Opinions please: Are these pension charges typical, or am I being ripped off?

Silver66

EthicsGradient said:

Active v. passive won't have made a big different over just a few years; but knowing the proportions in bond funds and share funds might help a lot. Also, when the advisor talked to you, did you say you were cautious, adventurous, etc.?  This might help us say whether the advisor balance between bonds and shares looked reasonable in 2018, and also whether the performance since is in the range of what might have happened (bonds would generally be seen as cautious in 2018, but the worldwide hike in interest rates over the last couple of years has hit them badly - so a lot of people who thought they were playing it safe have lost some money).

Hi EthicsGradient, Thanks for your reply.  I chose a 'Balanced' investor profile when I started.

Silver66

Thanks everyone for your replies.  To be honest, I feel like waiting until the funds recover a little, and then withdrawing them and putting them into a cash savings account.  I don't trust the stock market any more, and I don't like the idea that my savings might be paying other people's salaries more than they are accumulating in value for my retirement.

If anyone can suggest anywhere else I could go for impartial advice, I'd be grateful.  

Albermarle

Please could you tell me a bit more about how this top-up system works?  Do you mean that they charge per hour for financial advice?  I asked my adviser if this would be an option, instead of the 0.75% overall charge, but he said that it would cost me a lot more if I paid him per hour, because he does a lot of work behind the scenes monitoring my investments and so on.

You have misunderstood. It meant that if you are paying an advisor an ongoing charge, then normally any new top ups ( of money) to your investments, or even opening a new ISA/pension would not normally be charged.
It did not mean a top of advice.

Hi EthicsGradient, Thanks for your reply.  I chose a 'Balanced' investor profile when I started.

As already said a typical medium risk/balanced fund has returned on average around 5% pa for the last 5 years.
Taking away some of the fees you are paying, than probably 4% pa.
The fact that your funds have gone down is a bit worrying. Could be due to a number of things ( apart from the charges:
1) As you are adding to the funds during the period that muddies the waters.
2) The actively managed funds may have underperformed
3) The balanced fund is more on the low risk end of balanced. These type of funds have not done well recently.

Silver66

Albermarle said:

You have misunderstood. It meant that if you are paying an advisor an ongoing charge, then normally any new top ups ( of money) to your investments, or even opening a new ISA/pension would not normally be charged.
It did not mean a top of advice.

Thanks for your reply.  Please can you tell me if there's a regulation or law about this and if so, what's it called?  Then I can discuss it with my adviser.

gm0

You need to work through a few questions of consequence

- Do you need advice at all.  Can you be bothered to learn enough to DIY competently (not optimally - just enough to avoid naive mistakes). 

The consequence of being willing to - is that you can invest in broadly the same underlying equities and bond mixtures with 0% initial charges.  Chosen to suit age, circumstance and risk appetite for the order of 0.2% drag ALL IN.  In a world of 4.5% to 6% returns.  2% and 0.2% *cumulatively* makes a difference.  

The consequence of taking this calculable and known in advance saving.  Is that you are totally responsible for your own choices.  Good or bad.  And you can't tap the incidental financial/tax planning advice - for which you are currently overpaying.  Small pot 0.75% perhaps.  0.5% for larger.   Initial charges for top ups is radically taking the michael in my view.  Once at the start of the relationship perhaps.  Ongoing saving.  Just no.  Fundamental breach of trust to me.  And look how fast he pulled that off the table when you woke up.

- Age appropriate risk taking - basically the young dialing up risk and buying equities through the dips and ignoring it - strong stomach required for 50% losses along the way. But long term historically and so far - there has been little upside to holding too many bonds too young.  It's *all* about when you actually are going to access the money.  Investment time horizon.


- The right portfolios for you - active and passive.  Passive and near passive portfolios are easy to DIY as there are huge funds from major providers readily available.  Use one, or a couple of these for hedging provider risk and you may be done.  You can of course elaborate on that and diversify from there - and people will tell you this is a good idea or stupid in approximately equal quantity.  You can support either view in historic data by selecting the period carefully with hindsight.  DIY with 20 funds is overkill.  DIY with 5 is just homebrew "hybrid" portfolio building.  There is a lot of free and cheap (patreon) community content on this stuff.  The limiting factor is not information and access but your time and interest.

With large provider passive - the key thing that does is remove the need to do fund and fund manager review on active selections.  Which is harder to DIY.  Still possible.  But requires more effort.  All a passive ish setup needs with multiple asset classes is some occasional 12-18 month rebalancing.

On the active side - fill your boots - With active star managers or media hyped funds - by the time they are stars they may be about to go off the boil too much money coming in to find clever above general market returns. 
But again you can never know.

Your adviser doesn't have a crystal ball either.  They can't and won't guarantee a damn thing other than it is risk appropriate for you to invest to that level - your financial capacity and stated attitude in discovery.  Nothing is guaranteed to be better about the hybrid portfolio they pick.  It will be as good or bad as yours will be based on events in the world and markets.  Only if you do one yourself and screw it up structurally taking risks you don't undestand is it possible to claim a priori the adviser one is better (due to being suitable and by avoiding those risks).

If you (still) trust them and find the wrap around advice useful and well delivered - drop the initial/top up charges and carry on.  Agree when ongoing drops to 0.5% or what the cap is - as it grows.  Be assertive. 

You could find another one and save a little on ongoing but end up paying initial charges again unless you negotiate them away.  There is not a "price" for this stuff - just how badly they want your funds under management and you as a client.  Existing provider would likely prefer to keep you at lower margin than fall out and go to zero revenue.

Cannonball2134

It sounds like you are not very happy with the current performance. What about talking to or comparing a few different IFA's or Wealth Managers? I would look for a comparison platform and talk to a few different options, you don't have to use them in the end, but at least you will be able to see if they performed any better to what you currently have? 

dunstonh

Silver66 said:

Albermarle said:

You have misunderstood. It meant that if you are paying an advisor an ongoing charge, then normally any new top ups ( of money) to your investments, or even opening a new ISA/pension would not normally be charged.
It did not mean a top of advice.

Thanks for your reply.  Please can you tell me if there's a regulation or law about this and if so, what's it called?  Then I can discuss it with my adviser.

The Retail Distribution Review from 1st January 2013.    Advisers are not allowed to charge an initial fee against regular contributions in excess of the agreed for and for no longer than 12 months.  e.g. if the initial fee was £750 then it can be collected as 12x £62.50 but nothing thereafter.

Also, from your description, it would not be an IFA you are using but an FA.  Based on your reference to the "IFA" being from the same company.   The I in IFA stands for Independent.    IFAs can place business from the whole of market.  So, IFAs would not work for the provider.    FAs/sales reps work for the provider.

LHW99

Silver66 said:

Thanks everyone for your replies.  To be honest, I feel like waiting until the funds recover a little, and then withdrawing them and putting them into a cash savings account.  I don't trust the stock market any more, and I don't like the idea that my savings might be paying other people's salaries more than they are accumulating in value for my retirement.

If anyone can suggest anywhere else I could go for impartial advice, I'd be grateful.  

While you could easily transfer an ISA to another provider see the section on Transferring ISAs at

https://www.moneyhelper.org.uk/en/savings/investing/stocks-and-shares-isas

You would probably have to sell the funds in the ISA, and then ask the new cash ISA provider to transfer it.

For a pension, you cannot access it until you are 55 (soon to be 57), and even then, if you take it all out as cash in one go, you are likely to suffer a high tax on the money, and would also trigger the MPAA.

Silver66

dunstonh said:

The Retail Distribution Review from 1st January 2013.    Advisers are not allowed to charge an initial fee against regular contributions in excess of the agreed for and for no longer than 12 months.  e.g. if the initial fee was £750 then it can be collected as 12x £62.50 but nothing thereafter.

Also, from your description, it would not be an IFA you are using but an FA.  Based on your reference to the "IFA" being from the same company.   The I in IFA stands for Independent.    IFAs can place business from the whole of market.  So, IFAs would not work for the provider.    FAs/sales reps work for the provider.

Thanks so much for this.  Do you know where I can find the wording of the document itself?

Silver66

Cannonball2134 said:

It sounds like you are not very happy with the current performance. What about talking to or comparing a few different IFA's or Wealth Managers? I would look for a comparison platform and talk to a few different options, you don't have to use them in the end, but at least you will be able to see if they performed any better to what you currently have? 

Thanks for this.  What is a comparison platform - do you mean comparison websites?  Would I have to pay and would it be something like £150 an hour?  I'm trying to find lower cost guidance if at all possible.