Finding a fee-based IFA

BarbaraG2000

TL;DR

How easy is it to find an IFA who will advise on flexible drawdown from a personal pension pot on a fee basis (£ per hour) rather than taking a percentage of the pot, and how much is it likely to cost?

The Detail
Husband and I are now 63 and 59. We ‘retired’ 18 months ago, but on the advice of our (then) IFA we are leaving our (multiple, partial) DB pensions alone, probably until normal pension age for each scheme. We both have full entitlement to SP, him at 66, me at 67.  Once all those are in payment, the combined income will be slightly higher than we are living on at the moment.  We each have a personal pension pot as well, his circa £320K and mine £190K. We also both have substantial stocks and shares ISAs. The bulk of these are managed by a discretionary portfolio manager, but there is a smaller pot each with Aviva. We own our house outright and have no children.

The IFA we had had for years, knew and trusted, was in a partnership, but sold out to a large national firm several years ago. When we started to make concrete retirement plans, he was looking at transferring our personal pension pots into a flexible drawdown product, and withdrawing at a level which would keep us below the personal allowance, with 25% of each withdrawal being tax free. In round numbers, withdraw £15K per annum, £3,750 of this is tax free, £11,250 is covered by personal allowance with a bit of headroom for a small amount of other income.  The difficulty was that, because he had joined a big national firm, they would have charged on a percentage basis for setting this up, and it was thousands of pounds - nearly £6K in total, I think.

Then our IFA retired himself, somewhat abruptly, shortly before we did ourselves - and crucially, before our plans were finalised. We were allocated a new IFA by the national firm. She looked at everything, and advised that we should leave the personal pensions alone and make a regular withdrawal from the Aviva ISA’s instead to provide a monthly income.  The logic was that this would reduce the size of our estate, and therefore liability to IHT. We followed the advice, and those are the arrangements currently in place.

However, the new adviser subsequently left the company. We were not informed of this directly - but our portfolio manager (whom we also know and trust) let us know, as he had been trying to contact her. We were not impressed, but decided to wait and see. A couple of months later, we received a pack from the big national firm, from someone we had never heard of, telling us our annual review was due and giving us loads of forms to fill in. No letter of introduction or explanation as to where the other one had gone, nothing. We decided to sack them and save the ‘ongoing advice charge’ - for which they basically did nothing.

However, my husband recently had a statement from the provider of his personal pension, counting down the now less than 2 years to his retirement at 65, outlining options etc - and also saying that if he doesn’t intend to retire at 65, he should let them know. I understand that ‘retire’ to them means ‘start taking your benefits’, whereas to us it means ‘stop working’, and we have already done it.  This has prompted us to reconsider the advice to take income from the ISA’s and leave the pensions alone - the logic was to reduce IHT, because pensions can be inherited tax free.  But we have no children! Anything our nieces and nephews inherit will be a bonus, but the priority for our money is to keep us comfortable in our lifetime. So surely it makes more sense to use up our personal allowances on the personal pension pots, while we still can, i.e. before our DB pensions are paid?

In order to do this, we need someone to have a look at the whole package and point us in the right direction of a drawdown scheme/provider with the flexibility we need and reasonable performance and charges. And we would like one who won’t take 2.5% of our pot to do it.

Dazed_and_C0nfused

Husband and I are now 63 and 59. We ‘retired’ 18 months ago, but on the advice of our (then) IFA we are leaving our (multiple, partial) DB pensions alone, probably until normal pension age for each scheme. We both have full entitlement to SP, him at 66, me at 67. 

What are you basing that on?

Albermarle

AIUI, charging by the hour for financial advice is not popular with clients, as it is too open ended/you do not know the final bill until you get it. No doubt it is available, but not widely as far as I know. So that leaves you with 3 options.
1) A one off review costing a % of the pot . You should maybe be able to  agree less than 2.5% as you have funds in excess of half a Million .
2) A review followed by ongoing charging/reviews ( probably 0.5%)
3) DIY

By taking income now below your personal allowance, you are saving tax directly until you reach SP age
Doing it the other way by taking money from ISA's, you are saving potentially more tax , but firstly you will be dead, and secondly there is no guarantee that the IHT exemption for pension pots will last indefinitely in its current form.

In order to do this, we need someone to have a look at the whole package and point us in the right direction of a drawdown scheme/provider with the flexibility we need and reasonable performance and charges

Finding a reputable pension/drawdown provider is the easy bit- there are plenty, and many are only too  happy to deal directly with the general public . You can set one up online in a matter of minutes. In fact it could well be that your current providers would be fine. Charges do vary but normally are not wildly different.
However pension or drawdown pots do not perform - it is the investments within them that perform ( or not ) . The choice of investment(s) is much more important than which pension provider you use. 
Same of course for your S&S ISA's .
Also you have to be clear what you mean by 'reasonable performance' . In reality the more you want growth the more risk you have to take. Conversely if you like to be cautious, you can not expect too much in the way of growth.

Linton

As Albemarle says the problem with charge per hour is you have no control what the final cost will be. Neither does the IFA.

You will find that with % charging the % used is dependent on the size of the pot, so what you are getting is a fixed charge that happens to be expressed as a % of the pot size.  The only thing that matters is the final cost in £.

So I suggest you drop your requirement for a cost per hour and talk to a few local IFAs.

MX5huggy

What does the portfolio manager say? To be honest I don’t understand how a portfolio manager and IFA interact with each other, but I would be asking them for some recommendations. 

As for not using up the personal allowance that seems a bit bonkers unless you planned to go back to work and were avoiding MPAA. 

Pat38493

Linton said:

You will find that with % charging the % used is dependent on the size of the pot, so what you are getting is a fixed charge that happens to be expressed as a % of the pot size.  The only thing that matters is the final cost in £.

I suppose someone could worry that this could provide a subliminal incentive to the IFA to recommend putting DB assets into payment earlier in order to preserve the fund size and therefore keep their fee higher, but in any case that doesn't appear to have happened here.

If it was up to me I would probably request a fixed fee per year, to be reviewed if the pot goes below or above certain agreed thresholds, but I guess that's not the model.

Agree the advice to take money out of ISA doesn't seem at first glance to make sense if you have no children.

dunstonh

How easy is it to find an IFA who will advise on flexible drawdown from a personal pension pot on a fee basis (£ per hour) rather than taking a percentage of the pot, and how much is it likely to cost?

Not that easy as most consumers don't want hourly rates and to be honest, most flat fee or percentage fees work out similar to hourly rates without the risk of the hourly rate spiralling.   i.e. I have a client with some work on the go at the moment where I have rung 6 times in the last week and been on the phone for over an hour each time and still not got through.   On an hourly rate, you would be charged for that.   On a fixed charge you would not be.

 No letter of introduction or explanation as to where the other one had gone, nothing. We decided to sack them and save the ‘ongoing advice charge’ - for which they basically did nothing.

When dealing with large regionals or nationals, staff turnover has always been a problem.  If you want consistency, then you are usually best looking at small local firms where the advisers are the business owners.

What does the portfolio manager say? To be honest I don’t understand how a portfolio manager and IFA interact with each other, but I would be asking them for some recommendations. 

Most IFAs do not use DFMs.  However, they are more common with national and regional firms and those tagged as wealth managers.    IFAs using DFMs get the DFM to do the investment work and then get the consumer to pay for that.  DFMs make the IFAs job easier.   So, its a bit of a money maker for IFAs that use them.    Advisory IFAs control the investment selection and there isnt that extra level of charge that a DFM has.   In my opinion, DFMs are only really useful if you have an ESG preference.  

Agree the advice to take money out of ISA doesn't seem at first glance to make sense if you have no children.

At the end of the day, the tax wrappers should be viewed holistically.  Withdrawals should be from the most tax efficient option.   When there is children and IHT issues, you would take that into account.  Where there are no children, it becomes far less important but some people still like to consider nieces and nephews etc.

Personally, I would have thought drawing at least £2880 out of the pension using the personal allowance and paying it back in again would have been something to consider (possibly x2 if spouse has no LTA issues).  Or maybe extending it to the personal allowance and putting £2880 in to the pension and the excess into ISA.   Then in later years, if there is no personal allowance available, you bed & Pension from the ISA.   So, what you do in the early years changes in the later years.

xylophone

You have both obtained state pension forecasts?

https://www.gov.uk/check-state-pension

With regard to finding an IFA, you might try

https://adviserbook.co.uk/

Tick "confirmed independent" and such other specialisms required when the menu comes up.

Then ring round to discuss fee basis etc.

BarbaraG2000

Dazed_and_C0nfused said:

Husband and I are now 63 and 59. We ‘retired’ 18 months ago, but on the advice of our (then) IFA we are leaving our (multiple, partial) DB pensions alone, probably until normal pension age for each scheme. We both have full entitlement to SP, him at 66, me at 67. 

What are you basing that on?

Which bit - the entitlement to full SP? Have done online checks on the Government site and it says we can’t increase our entitlement any more.

leosayer

OP your post is well written and it sounds like you have a good grasp of the issues and your needs. 

What value do think an IFA will provide over what you and your husband could do yourself? There are so many useful resources available to DIY planners such as forums like this and youtube videos that are a great help provided you have the enthusiasm and time to dedicate.

I find your currently implemented plan to avoid paying basic rate tax slightly unusual. Undoubtedly you will be paying basic rate (and maybe higher rate?) tax once you DB and State pensions anyway which might reduce future headroom. 

Out of interest, what reason was given for waiting until normal retirement date on your DB schemes now? 

Pat38493

leosayer said:

Out of interest, what reason was given for waiting until normal retirement date on your DB schemes now? 

I would be interested in this as well.  I think the usual headline reason given is poor commutation rates and hedging against very long lifespan.

A lot of the modelling tools I've looked at actually seemed to favor taking the DB early as it should smooth out the SOR risk on worst case scenarios..

Also I guess if you don't have children, legacy wouldn't have been such a concern in the original discussions with the first IFA perhaps, so using the fund for bridging made sense.