IFA costs and ongoing charges.

zimmacdo

I have received a quote from an IFA for amalgamating 9 DC workplace  pension schemes and 2 share ISA pots all worth just over  £730K (share ISA's and Pension schemes obviously not in the same pot).  I have been quoted £10,000 for the set up and the platform charges will likely be from 0.95% up to 1.1% for the whole amount going forward. Is this initial charge excessive? The 1% I assume is about average from what I have read. Any thoughts please.

dunstonh

  I have been quoted £10,000 for the set up and the platform charges will likely be from 0.95% up to 1.1% for the whole amount going forward. Is this initial charge excessive?

The ongoing as a bottom line is not expensive (IFAs have to include platform, OCF, TC and IC.  TC will be a bit of that charge but most people ignore it).   You could get a bit cheaper but circa 0.8x% would likely be the lowest with ongoing).

The initial is expensive. Many firms cap out their charge at better than half that amount.

zimmacdo

Thanks dunstonh. I thought as much. It's so hard to know what it should be as I have had my current Financial advisor for many years but unfortunately they are  no longer independent and it seems the current platform shares are not making the profit I expected.

dunstonh

zimmacdo said:

Thanks dunstonh. I thought as much. It's so hard to know what it should be as I have had my current Financial advisor for many years but unfortunately they are  no longer independent and it seems the current platform shares are not making the profit I expected.

Investments have had a mixed time.  equities have doubled over the last 7 years (mostly on the back of US equities rather than UK equities) but bonds are down on 7 years ago.  Gilts massively so.    So, portfolios heavier in equities have done well but portfolios heavier in bonds have done not so well and portfolios heavy in gilts have had a torrid time.

Some IFAs will charge much less if you are on a platform that they can continue to use going forward.  Some are just greedy though.

gm0

A DIY consumer POV - book and web forum taught.

You can do this yourself - free with cashback as a bonus on the transfers to offset fees. 
And the lower DIY total cost. 

Perhaps for a "holding pattern" consolidation to a SIPP or two saving the initial and ongoings until closer to access age.  And reducing the complexity and the initial fee (a bit) for later if using advice in drawdown because you want other tax planning help or whatever reason you value having the IFA on contract.

I did not take my advice offer and did mine for zero initial. And achieved sensible ongoings for my preferred investment styles.  Circa 0.2%. And a platform cashback on some of it offsetting those fees for a spell.

As to portfolio that is what it is.  It compares on backtest (trustnet) with other things I have learned about. And had recommended via advice.  It seems plausible to do what I want.  It seems to live vs well known alternatives in a space where odd surprises due to mistakes in my fund choices are quite unlikely.  Reacting as I expect vs tiered multi-asset funds in the more recent volatility events/crises.  You test what you can.  You live with what you can't.

Advice value is not really centred in the implementation of a drawdown pension wrapper and fund select itself. 

Regulation constrains the adviser fact find, deliverables and product select.  Risk tiered patterned portfolios at lower wealth levels are - lets be honest - if not commoditised - heading that way in a lot of the market.  There are no doubt exceptions.  But comparable options in terms of "what is inside" for a moderately aggressive deaccumulating pensioner in drawdown are widely distributed DIY and Adviser introduced. 

The constraints on the advice audit trail and deliverables are quite tight.  Advisers can be more or less engaging around how they do it.  But what they *do* for a pension setup process will be pretty similar independent of channel and charges and how flash the advice firm is.

Neither advised nor DIY can be said to be seriously advantaged on platform cost fund cost drag or in many cases on performance potential. Massive overlap. Either being better is a case not proven situation.  Choose a recommended portfolio poison.  Or choose your own.

Consider 15k one off savings to do your own schemes a bit at a time - shopping for SIPP platform cashback offsetting fees.

Or consider 85k lifetime savings for DIY over advised - at this DC level.  40 year plan

But with all the risk of mucking it up and no handholding. All the admin. 
Own checking on old schemes for special terms.
Nobody to contact if the world seems on fire
Or with an IHT question. 

For most people who find their way here.  It's not about "can I do it" to save the money.  It's do I want to spend the time on it - would that be keep brain active enjoyable learning it or just horribly tedious.

It's a lot of money. 11% or 3 years drawdown income. 
And it is also a a fair amount of effort.

Not the admin.  More in learning enough to act with conviction and confidence. 

For now.  I DIY.

You do you.

m_c_s

If you have £100k and it returned 8% over 40 years you’d have £2.2m. At 7% you’d have £1.5m. Do you like your IFA enough to give him or her £700k over 40 years?

zimmacdo

I’m looking to retire in about 3 years (or less) and  not take the drawdown on pensions for another 5.  Not a lot of time but don’t relish giving away 17k in 1st year. I’ve read that DIY is much cheaper but not sure I have the experience to do it. Maybe 20 years ago yes!!!!!

cfw1994

Do you know what you would move those pensions to?  Platform and funds?

Any idea what the costs for those are - I doubt very much of the 1.1% you are being told will not include all fees.  & do note, if you are given a range, it will be the top number quoted 🤣

It is possible you might be “giving away” over 2% of your pot each year 😳
Compare that with the sub-0.2% you could pay for a Vanguard pension, & you can see how your fees can drain the growth for the next 10, 20, 30 years 👀

Moving a pension from one to another is usually a simple thing to do.  I moved 4 of mine some years ago: Origo Options made it very straightforward.  Maybe @dunstonh can confirm that is what an advisor would use?

One key question is whether any of them have “protected benefits” - guarantees on payouts.  Did your prospective IFA mention that or ask any questions?  Those pensions are often best left alone, although that doesn’t mean you cannot see what funds they are invested in and consider changing those 👍

Moving ISAs is also a pretty simple task - just remember to move then - do NOT cash one in hoping to move it to another.

The initial fee sounds very high to me.  I would suggest that “moving around” stuff is a day, maybe two, of admin.

That said, all advisors have a business to run, insurance for themselves, etc, whether independent or not 🤷‍♂️

zimmacdo

The DC pensions have no protected benefits. The DB schemes will not be touched. Some of the DC pensions have no draw down options, one of the reasons to amalgamate into one pot. ISA shares will only be transferred not withdrawn. It’s not difficult to transfer all the DC,s  into a platform but charging 10k for the privilege just seems a bit steep.  The 1% ongoing management fee is also steeper than expected but being sold it on prospective rewards going forward. 

dunstonh

Moving a pension from one to another is usually a simple thing to do.  I moved 4 of mine some years ago: Origo Options made it very straightforward.  Maybe @dunstonh can confirm that is what an advisor would use?

As an IFA, I would look at what the person has and see if I can arrange better. For example, if the existing platform charge is 0.30%, but an alternative is 0.15%, then I would recommend a change. However, if the person is already on 0.15%, then I would consider leaving it where it is. There would need to be a justifiable reason for moving it.  That may be functionality.  That may be software or service issues.    For example, one of my preferred platforms since 2011 is now looking long in the tooth.  Between 2011 and 2022, I could count the issues I had with them on one hand and they always resolved them.  Since 2023, their software has been throwing up issues, they announced redundancies and I have had more issues year to date than the previous 13 years.        

Moving between platforms where Origo is used takes about 3-5 days now.   Even in-specie transfers are easier now that you don't need stock transfer forms any more.

Any idea what the costs for those are - I doubt very much of the 1.1% you are being told will not include all fees.  & do note, if you are given a range, it will be the top number quoted 🤣

For reference, I read that as being the total charge (platform, funds + adviser).  its in the ballpark. e.g. 0.13% platform, 0.5% adviser, 0.18% funds = 0.81%.   So, 1.1% would suggest either active funds or expensive platform or higher adviser charge (a bit of all of that) but at the end of the day 1.1% all in is not a bad cost for an solution maintained on an ongoing service by an adviser.

 but charging 10k for the privilege just seems a bit steep.

It is very.

  The 1% ongoing management fee is also steeper than expected but being sold it on prospective rewards going forward. 

1% all in is where expect it to be (see my comments above.  Unless you are talking 1% as the adviser charge on top of the platform and investment charge.   In which case, that is greedy on your value. Half that should be a better target.

LHW99

At least find out, for each pension pot, The company, amount, funds and actual fees charged (for workplace pensions, some companies arrange a discount on the 'usual' fees the pension company puts on the fund data sheets).

You might find you could yourself transfer some / all the pensions into one of the others you already hold (putting it into the same / alternative funds), having lower fees overall.

You might also find that the newer pensions could offer all / most of the modern drawdown options, so that when you want to access the pension, it won't necessarily need transferring to do so.

Have you talked to PensionWise / MoneyHelper?

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise