Fees Financial Advisor

sarahbythesea

I’ve recently been to see a Financial Advisor about my personal pension (currently with the Pru) which he’s advised moving it to materialise the Final Bonus element and has suggested Royal London. Although I’m 55 next year I don’t intend to draw it yet and want to leave it for at least another 2-3 years more and would then like to use it for drawdown .
However for this service (my fund at c£100k ) he wants to charge 2.5% to move it and then another £26.50 per MONTH until my retirement date ? As I understand it this would be on top of fees payable to Royal London whilst the money is in their scheme. This seems like an expensive fee so wondering if anyone has experience of fees that are charged in cases like this please ?
Thanks !

JohnWinder

No experience of moving pensions, or fees like that, but let’s see: £2500 being charged at £150/hour is 16 hours work. I suppose it could take that long to move a pension. And then 2 hours/year thereafter, doesn’t sound much work which would be a blessing for you.

dunstonh

 As I understand it this would be on top of fees payable to Royal London whilst the money is in their scheme. This seems like an expensive fee so wondering if anyone has experience of fees that are charged in cases like this please ?

It could be cheaper than your existing Pru pension.    Most Pru pensions are 1%-1.5% p.a.   RL's charge is 0.45% and the adviser charge equates to about 0.3%.   giving you around 0.75% p.a. 
 (I am ignoring the annual profit share that returns a portion of the fees as that figure is variable but its never been lower than 0.15% or higher than 0.18%)

So, based on your information, it looks cheaper than your existing plan.    However, the ongoing adviser fee is optional.  You can ask not to have it if you don't want it.  However, when it comes to future advice, you would be paying initial fees again if you don't have ongoing.   Usually, the ongoing fee means no more initial/ad-hoc charges.   In some years, you may not have much work and in other years you may have more.  So, there is an element of cross-subsidy in an ongoing charge.

The initial charge is in the ballpark.  Ignore the multiplier going by hours as that method above is ignoring VAT that would be applied to some of the work if that method was used (when breaking the work down into the different phases, VAT can apply to some of those phases).    Plus, £150 is an unrealistically low hourly rate.  And it's ignoring the cost of liability. Pension switches are a high-risk transaction for advisers and one of the larger cost elements to an adviser's PI insurance.   Its not the time that is the biggest cost here but the cost of liability and regulation and compliance.

You could get maybe 2% initial but there are plenty out there charging upto 5%.  So, you can see where it sits on the scale.

JohnWinder

£150 is an unrealistically low hourly rate.  And it's ignoring the cost of liability. Pension switches are a high-risk transaction for advisers

So you can imagine how specialist surgeons in the NHS, doing a high risk transaction like brain surgery, feel about £55/hour as their salary. https://www.bma.org.uk/pay-and-contracts/pay/consultants-pay-scales/pay-scales-for-consultants-in-england

Nebulous2

JohnWinder said:

£150 is an unrealistically low hourly rate.  And it's ignoring the cost of liability. Pension switches are a high-risk transaction for advisers

So you can imagine how specialist surgeons in the NHS, doing a high risk transaction like brain surgery, feel about £55/hour as their salary. https://www.bma.org.uk/pay-and-contracts/pay/consultants-pay-scales/pay-scales-for-consultants-in-england

You have a point - but it isn't a straight comparison. The surgeon's wages don't include all the costs of providing the operation.

The IFA has to run all of their business from their hourly rate, including the price of insurance that Dunston keeps telling us about. 

My franchised garage charges their mechanics at around £75 an hour, but I'm sure the mechanic will be getting less than a third of that. 

Having said that I'm glad I have a DB pension. I wouldn't be bothering an IFA with a £100k pot. 

AlanP_2

JohnWinder said:

£150 is an unrealistically low hourly rate.  And it's ignoring the cost of liability. Pension switches are a high-risk transaction for advisers

So you can imagine how specialist surgeons in the NHS, doing a high risk transaction like brain surgery, feel about £55/hour as their salary. https://www.bma.org.uk/pay-and-contracts/pay/consultants-pay-scales/pay-scales-for-consultants-in-england

Aggrieved, that's why they are striking for more.

However I doubt if that specialist surgeon is paying his own total pension contribution, his own utility and premises costs or his own liability insurance.

Additionally the surgeon will get paid whilst off sick or on leave. The advisor may get his ongoing fee but won't earn any initial whilst off.

Maybe you should try being self employed and running your own business before giving a view on what a reasonable hourly rate is.

JohnWinder

Good points, thanks. I allowed £95/hour to run all their business including insurance (ie £150-£55/hr), and allowed for transferring a pension to be equivalent to brain surgery, in my comparison.

LHW99

or his own liability insurance

I suspect he does - GP's do.

Albermarle

sarahbythesea said:

I’ve recently been to see a Financial Advisor about my personal pension (currently with the Pru) which he’s advised moving it to materialise the Final Bonus element and has suggested Royal London. Although I’m 55 next year I don’t intend to draw it yet and want to leave it for at least another 2-3 years more and would then like to use it for drawdown .
However for this service (my fund at c£100k ) he wants to charge 2.5% to move it and then another £26.50 per MONTH until my retirement date ? As I understand it this would be on top of fees payable to Royal London whilst the money is in their scheme. This seems like an expensive fee so wondering if anyone has experience of fees that are charged in cases like this please ?
Thanks !

In most cases it is quite easy to move a pension from one provider to another yourself, at zero cost.
However you have to then choose what investments to use, and organise the drawdown yourself when it is time.
If you want it to last many years you need to be careful not to draw too much each year.

Overall probably a good idea to move from the Pru as they charge you 3% for moving to Drawdown, and their customers service has a poor reputation. 

Linton

LHW99 said:

or his own liability insurance

I suspect he does - GP's do.

I thoought GPs were self employed rather than NHS employees.

On hourly fees, Google tells me that a typical rate for an experienced solicitor is £200-£300/hour.. Presumably the breakdown of the work is not too different to an IFA's: eg not all work is chargable, significant admin load, significant  insurance costs, regulatory overhead.

LHW99

I thoought GPs were self employed rather than NHS employees.

At least a proportion are partnerships, rather like solicitors' firms