Fees and Charges

dunstonh

To me the initial one-off 3% plus the on-going 1.9% charge is a huge inroad into a not very big total pot.

There will nearly always be an initial charge with an adviser as that goes to them.   That is their payment.     Don't look at it in percentage terms.  Look at it in monetary terms.   3% against £50,000 is not bad (could do better) but 3% against £200k is very high.    Look for circa £1700-2500.

In IFA terms, your post is not big. So, an ongoing adviser charge may be 0.50% but closer to 0.75% is likely to be more common.   

The investment charges will be based on your preference or the preference of the IFA.  They could be as low as 0.1% but could be 0.8% (if fully active).

The 'ongoing fund' charge for each of the three current pots is 0.34%, 0.3% & 0.25%, with no platform or advisor fees.

These are already at the very cheap end of the scale.  Whilst an adviser can get that cheap, it will only be on a transactional basis and not ongoing and using similar basic funds.   That may be fine for you.  It may not.

Linton

Another factor to add to the discussion - just because you change funds to cut the published fund fees you dont necessarily see that in improved performance.  Taking FTSE 100 trackers....

Over the last 5 years..

FTSE 100 index (total return) +22.2%
HSBC FTSE 100 Index fund  +21.9% OCF 0.09%
iShares Core FTSE 100 ETF +21.8%  OCF 0.07%
Vanguard FTSE 100 Index fund +21.2% OCF 0.06%

JohnWinder

Those figures, from the same website perhaps, give a tracking error over 5 years of:

HSBC 0.3%.

Ishares 0.4%.

Vanguard 1.0%.

Taken from the company's websites, you get:

HSBC 0.15%  https://www.assetmanagement.hsbc.co.uk/en/intermediary/fund-centre/gb00b80qfr50?t=1

Ishares 0.39%  https://www.ishares.com/uk/individual/en/products/251795/ishares-ftse-100-ucits-etf-inc-fund?switchLocale=y&siteEntryPassthrough=true

Vanguard 0.26%  https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-100-index-unit-trust-gbp-acc/price-performance.

The differences, between the data sources, is very small but I don't know why they're different.

JohnWinder

That is their payment.     Don't look at it in percentage terms.  Look at it in monetary terms.   3% against £50,000 is not bad (could do better) but 3% against £200k is very high.    Look for circa £1700-2500.

Look for £1700-2500, indeed. Why isn't the fee expressed like that if that's what we're looking for?

dunstonh

JohnWinder said:

That is their payment.     Don't look at it in percentage terms.  Look at it in monetary terms.   3% against £50,000 is not bad (could do better) but 3% against £200k is very high.    Look for circa £1700-2500.

Look for £1700-2500, indeed. Why isn't the fee expressed like that if that's what we're looking for?

You will need the OP to answer that as it is mandatory for fee disclosures to be in monetary terms.   They can be in other terms too e.g. x% of £y = £z or  hours x £x per hour = £total.   However the total needs to be shown in monetary terms.  You cant juts say 3% and leave it at that.  

Username03725

dunstonh said:

JohnWinder said:

That is their payment.     Don't look at it in percentage terms.  Look at it in monetary terms.   3% against £50,000 is not bad (could do better) but 3% against £200k is very high.    Look for circa £1700-2500.

Look for £1700-2500, indeed. Why isn't the fee expressed like that if that's what we're looking for?

You will need the OP to answer that as it is mandatory for fee disclosures to be in monetary terms.   They can be in other terms too e.g. x% of £y = £z or  hours x £x per hour = £total.   However the total needs to be shown in monetary terms.  You cant juts say 3% and leave it at that.  

To be fair a monetary value is given, but as the total value of the three pots fluctuates daily the percentage value is given with the usual explanatory note.

JohnWinder

So which one varies, the £ cost or the cost as a %? Or do both!

dunstonh

JohnWinder said:

So which one varies, the £ cost or the cost as a %? Or do both!

If it is measured by percentage then it will be the percentage.    Although sometimes it can be fixed in place at that monetary amount irrespective of change.   No fixed rules there.

Username03725

JohnWinder said:

So which one varies, the £ cost or the cost as a %? Or do both!

I didn't realise there was an ambiguity. It's 3% of the total, which for the values of the three pots at the time the advice was being done equated to about £7,980. It's fixed at 3%, the monetary value will change in line with the value of the three pension pots. 

GrahamMackie

Funny how the combination of a downturn in the market and you moving closer to retirement makes you look more closely at your investment portfolio, its performance, costs etc.

I have two pension funds, one with Aviva which is contributed towards by salary sacrifice and my employer.  The other is an actively managed, discretionary fund through an IFA and held in a wrapper with Transact.  In a review of 2022 the Aviva fund outperformed the managed fund by a few percentage points but the bigger shock were the fees being charged by my IFA and Transact.  The TER on the Aviva fund of a few hundred £k is 0.5% whereas the managed fund, which is four times the size, came in at 2.08% for the year.  

Reading the above comments it seems like the norm is for the fees to reduce, in percentage terms the larger the fund gets.  If this is the case can anyone give me a target TER for a large actively managed fund ?  I am considering moving the whole fund over to Aviva at this rate.

Thanks in advance