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

Silver66

gm0 said:

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.

Thanks gm0.  I can see the logic in this, but I don't feel confident or brave enough to choose my own investments.

Silver66

LHW99 said:

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.

Thanks LWH99.  What I am thinking of doing is leaving the pension where it is, and starting a new one elsewhere.  And transferring out the ISA altogether, or at least a large part of it, because the charges on the whole portfolio are negating the 25% HMRC bonus I get on my pension contributions.

Albermarle

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? 

It is very difficult to directly compare things in this area.

For example your IFA could have put you in a medium risk fund that has just ticked over and has made maybe 20% in the last 5 year. 
I could have been recommended a 100% US equity fund that has gone up 55% in 5 years.
So my advisor has apparently performed better, so you should switch your fund to my advisor. Yes ?
No - as a 100% US equity fund, with its attendant volatility maybe be totally unsuitable for your objectives, personality etc

If the US market crashed then we would both be better off in the medium risk fund.

Of course you can compare charges, customer service etc, but investment portfolios are tailored to the client, so very difficult to compare them and this is an area a lot of people struggle with. They would like to benchmark their financial advisor but it is far from easy.

MEM62

Silver66 said:

MEM62 said:

Silver66 said:

No, it wasn't them, it was a different financial planning company but I'd rather not name them here.

You will never get the best advice and you will always pay high charges when using such companies.  Call them what you like - financial planning, wealth management - they all similar.  What you want is proper advice from an IFA.  

Hi MEM62, Thanks for your reply.  My advisor is an IFA, although employed by that company.  He says he's advising what he believes is in my best interests.  But obviously he and the company are profiting from my investments.  He says our interests are aligned because we both want my investments to grow.  

I want to get advice elsewhere, but I'm not sure where to go.  There are thousands of IFAs out there and I'm not sure who to approach.  If anyone knows where I could get advice on my situation either for free or at a low cost, I'd be grateful.

I am not convinced that this guy is an IFA.  The 'I' in IFA stands for independent.  If he is working for a company and only sells that company's products then he is not an IFA.   

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.

 

That would be a mistake.  Keep your money is cash and it is guaranteed to loose value (spending power) due to inflation.  The stock market is what it is and distrust of it is not logical and usually arises from a lack of understanding.  I think the issue here is the advise that you have been given and where you investments has been placed.  With most mainstream areas, you should not be behind where you were in 2018.

Search for local IFA's and talk to a few of them.  Most are happy to have an initial chat without commitment.  You may well find that there is one in particular that you are comfortable with and who will explain things in a manner that is clear to you.         

eskbanker

MEM62 said:

Silver66 said:

MEM62 said:

Silver66 said:

No, it wasn't them, it was a different financial planning company but I'd rather not name them here.

You will never get the best advice and you will always pay high charges when using such companies.  Call them what you like - financial planning, wealth management - they all similar.  What you want is proper advice from an IFA.  

Hi MEM62, Thanks for your reply.  My advisor is an IFA, although employed by that company.  He says he's advising what he believes is in my best interests.  But obviously he and the company are profiting from my investments.  He says our interests are aligned because we both want my investments to grow.  

I want to get advice elsewhere, but I'm not sure where to go.  There are thousands of IFAs out there and I'm not sure who to approach.  If anyone knows where I could get advice on my situation either for free or at a low cost, I'd be grateful.

I am not convinced that this guy is an IFA.  The 'I' in IFA stands for independent.  If he is working for a company and only sells that company's products then he is not an IFA. 

Surely, given the context of those quotes, the company that OP refers to is the "different financial planning company" (who can indeed employ IFAs) rather than a product provider?  Naming them would obviously help clarify but OP is reluctant to do so....

Silver66

Thanks a lot to everyone who's taken the time to reply to this thread.  I've ordered  the 'Smarter Investing' book as I want to be better informed so that I don't rely as much on advisers!  I've done some internet searches and have found some possible options for continuing my pension.  There are some cheaper pension providers out there such as Wealthify, Vanguard and Halifax although I don't know if lower charges mean that less work goes into choosing the investments.  Has anyone used any of these platforms?  

I'm on Unbiased.co.uk looking for IFAs in my area.  It says that the initial consultation is free, although I don't know if they'd give you any actual advice in the first session.

I think I will start a new pension pot somewhere else from next tax year.  I'd rather not keep all my eggs in one basket.  I'll see how it performs and compare it to the pension I already have.

I think I will withdraw the ISA although I'm not yet sure where  else to put it.  

Albermarle

 There are some cheaper pension providers out there such as Wealthify, Vanguard and Halifax although I don't know if lower charges mean that less work goes into choosing the investments.  Has anyone used any of these platforms?  

Vanguard and Halifax are providers of pensions. They organise the administrative side, take contributions, make payments, sort out tax,  and provide a choice of investments to hold within the pension. They charge you a platform charge for doing this.

However YOU have to manage the pension and decide which investments to pick. For sure there will be guidance on their websites and they may point you to some of their own funds, but they will not offer any personal financial advice. Which as you are very aware of, you have to pay for.

Wealthify are a robo advisor. This means as well as offering a pension and investments, they will ask you a few personal questions and then suggest which of their funds would be best for you. It is a kind of stripped down to the bones financial advice of a sort. Their platform/administration charges are higher though.

At the end of the day if you want someone to manage your pension/investments for you, you have to pay for that.

eskbanker

Silver66 said:

There are some cheaper pension providers out there such as Wealthify, Vanguard and Halifax although I don't know if lower charges mean that less work goes into choosing the investments.

No, the platforms charge for holding your investments for you, but don't choose them, so you need to do that yourself, regardless of platform choice.

Silver66 said:

I'm on Unbiased.co.uk looking for IFAs in my area.  It says that the initial consultation is free, although I don't know if they'd give you any actual advice in the first session. 

No, there won't be any financial advice given in the free introductory session.

https://forums.moneysavingexpert.com/discussion/6481574/finding-decent-ifa-without-word-of-mouth goes over some of the ground of how to find IFAs, and in particular the perils of relying on sites like Unbiased....

wjr4

To be honest, I’ve had clients who haven’t made much money since 2018 being a medium risk investor. Financial advisers cannot predict the future with investments. We can only give you advice based on your attitude to risk, capacity for loss, timeframe, knowledge and experience. Receiving financial advice is more than just investment management. 

How long will you be investing for? How old are you? What are your objectives? There’s so much more to the job than just investment management. 

Qyburn

Silver66 said:

I think I will withdraw the ISA although I'm not yet sure where  else to put it.  

Why not transfer it instead, keep it tax free? You may be able to transfer into a cash ISA meanwhile.