidance team" as well as an unadvised client. Free.
But you don't have to have taken formal paid advice from an IFA. Or buy theirs.
The confusion arises because of the legal mandate and restrictions on advice for DB transfers and other valuable terms - GARs etc.
For basic DC - this is not prohibited or particularly obstructed beyond a bit of audit trail keeping so they can keep themselves happy for their FCA statistical returns.
The reply from the forum is usually just transfer out to another provider, before going into drawdown.0
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