DIY or stick with IFA

Scallypud

I would like to hear any thoughts on the following.
I have two SIPP's the bigger one run by my IFA ( 365K ) and a small one run by myself in HL ( 28K).
My question is would i be better off transferring my IFA run SIPP to my private pension to save on the 2.4% fees? My private is doing better than the IFA one which is maybe luck as i don't really know much about stocks and shares.
What are your thoughts?

dunstonh

My question is would i be better off transferring my IFA run SIPP to my private pension to save on the 2.4% fees?

2.4% if far too high.   No-one should be going through 2%.   That is more akin to sales reps and wealth management firms.  e.g on your value, a platform charge of 0.25%, fund charge of 0.4% (assuming hybrid) and adviser charge of 0.5% = 1.15% (less if fully passive, add another 0.4% if fully active)

Linton

2.4% seems very high for ongoing IFA fees.  You may be able to reduce the cost significantly simply by going to another IFA.  Is your IFA a small local business or a major national company?  Are you sure those are ongoing fees rather than an initial charge?  It would help if you could explain the fees in more detail. 

Very broadly returns are linked to risk - the less risk you want to take the lower the expected returns..  Your IFA's portfolio will be based on the level of risk that you together should have deemed appropriate given your objectives. Unless you are an experienced investor you may find it difficult to design a portfolio with the appropriate level of risk.

In your case you say you " don't really know much about stocks and shares".  So it is quite likely that you have a much riskier choice of investments than the IFA would choose.  With £365K at stake I think that you should stay with your IFA  ( or preferably a cheaper one) but focus on increasing your understanding to the level where you can make the right judgement on return vs risk and choosing the right type of investments.  At that point you may be able to confidently and safely diy.

Scallypud

My IFA passed on my SIPP pension to Quilter Cheviot to manage so my IFA gets 0.7% for doing nothing really. The breakdown of the costs is as follows

Quilter Management = 0.9%
IFA     =  0.7%
Weighted cost of collective funds = 0.9%
TOTAL = 2.5%

I'm not sure what the Weighted cost of collective funds fee is for but i know you guys will know.

Linton

Scallypud said:

My IFA passed on my SIPP pension to Quilter Cheviot to manage so my IFA gets 0.7% for doing nothing really. The breakdown of the costs is as follows

Quilter Management = 0.9%
IFA     =  0.7%
Weighted cost of collective funds = 0.9%
TOTAL = 2.5%

I'm not sure what the Weighted cost of collective funds fee is for but i know you guys will know.

I suggest you start talking to a few local IFAs.  In my view those fees are outrageous - what benefits does "Quilter Management" provide to justify 0.9%?

Weighted cost of collective fees is the average cost to the fund manager of running the funds, eg salaries, office space etc.  The fund manager takes his costs from the fund as a whole, it is not directly charged to you.  Published returns are after those costs.

tacpot12

The weighted cost of the collective funds is found by taking the costs of investing in each fund IN proportion to the amount you have invested, adding these up and then dividing by the total value of the portfolio. An example makes this easy to understand...

say you invest £100,000 with Quilter and they invest £25,000 in a UK fund with an annual cost of 0.4% and £75,000 in a global (ex UK) fund with a cost of 0.8%. The annual cost of the investment in the UK fund is £100, and the cost of the investment in the global fund is £600. The weighted cost of collective funds is £100+£600 / £100,000 % or 0.7% - it's a weighted average of the costs. 

 

tacpot12

I don't see a reason why anyone looking to go down the DIY route shouldn't just implement their current portfolio (e.g. the one the OP has with Quiter) on a DIY platform. All the same sorts of investments are available and at very similar costs. This should be sufficient for at least 10 years, and in some cases it could last a lifetime. In that 10 years, you can learn enough abou what you should change when your needs change. 

JohnWinder

Unless you are an experienced investor you may find it difficult to design a portfolio with the appropriate level of risk.

I don't know that experience is necessary, but knowledge and understanding sure help. On which I think there's agreement:

...focus on increasing your understanding to the level where you can make the right judgement on return vs risk and choosing the right type of investments.

Scallypud

Quilter Management provide the the manager to run my SIPP. They decide what shares to buy and sell.
My IFA is a small local company but they have been in existence for a long time now.
If i was to transfer my pension to my private SIPP would i incur exit fees?

Albermarle

Scallypud said:

My IFA passed on my SIPP pension to Quilter Cheviot to manage so my IFA gets 0.7% for doing nothing really. The breakdown of the costs is as follows

Quilter Management = 0.9%
IFA     =  0.7%
Weighted cost of collective funds = 0.9%
TOTAL = 2.5%

I'm not sure what the Weighted cost of collective funds fee is for but i know you guys will know.

In this situation, your IFA is still doing something. They have only delegated the actual investing side, they can still advise you on other matters of personal/family finance, tax efficiency etc.
However as they have delegated some of their work, they should have reduced their fee, to say half.
In addition the Quilter fee is also higher than you would expect, plus the fund costs are on the higher side as well. Something more around 1.5% total would be more reasonable.

f i was to transfer my pension to my private SIPP would i incur exit fees?
Probably not, but you need to dig out the paperwork to check. If instead you employed a new cheaper IFA, they would sort that out for you.

Scallypud

This might be a stupid question but here goes ,
Quilter = 0.9% IFA = 0.7% Total 1.6%
As for the Weighted cost for collective funds fee would i still have this to pay even with a new IFA?
Also please advise what is a reasonable fee for an IFA?