Are these IFA Fees reasonable

Tony_J

I recently went to an IFA and paid £750 for a report. I have 2 dormant DC pensions about 200k +25k. I had stated I was satisfied with the performance of the 200k and its management charge is 0.21%. The report recommends I transfer both of these to be managed by the IFA into 7im & copia, that would result in total management fees of about 1% (the IFAs charge being around £140 per month), plus the charge for setting these up is almost 5k.  There was also advice on which funds to move my current work pension to and what funds to move my vanguard S&S ISA into.  I feel rather than getting advice that is in my interest, I am being sold to.  The setup fee seems outrageous to me, but as I have no knowledge of the usual costs I’d like to ask if these charges are what you might expect.  I suppose if the performance were to be considerably improved it could justify the cost, but it seems a lot to me

dunstonh

I feel rather than getting advice that is in my interest, I am being sold to.

IFAs have to justify the transfer.  FAs less so.     They cannot just hoover up funds and put you in a more expensive option without justification.     So, you need to question the justification.   However, if you have the report, it should cover that.

The setup fee seems outrageous to me, but as I have no knowledge of the usual costs I’d like to ask if these charges are what you might expect.

Initial charges are expensive.  You would expect something around half that cost (initial) including the report.

Annual charges seem to suggest active funds rather than passive.  IFA charge is reasonable for ongoing though (based on your value).  

Tony_J

IFAs have to justify the transfer.  FAs less so.     They cannot just hoover up funds and put you in a more expensive option without justification.     So, you need to question the justification.   However, if you have the report, it should cover that.

From what I've so far understood of the report.  It seems a significant part of the justification is by saying drawdown is not available in this fund.  However I called the provider (AEGON) who said if I wanted to do drawdown it could be transferred to another account (no charge).  Also I would be able to do partial withdrawals.  I think the only difference between a partial withdrawal & drawdown is how income tax is applied (partial withdrawal would pay emergy tax and when claiming back would get the 25% tax free.  Drawdown could take a tax free sum without taking any taxable funds)

dunstonh

t seems a significant part of the justification is by saying drawdown is not available in this fund.  However I called the provider (AEGON) who said if I wanted to do drawdown it could be transferred to another account (no charge).

And the pension you are being transferred to has no charge either.   If the IFA wanted to use Aegon, they could do so.   I doubt many would want to use Aegon as its software is quite poor compared to others and its customer service leaves a lot to be desired (based on annual reports showing Aegon losing assets under management and my own point of view on their offering.  Plus Aegon pricing is not great for what it is).

That justification for moving it is fine.    The real issue here is that the adviser hasn't selected a low cost option but an expensive option and their initial charge is high.    So, perhaps there is a communication issue.   i.e. did you say to them that you wanted a low cost option?  (are they even IFAs - the platform used and the DFM is one that often gets used by Wealth Management FAs).

Also I would be able to do partial withdrawals.  I think the only difference between a partial withdrawal & drawdown is how income tax is applied (partial withdrawal would pay emergy tax and when claiming back would get the 25% tax free. 

All modern pensions that support drawdown have that functionality.  The only area that tends to be lacking with some providers is regular UFPLS (which happens to be the most common method I recommend).

Albermarle

Tony_J said:

I recently went to an IFA and paid £750 for a report. I have 2 dormant DC pensions about 200k +25k. I had stated I was satisfied with the performance of the 200k and its management charge is 0.21%. The report recommends I transfer both of these to be managed by the IFA into 7im & copia, that would result in total management fees of about 1% (the IFAs charge being around £140 per month), plus the charge for setting these up is almost 5k.  There was also advice on which funds to move my current work pension to and what funds to move my vanguard S&S ISA into.  I feel rather than getting advice that is in my interest, I am being sold to.  The setup fee seems outrageous to me, but as I have no knowledge of the usual costs I’d like to ask if these charges are what you might expect.  I suppose if the performance were to be considerably improved it could justify the cost, but it seems a lot to me

There is a common misconception that you pay an IFA to improve performance.
You pay an IFA to put your money in the appropriate places ( pension, ISA etc ) in investments that match your objectives and risk tolerance. Many people are incapable or unwilling to do this themselves so are happy to pay someone to do it for them. It stops people making a real hash of it and reduces anxiety.
If you feel happy to DIY your pensions, investments etc ( as many posters do on this forum) then you do not need an IFA.

Ibrahim5

Daylight robbery.

IvanOpinion

Looking at those fees I would be inclined to looking at a DIY solution.

If Aegon is not suitable for your purposes, then you can do a transfer yourself for free (assuming no exit fees, saving £5000), It involves filling in a few forms (reasonably straightforward but if you are stuck you can ask the providers for help) - took me 20-30 minutes. If the target platform supports your current funds and you are happy with them then you can just transfer them over (in specie) or you can convert them to cash and transfer it that way (which is sometimes quicker and allows you to pick alternative funds).

You would need to select a platform. Posters on this board can offer some help on that, but the decision is yours (you may even receive a bit of cashback). I personally chose II which means my monthly platform fees are £22 but there are other platforms available.

In future you can do what you have recently done and pay an IFA to get one-off advice when required.

If you are starting off on a DIY route then I would suggest not over thinking it. Keep your existing funds, if they still suit your purpose or select 1 or 2 trackers. Again most people have their favourites.

Tony_J

Tony_J 
I had stated I was satisfied with the performance of the 200k and its management charge is 0.21%.

There is a common misconception that you pay an IFA to improve performance.
You pay an IFA to put your money in the appropriate places ( pension, ISA etc ) in investments that match your objectives and risk tolerance.

I think this hits the nail on the head.  I don't see any benefit to me moving my largest fund when I indicated I was satisfied with it.  I do see the benefit to the IFA

cfw1994

Did they show any positive reason for you to give them the job of managing your pension fund?
For example, showing how they believe you would be financially better off doing the move versus leaving it where it is?
Or was it entirely based on giving you the ability to drawdown, which you have now found you could do with Ageon in a different way?
If that as all, you now know to ignore them moving forwards.

A relative had their company bring “Wealth at Work” in for ‘free’ pension consultations.  

The implication was that they were Independant (they are not!).  

The resulting report she got was very lengthy, but the small part near the back actually showed her funds, with THEIR PREDICTIONS, doing better if they were left with Aviva rather than moving to the WoW fund 🤣
Laughable!


It sounds to me like you might have a fair grip on things: is that how you feel?
Not sure what you usefully got for your £750, but if you can figure out your plan for using your funds later, go ahead and DIY it 🤷‍♂️

Tony_J

cfw1994 It sounds to me like you might have a fair grip on things: is that how you feel?

Thanks for your encouragement.  It is selecting the funds that I feel inadequate about.  I'm now thinking about starting a pension with vanguard in a managed fund.  I could transfer the small fund into it and add the extra I cannot put in my workplace fund.

So as I'm losing confidence with the IFA, I'm not sure if I should follow their advice on switching my current workplace scheme funds.  This is with Scottish widow.  They recommended moving to 50% “pension portfolio A” and 50% “pension portfolio three”.  I guess I could move these myself.  I am thinking about moving 40% into each fund, then I could have a comparison to see if it does better

cfw1994

Buy the world.
Take half an hour to watch Lars videos at https://kroijer.com

75% of mine are in global funds.  

Only using two to hedge my ‘bets’ - I check every now and then (too often) and might tweak things perhaps each year.  I hold the American funds just because I believe it will do well.  If it doesn’t, only 25% of my wedge is at risk.  Having spend a career with US firms, that’s my choice!
Costs are 0.23-0.33%.

Also have a personal bias *away* from the UK.  Our house is the UK element of our wealth….& the UK is only around 6% of ‘the world’ in market terms…

BTW - meant to double check - is your IFA definitely independent?  Were they recommended?