Pension Advisor fees

Quorden

Curious, if you're happy with the funds that the IFA had recommended (?), if not the fee's, then why don't you do the transfers yourself? Having done a number of transfers myself it's relatively straight forward.

Only surprise for me is that an IFA only recommended two funds

JohnWinder

Whether the fees you quote are the norm or stupidly high, the investment product you’ve been offered looks questionable, and with a little effort you could do a lot of what’s needed yourself with confidence and great saving.
Firstly, I found it difficult to find much about AIPM Core Alpha 40, as most of the web links turned up ‘404’ error - file not found.     Are they shy of scrutiny? Secondly, Furnley House (is that you we’re talking about?) has an associated investment research and portfolio management business which avoids having money leave the entity for someone else’s benefit, probably ties the clients to using these associated businesses however sub-optimal that might be for the clients.
Thirdly, Core Alpha sounds very much like an actively managed investment; that is much more likely to produce poorer returns than something like the HSBC Global Strategy fund (assuming the risks are similar) and should be avoided unless you have a strong personal conviction that active management is for you. Fourthly, as well as web pages that don’t load, their use of English doesn’t inspire:  ‘The company that lives by it's values’. https://www.furnleyhouse.co.uk/investments
Borrow Tim Hale’s book Smarter Investing from your library, and after reading it you’ll either know you can do better yourself, or at least know when you’re having the wool pulled over your eyes. Search https://search.worldcat.org/ for library holdings.

Aminatidi

JohnWinder said:

Whether the fees you quote are the norm or stupidly high, the investment product you’ve been offered looks questionable, and with a little effort you could do a lot of what’s needed yourself with confidence and great saving.
Firstly, I found it difficult to find much about AIPM Core Alpha 40, as most of the web links turned up ‘404’ error - file not found.     Are they shy of scrutiny? Secondly, Furnley House (is that you we’re talking about?) has an associated investment research and portfolio management business which avoids having money leave the entity for someone else’s benefit, probably ties the clients to using these associated businesses however sub-optimal that might be for the clients.
Thirdly, Core Alpha sounds very much like an actively managed investment; that is much more likely to produce poorer returns than something like the HSBC Global Strategy fund (assuming the risks are similar) and should be avoided unless you have a strong personal conviction that active management is for you. Fourthly, as well as web pages that don’t load, their use of English doesn’t inspire:  ‘The company that lives by it's values’. https://www.furnleyhouse.co.uk/investments
Borrow Tim Hale’s book Smarter Investing from your library, and after reading it you’ll either know you can do better yourself, or at least know when you’re having the wool pulled over your eyes. Search https://search.worldcat.org/ for library holdings.

Without speaking for the OP I imagine it can be quite daunting waking up one day and trying to decide what to do with £600K.

That doesn't mean that the fees or company mentioned is good value (I'd listen to Dunston and run a mile) but I can see why it may not be as easy as just transferring it all into a SIPP and doing it yourself even if it arguably should be 😀

dunstonh

Only surprise for me is that an IFA only recommended two funds 

They haven't really.

Like the Vanguard LS funds where there are three versions (DFM as an OEIC, DFM as an MPS and a DFM MPS varient without home bias), HSBC do similar (except no need to have a non-home bias version).

It may have been the DFM as OEIC version, which is a single fund holding many more funds within it. Or it may have been the MPS version, in which the investor holds the underlying funds but software controls the weightings.

So, if the MPS version was held, the investor would have the following funds held:



Whereas if they held the OEIC version, they would see this:


The reference to DFM suggests the MPS version as the OEIC version is a DFM within the OEIC structure and doesn't require the DFM charge and fund charge to be unbundled. i.e. the OCF is the total.   DFM wouldn't be mentioned with the OEIC version.   Whereas the MPS version would unbundle the fund charge and DFM. It would have the lower OCF of the individual funds plus the DFM change on top giving you the total.

Like Vanguard and their MPS range, the HSBC MPS version has outperformed the OEIC version.



There are slight variances due to the structure.   For example, the OEIC version achieves currency hedging via FX forwards whilst the MPS holds hedged share classes.  The OEIC version holds some global Govt bonds directly whereas the MPS doesn't (all done using funds).   The MPS version doesn't rebalance to set frequency.    Whereas the OEIC version is controlled via inflows and outflows and an algorithm which allows some drift but not much.

The MPS versions exist to give an IFA the edge over the retail version that is available to buy off the shelf direct to consumer (or use by IFAs that don't have access to the MPS version - they are not available on all platforms).

Millyonare

TGP99 said:

Hi, I wonder if someone could tell me if these fees are sensible please?

I'm hoping to retire in a few years and have various pensions most of which are dornmant now. I wanted an advisor to tell me when I could retire and whats best to do with my current pensions.An advisor was recommended and hes prepared a report for a fee and had discussed his ongoing %age of my pension pot which seemed OK.  However when I see the total costs of setup and year on year costs I'm really surpised its so high.

For a £600K pot its £18K to setup and £9K/annun to maintain. Thats all in and includes 1% fee for transfering all my pensions and platform costs etc. It just seems like a crazy amount of money. My risk appetitte is low so theres not much scope for growth and any little growth would seem to get swallowed up in these fees. Finding the process very stressful and not sure what to do

For me, I'd do it all myself.

A quick tap on the calculator says I can save £26.5k in year 1, and £8.5k in years 2 to 10.

Over a decade, I'd have £103k extra in my pension pot. Invested and dripped into (say) a global index tracker, I'd likely be something like £125k richer.

That's £125,000 in my pocket. Not in someone else's pocket.

Not investment advice. Numbers are rough calcs for illustration. Dyor, etc.

dunstonh

Over a decade, I'd have £103k extra in my pension pot. Invested and dripped into (say) a global index tracker, I'd likely be something like £125k richer.

How does that fit with the objectives stated by the OP?

Aegis

TGP99 said:

Hi, I wonder if someone could tell me if these fees are sensible please?

I'm hoping to retire in a few years and have various pensions most of which are dornmant now. I wanted an advisor to tell me when I could retire and whats best to do with my current pensions.An advisor was recommended and hes prepared a report for a fee and had discussed his ongoing %age of my pension pot which seemed OK.  However when I see the total costs of setup and year on year costs I'm really surpised its so high.

For a £600K pot its £18K to setup and £9K/annun to maintain. Thats all in and includes 1% fee for transfering all my pensions and platform costs etc. It just seems like a crazy amount of money. My risk appetitte is low so theres not much scope for growth and any little growth would seem to get swallowed up in these fees. Finding the process very stressful and not sure what to do

This is precisely why I decided to provide services for fixed fees when I set up my own firm.  If you were talking about a £60k pension, the fee would be £1,800 now and £900 a year - what is the difference in the amount of work? It's definitely not a tenfold increase in hours required.  In fact, I would go so far as to say that it's much more about the number of pensions that need to be analysed than it is about the amount of money you happen to have saved up.

At the level you are talking about, it may be worth specifically seeking out a fixed fee adviser rather than someone charging 3% up front and probably between 0.5% and 1% ongoing advice fee.

Aegis

Albermarle said:

As said 3% is high on a £600K pot. About half of that would be more reasonable.
With the ongoing fee as the previous poster said, we need more detail of what it includes.

If your needs are relatively straightforward, you could consider handling it all yourself. Obviously some more reading/research would be needed, and DIY finances do not suit everybody. Many of the posters on this forum learnt a lot just by reading this, and the Investments forum regularly.

I just checked my own fee schedule and it would be £2,500 for the first scheme and £500 for each additional scheme.  Obviously this may change if it turns out that one of the additional schemes is a more complex pension like a buy-out bond with a host of additional work required, but if we're just talking about an additional defined contribution scheme without any odd features, there will be fairly little additional work analysing two schemes rather than just one, as the first scheme will require doing all the things like cash forecasting, risk profiling, selecting an investment strategy and picking a suitable provider for the receipt of funds.  There's a lot to be said for the economies of scale involved in looking at multiple schemes rather than just one.

Aegis

Billxx said:

TGP99 said:

It was 1% (as part of initial fee) for every existing pension that got transfered to the new platform, which ended up being all of them. Ongoing costs are platform costs, Fund management fee ~1K (think thats the AIPM managed fund), Fund costs ~4K and ongoing advisor fee ~4K. The initial figure seems massive but my main concern with the ongoing costs are I only need ~30K/Year from it and paying 9K to secure 30K seems a bit counter intuitive

I think you are right.  There are plenty of IFA's who will lay out all your options, consolidate your pots into a single provider (if that's what you want), choose a governed portfolio based on your attitude to risk.  They will do this for a few thousand, nowhere near £18k.
  
The ongoing fee to me feels huge, I could be wrong, but £750 per month!

That's about what I would charge someone who wanted the top level service, including ISAs, GIAs, pensions and bonds, possibly with offshore considerations thrown into the mix. 

Aegis

dunstonh said:

For a £600K pot its £18K to setup and £9K/annun to maintain. Thats all in and includes 1% fee for transfering all my pensions and platform costs etc. It just seems like a crazy amount of money. 

Thats a disgraceful amount.  Sounds like the sort of level a sales company charge or a greedy IFA.  For reference, an IFA operating on fixed fee or cap/collar and/or tiered basis would be closer to around £3k initial

i assume the 1.5% p.a. (which is the £9k) is the total charge.    I cannot imagine any adviser firm charging 1.5% for themselves.   That is almost double what an IFA using passive investments would be. (circa 0.7-0.8% all in)

You need to find another IFA.  This one is taking the P.

By the sound of it the adviser in question is then just using passive multi-asset funds, so the majority of that 1.5% likely is their fee.  I would guess around the 1% figure.  

There does seem to have been a recent trend for advisers to decide to switch to passive funds ostensibly for their clients' benefit, but then increase their own fees by the saving, essentially undoing the benefit of going passive in the first place.