Finding a fee-based IFA

JohnWinder

You’re in the vanguard of clients who want to try a service charged by the hour rather than assets under management, and you’ve already encountered some of the push-back inherent in our national conservatism. Hourly rate charging is likely to increase here until the balance is found between it and other charging models, none seeming to be ideal (certainly not the compromised paid by commission we put up with for so long). Progress is often slow. Advisors who are allowed to determine/change your investments might need to be paid more if they have higher regulatory compliance or indemnity costs. Advice only advisors could find an hourly rate satisfactory.
Whatever, you’ll likely get a recommendation from https://www.evidenceinvestor.com/help/#content-help-1. Based in UK, not somewhere foreign.

BarbaraG2000

Albermarle said:

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.

Thank you - that’s one option to explore which I hadn’t considered (finding a provider and setting it up ourselves)

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.

Good point well made. When we’ve done risk profiling for various providers, my husband comes out about 6 out of 10, I’m a bit more adventurous at 7. I do understand the relationship between risk and reward. We can afford to take a long term view, and therefore tolerate more risk than if the margins were tighter,

If you lumped all our ISA’s and personal pensions together, the level of income we currently require amounts to about 3% per annum of the total pot. I think that would normally be regarded as a safe withdrawal rate which should not leave us running out of money, although given our relative youth, some people might want to be more conservative with it.

However, we are only withdrawing at that rate for a limited time, because there are the DB pensions and SP to kick in at various points. As that happens, we would reduce withdrawals from the Big Pot. We envisage that once all DB’s are in payment, we will be taking little or nothing from the Big Pot. It would become a place to turn for big expenditures such as a new car or the holiday of a lifetime, but for the most part it will be left to accumulate. It is our safety net, should the time come when one or both of us have care needs.

BarbaraG2000

MX5huggy said:

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. 

Good point.  The way it worked in our case was this: after we had been with the IFA several years, my husband inherited from his parents. At that point, the IFA introduced us to the portfolio manager, who took over investing the lump sum for us, gradually moving it into ISA’s. The IFA continued to look after the pension plans and pre-existing ISA’s - he did regular reviews and periodically recommended changing funds or providers. The IFA and portfolio manager were in contact from time to time to review the overall picture, so the IFA was getting an ongoing advice fee

Before we decided to sack the replacement replacement IFA, we discussed it with the portfolio manager. My initial feeling was that although the IFA had been useful in setting up the regular withdrawal, and had actually moved us to a different provider - now that it was set up, they were not really doing anything for us - but were collecting 0.5% for their lack of effort. The portfolio manager confirmed that the IFA who took over had been much less responsive than the one we had originally, and the only material difference he could see was 0.5% staying in our portfolio rather than being paid out. It had crossed my mind to run this one past him, so thank you for the nudge.

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. 

Not planning on going back to work in any significant way, although we do both do small amounts from time to time. Unlikely to trouble HMRC to any great degree.

Scot_39

Pat38493 said:

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. 

At a guess - if like my one of my unfortunately very small DB pots - there can be punitive reductions if lift it before scheme normal retirement age - not the same as current SPA.

At one stage - they announced these reduction factors (there was a proper name - escapes me) doubled - from c1% pa to c2% pa - 60-65 and 2% to 4% pa - from 55-60.

Several experienced staff - decided to take a voluntary redundancy package on offer - and lift at the old max 15% level - rather than staying for the new max 30% at 55.

BarbaraG2000

leosayer said:

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.

Hmm…. Well, at one point I was under the impression that financial advice was required before accessing any pension. I’ve since learned that is only the case if you want to transfer a DB pension.

Also, there’s just a nervousness about making the wrong decision in a way which would be irrevocable.

For example - someone previously mentioned £2,880 per year paying back into a pension…. I’m vaguely aware that we could still be paying into a pension, and the Government would add some money. But there are some rules about that - once we’ve put any pension into payment, we can no longer do that…. or something……. these are the sort of things that an IFA should be on top of, and up to date with changes. I suppose I just doubt that I can keep adequately on top of it? I have form for being intensely interested in something for a while, but then losing interest.

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

It’s more a case of we said “we thought we’d leave the DB pensions until their normal date” and the IFA not disagreeing with us. Our logic was that those pensions have a guaranteed value for life, and are index linked - although variously capped at either 5% or 2.5%. So they are a secure bedrock for later life, and we had sufficient cash in the Big Pot to bridge the gap with plenty to spare.

Another thing to mention here is that I’ve always assumed that we would take the full pension as pension (with automatic spouse’s pension) and not take the lump sum - whereas the IFA’s have always said they always advise people to take the lump sum. But we have plenty of cash - well, not cash, but ISA’s - why do we need to add to that pile? If someone could help me to understand the logic of that, I would appreciate it.

Albermarle

BarbaraG2000 said:

leosayer said:

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.

Hmm…. Well, at one point I was under the impression that financial advice was required before accessing any pension. I’ve since learned that is only the case if you want to transfer a DB pension.

Also, there’s just a nervousness about making the wrong decision in a way which would be irrevocable.

For example - someone previously mentioned £2,880 per year paying back into a pension…. I’m vaguely aware that we could still be paying into a pension, and the Government would add some money. But there are some rules about that - once we’ve put any pension into payment, we can no longer do that…. or something……. these are the sort of things that an IFA should be on top of, and up to date with changes. I suppose I just doubt that I can keep adequately on top of it? I have form for being intensely interested in something for a while, but then losing interest.

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

It’s more a case of we said “we thought we’d leave the DB pensions until their normal date” and the IFA not disagreeing with us. Our logic was that those pensions have a guaranteed value for life, and are index linked - although variously capped at either 5% or 2.5%. So they are a secure bedrock for later life, and we had sufficient cash in the Big Pot to bridge the gap with plenty to spare.

Another thing to mention here is that I’ve always assumed that we would take the full pension as pension (with automatic spouse’s pension) and not take the lump sum - whereas the IFA’s have always said they always advise people to take the lump sum. But we have plenty of cash - well, not cash, but ISA’s - why do we need to add to that pile? If someone could help me to understand the logic of that, I would appreciate it.  

Generally you are more clued up about investments and pensions than the average person, so handling it all yourself is really a possibility. Regarding details, such as the £2880, a few weeks reading this forum half an hour a day, will soon get you up to speed on all these finer points, and answer any questions. That's how many of the regular forum users started. Plus you can not guarantee that an IFA will be on top of all details all the time, although the good ones should be.
Regarding taking the lump sum from a DB pension - it depends on personal circumstances and the offer from different DB schemes is not always the same. For most public sector schemes taking the lump sum is a poor deal, but in the private sector it tends to be a bit 50:50.
I did not take mine for the same reasons you mention.

Albermarle

 Well, at one point I was under the impression that financial advice was required before accessing any pension. I’ve since learned that is only the case if you want to transfer a DB pension.

You only need advice to transfer a DB pension to a DC pension
You also need financial advice to transfer a DC pension that has certain guarantees, and in both cases getting a positive recommendation to transfer is unlikely.
There are a few pension providers who only or mainly deal direct with advisors, and if you are with one of these, they may insist you take advice just to go into drawdown. However the solution is just to transfer out to another provider.
However be aware that all providers will regularly couch all statements with the rider 'we recommend you seek financial advice ' but they do not insist on it, they are just covering their backs.

Pat38493

Albermarle said:

Generally you are more clued up about investments and pensions than the average person, 

Sounds like OP might even be more clued up than the IFA if the IFA said that they "always" advise taking the lump sum on a DB pension.  In many cases this is not the most rational thing to do as far as I understand.

dunstonh

Pat38493 said:

Albermarle said:

Generally you are more clued up about investments and pensions than the average person, 

Sounds like OP might even be more clued up than the IFA if the IFA said that they "always" advise taking the lump sum on a DB pension.  In many cases this is not the most rational thing to do as far as I understand.

With DB schemes, it is risky to say its always best.  Its certainly isnt the case.    With DC schemes, unless there is a GAR, then when buying annuity, then its always best to to 25% TFC.   

To be honest, the original adviser doesn't sound like they have been very good on a range of points.   

zagfles

Pat38493 said:

Albermarle said:

Generally you are more clued up about investments and pensions than the average person, 

Sounds like OP might even be more clued up than the IFA if the IFA said that they "always" advise taking the lump sum on a DB pension.  In many cases this is not the most rational thing to do as far as I understand.

I went to a "retirement course" run by our union where one of the talks was from an IFA trying to sell the idea of taking a DB PCLS at a rubbish commutation rate maybe 10-15x annual pension lost, and invest it with them! But they advised against full transfers at 35x  There are some rubbish IFAs out there, we see it here all the time. One quick check you can do is check for FO decisions against them:

https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions