Can I deal direct and cut out my IFA?

toolateforsums

I transferred all of my pensions into a platform provider. around 4 years ago, and used an IFA to do this work and also assist in a db pension transfer out. All went seamlesslely and have since set up a drawdown , which is working perfectly. The total fund value has had its ups and downs , but is perfoming , I would say quite well, to the extent that after nearly 4 years of drawdown, I actually have slightly more than originally invested, after all withdrawals , fees and dividends . However, the IFA has really not done much , other than a yearly review , since setting everything up. he costs me around 0.6% pa of my fund , or around £6k per annum. Not bad . Now everything is set up and running smoothly , why do i need him and can i just deal with the platform provider directly? Saving a good chunk every year. I am drawing down around £35k per annum for reference , and enjoying retirement very much!

Albermarle

A common question on this forum.

You have not said how much you know about investing? any experience with dealing with investment platforms/pension providers ? tax issues, pension legislation etc 
Many regular contributors on here do not use advisors and DIY, but a certain basic knowledge is needed to avoid foul ups.

Similar threads running.

Moving to Vanguard to save on investment fees — MoneySavingExpert Forum
Dumping IFA portfolio to go DIY — MoneySavingExpert Forum

Peterrr

In short, yes you can cut out your IFA and manage your pension directly via your platform provider. You don't mention who that platform is, but in the (highly unlikely) event they don't deal directly with end clients, then simply instruct your IFA that you wish to end the association and have them transfer your pension to another platform of your choosing

dunstonh

However, the IFA has really not done much , other than a yearly review , since setting everything up. he costs me around 0.6% pa of my fund , or around £6k per annum. Not bad .

The IFA should be running modelling and sustainability checks.   Portfolio rebalancing and adjustments along with ongoing governance checks on the investments and any tax efficiency transactions, where applicable.  In some years, these will be going on but not triggering much in the way of transactions.  In other ways, it can create more changes.    Things like the modelling will often have weekly snapshots and alerts to the adviser.  You don't see these unless there action is required.  Also, things like monthly governance reports on funds and ongoing suitability checks will largely be silent unless they generate a reason for change.   So, the annual summary will be a sum of its parts where the work is behind the scenes.

You can end the service given by the adviser, but you will take on responsibility for everything going forward.       
The platform you are using may not be geared for direct-to-consumer transactions. So, it's likely you will need to transfer the pension at some point.

Albermarle

Peterrr said:

In short, yes you can cut out your IFA and manage your pension directly via your platform provider. You don't mention who that platform is, but in the (highly unlikely) event they don't deal directly with end clients, then simply instruct your IFA that you wish to end the association and have them transfer your pension to another platform of your choosing

The route is to open up your own new pension first, and then request a transfer that your new provider will organise with the current provider.

Pat38493

Yes you can do this, but it is not really a fire and forget decision - if you do this you need to do a bit of research and reading around, and you need to create your own annual review process and learn enough about investing and pensions so that you don't make any silly decisions and/or not notice if something is going horrendously wrong or you are spending way too much or suchlike.

Also - I've seen comments that a lot of what IFAs do comes in the bad times when investments are going down a lot - their role in that situation is to reassure clients and try to prevent them from making rash decisions and crystallising losses.  You need to have an understanding of the concepts around this if you don't want to make those mistakes yourself.

JSL_2

I have been to see my financial adviser, reviewed my investments and everything doing well . will be commencing drawdown in next financial year. I will become SPA then too. I am with royal london and pension is in GOV Portfolio 2.
FA has advised I can arrange drawdown my self and move to GRIP 3 or 4. I'm assuming its simple enough to do ,as that's what I've been advised  ??

JohnWinder

'The IFA should be running modelling and sustainability checks.  ....ongoing governance checks on the investments...... modelling will often have weekly snapshots .....  You don't see these unless there action is required.  Also, things like monthly governance reports'

Can you briefly explain what might be modelled? What sustainability does that refer to? What would be a governance issue that would be checked?

dunstonh

JSL_2 said:

I have been to see my financial adviser, reviewed my investments and everything doing well . will be commencing drawdown in next financial year. I will become SPA then too. I am with royal london and pension is in GOV Portfolio 2.
FA has advised I can arrange drawdown my self and move to GRIP 3 or 4. I'm assuming its simple enough to do ,as that's what I've been advised  ??

Yes.  When I have a transactional client, Royal London is my provider of choice as they take instructions directly from the consumer.   There is no point an IFA putting someone with a provider that doesn't deal with the client directly if they know that is what the client wants to do.  Indeed, the FOS upheld a complaint a couple of years ago against an adviser because they knew it was a transactional client and still used a provider that didn't allow direct transactions.

Can you briefly explain what might be modelled? What sustainability does that refer to? What would be a governance issue that would be checked?

in simple terms, IFAs carry the liability for making sure the person doesn't run out of money or making sure that the person is completely aware of the risks and issues if they insist on drawing too much.    Modelling the draw against the assets held over a lifetime and ensuring the draw is sustainable for life.  Not just the income but also future ad-hoc draws (cars, boilers, holidays etc) and not just against their pension but their assets.  Using variable rates to reflect the underlying assets, including variable inflation etc.  A bunch of what if scenarios (not just market events but death, illness etc) need to be factored in along with tax, use of tax wrappers etc.

For the investments, the person making the recommendations carries the liability for that recommendation.  Again, from a regulatory point of view, IFAs have to carry out Governance and due diligence.    Its not like the old days (its not even like 3 years ago, let alone 5 or 10).    Realistically, most IFAs do not have the resources to do this.  So, they either outsource fully or buy in the research, analysis and due diligence (or combination).    Even where they outsource and use a DFM (even if Vanguard LS MPS or HSBC GS MPS), the adviser is responsible for the assets/funds used by that DFM.  So, if the client is a retail client and the DFM uses a non-retail asset, then IFA is on the hook if it goes wrong.     The IFA would need the audit trails, methodology, process, systems, analysis etc to support the reasons for it being included even though it wasn't the IFA personally selecting it.

JohnWinder

Thanks. There might be something useful in this for DIYers since they're taking on some of the responsibilities an advisor might be held to.

Firstly, modelling or monitoring to avoid running out of money or dying super rich is a task DIYers must do. There are some guides like the 4% rule to help with this.

Next, you don't say what a governance issue could be but it might be that a fund is not changing its objectives or that the ace stock picker isn't leaving for the Riviera. This would seem to be more important for holdings in niche investments that aren't in the public eye and could drift into bad habits before the ripples are obvious. For DIYers holding something mainstream like HSBC global fund there wouldn't seem to be much governance checking or diligence to do other than checking fund announcements every 6 months, tracking error and fees every year or so.

barnstar2077

An extra £60k in your pension every ten years would certainly help to smooth out any bumps in the road imo.