IFA costs and ongoing charges.

Albermarle

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 🤷‍♂️

I think some of the problem is that advisors can not just move stuff around, without first spending time with the client assessing needs, objectives, risk tolerance etc + filling in a lot of forms no doubt. They are highly regulated and have to do everything by the book. Not as simple as you or I moving a pension from A to B.

Having said that £10K is too much, something on which every reply seems to be agreed.

barnstar2077

Any reason why you couldn't just open a SIPP, transfer them all in and go from there?

The Pensioncraft channel on youtube is a good place to start learning a bit more about it all (As well as these forums and google of course.)

https://www.youtube.com/@Pensioncraft/videos

gm0

Regulation drives behaviour.  Advisers are not allowed far off piste while remaining compliant and in the bounds of their indemnity insurance for lifetime liability on advice being suitable.  Recommended product, portfolio fit to risk, the general treatment of "risk" around modern portfolio theory - or the process and "compliance" deliverables about "product suitability".  Even when the emperor may have no clothes.  Yet they are bound to do it a particular way.

In fact the whole thing now reeks of organised religion in a bureaucracy - a private language and a liturgy, a prescribed process and order of service, a fair amount of parish record keeping and routines.
In this case its FCA imposed dogma which defines the "belief" system within which the prescribed dance takes place.

Anecdotally - at the moment the FCA direction of travel on prodding advisers seems to be towards more required contact time (frequency of contact) every year.  More regular confirmation on products and suitability.  If pursued it will drive up the annual effort per client for the adviser for real or virtual face time and prep and compliance letters as write ups.  Which in turn drives up the "viable minimum" pot size to do it "by the book" for the revenue in ongoing fees as % of AUM.  Either prices rise.  Or the minimum pot size to bother with a client does.  Or both.

People with a pot too small to be offered a good price for advice have an issue.  Drawdown complexity isn't magically simpler just because you are below the threshold.  

This drift in regulation can open up the well known "advice gap" below the wealth level.
People who may need or want help.  But can't actually realistically get it at a sensible price - because the revenues from taking them on are not exciting for the costs of regulated ongoing service.  And no "cut down" version is permitted.

Deterrent pricing after first screening contact.  Or not offered.  Different firms take on different segments.

It's the overall coverage that should be (and is) a concern to the FCA.  Absent real simplification.

This has been a concern of the FCA prior (correctly) in terms of an unmet need in this regulated market space.  

Hence Pensionwise, MAS etc. 

But you would not always recognise that in terms of other habitual fixes to other perceived problems by adding more deliverables, more audit data collection, more consumer nudges, and more contact time

zimmacdo

Thanks for all the views. I am aware that the excuse for higher charges also relates to advisor contact time but in reality if I meet say twice or 3 times a year for say a couple of hours I would love to know what their hourly rate is based on what I am being charged.

I would imagine they generate spreadsheets to show me how much money the shares are not making with a touch of the mouse. 

Maybe I'm just a cynic.

I have made plans to talk to pensionwise and also looking at the pension craft channel. Very much appreciate all your feedback. You all kind of confirmed what I was thinking regarding excessive initial set up fees etc. 

I suppose alarm bells started to ring when I requested what the charges were and he declined to answer the email but would only inform me verbally with a phone call.

dunstonh

Thanks for all the views. I am aware that the excuse for higher charges also relates to advisor contact time but in reality if I meet say twice or 3 times a year for say a couple of hours I would love to know what their hourly rate is based on what I am being charged.

You are not just paying for things you see directly.  You are paying for things that allow the adviser to give advice.  i.e. buying in the portfolio actuarial data, fund due diligence being carried out (monthly is typical on that),  modelling software being updated weekly and warnings generated [that the IFA would need to act on].    Then you have FCA, FSCS, MAS, FOS levies, and compliance costs (these take around 1/3rd of the IFA turnover).  Plus, staffing, office costs etc.

However, with meetings, preparation is probably about an hour on average and work after the meeting is around 6-8 hours.  But it really depends on what the IFA is being employed to do.   Tax allowances use takes longer than it used to due to the tighter limits.

A lot of professions have an hourly rate plus you pay for stuff on top plus VAT.   The IFA charge is inclusive of all the other things with no VAT.  If you started to strip bits out and charge by the bits of the job, then a lot of it would become VATable.

I would imagine they generate spreadsheets to show me how much money the shares are not making with a touch of the mouse. 
Maybe I'm just a cynic.

With most people, investments are not the key discussion point in any meeting.   

Cus

Even though investments are not the key discussion point in a meeting, it is the key in the IFA's charging model.  

It's seems that people either moan about ongoing charges or the cost of initial advice.

Is a transactional base fee model just not worth the hassle for an IFA due to all the regulatory costs etc?

gm0

As dunstonh says. The compulsory lifetime liability PI insurance and the FCA collection plate for other things are in the picture.  Tools and data subscriptions.  Before employment costs and normal business things before billable hourly rate.

Government (all of them) love this stealthy levy approach. Use it all the time. 

See also electricity tariffs - for many a year.  Nuclear, fuel poverty, green transition. Things that could be general taxation which turn up in stealth consumption taxes of essential or discretionary goods and services.

Approach:

Use a bill to spawn a regulator at arms length from core civil service department - for blame dispersal and jobs for the boys

Set them an objective/problem list and grant powers under 2y legislation in the act creating it.  Allowing fiddling later without going back to parliament.

Create new levies as a way to fund a proposed something must be done "solution" to a perceived problem which has hit the media.

Bake said levies into costs to serve of the regulated providers of the product or service via regulation.

This approach is highly superior.  Rather than fund the solution via general taxation - it doesn't show up in the OBR PSBR forecast. Arms length. Off the books. Complicated and jargon rich.  Hard for citizens and some media to follow and communcate about the legerdemain.  Provider gets a consumer reputational shoeing. 
See also PFI hospitals of old though those chickens have now been roosting a wee while and this has been noticed and curtailed for new.

Brag about the success of the solve a problem program on some input or process volume metric - not actual outcomes  With this topic the process metric is whether or not people have called Pensionwise - not whether or not it was useful or their outcomes shifted the dial in aggregate.  Approach used. Cash held - whatever outcome was of concern.

Then hope people don't notice the levy inflation of the prices of goods and services

If people *do* notice and stop buying the thing because its too expensive and thus avoid the levy.  And it was a discretionary good - like this is.

That is possible to sort out. as well.  Although discretionary goods/services are trickier than heat, power, water and transport to go to work

Consider making buying the thing "compulsory" - blocking product access entirely without advice in this context. 

You can't trust the poor ignorant laity/consumer not to screw it all up on their own.  Look at all the trouble it causes. Too much cash being held.  Bad portfolio and early retirement decisions. Tax free cash being taken when it shouldn't be risking falling back on the state and claiming pension credit later. Rich people and their lambos.
Not enough of the investing going into UK equities on LSE.   Whatever "sinful" thing we have all done, or not done - this time that can be paraded to the media as the excuse for an illiberal and authoritarian interevention. 
No No.  We the paternalistic government must "save them from themselves and their poor choices" and take this in hand.  Not actually do it obviously.  Just commission a swarm of new spivvery to execute a compulsory process on consumers to compel them to *do as they are told* via regulation. In a more expensive way than necessary.  The road to hell is paved with good intentions.  I am liking my religion analogy today.

FCA have rather desired making advice compulsory for a while. And the kite gets flown in problem solving consultations.  But it is problematic on the "adequate supply" end. As well as from a personal liberty point of view. 

Without universal compulsion you have the adverse selection problem that the people you want to do over financially in the charging framework to cross subsidise the others will - of course - opt out. e.g. If there was more supply in care home sector.  Another sort of discretionary service in that you choose who to buy it from.  With more supply self funders would not be done over quite so regularly - in exactly this rate stacking customer A in order to pay for shortfall (from LA) for part of customer B as well as their own.

General taxation is the better, simpler, but more visible solution to many of these.
So they pick the complex inferior one - mostly.  Not party political.  Institutional habit of mind.

Back to my church analogy.  They want to make us all go.  But don't think they have enough pews.  And also think it would be wildly unpopular.  And are therefore a bit  frit. 

Let's see what happens next.  It'll be amazing. And if not amazing.  Amusing.

dunstonh

Is a transactional base fee model just not worth the hassle for an IFA due to all the regulatory costs etc?

It depends on the IFA, time of the year, overall workload and business model of the IFA.  

Cus

gm0 said:

As dunstonh says. The compulsory lifetime liability PI insurance and the FCA collection plate for other things are in the picture.  Tools and data subscriptions.  Before employment costs and normal business things before billable hourly rate.

Government (all of them) love this stealthy levy approach. Use it all the time. 

See also electricity tariffs - for many a year.  Nuclear, fuel poverty, green transition. Things that could be general taxation which turn up in stealth consumption taxes of essential or discretionary goods and services.

Approach:

Use a bill to spawn a regulator at arms length from core civil service department - for blame dispersal and jobs for the boys

Set them an objective/problem list and grant powers under 2y legislation in the act creating it.  Allowing fiddling later without going back to parliament.

Create new levies as a way to fund a proposed something must be done "solution" to a perceived problem which has hit the media.

Bake said levies into costs to serve of the regulated providers of the product or service via regulation.

This approach is highly superior.  Rather than fund the solution via general taxation - it doesn't show up in the OBR PSBR forecast. Arms length. Off the books. Complicated and jargon rich.  Hard for citizens and some media to follow and communcate about the legerdemain.  Provider gets a consumer reputational shoeing. 
See also PFI hospitals of old though those chickens have now been roosting a wee while and this has been noticed and curtailed for new.

Brag about the success of the solve a problem program on some input or process volume metric - not actual outcomes  With this topic the process metric is whether or not people have called Pensionwise - not whether or not it was useful or their outcomes shifted the dial in aggregate.  Approach used. Cash held - whatever outcome was of concern.

Then hope people don't notice the levy inflation of the prices of goods and services

If people *do* notice and stop buying the thing because its too expensive and thus avoid the levy.  And it was a discretionary good - like this is.

That is possible to sort out. as well.  Although discretionary goods/services are trickier than heat, power, water and transport to go to work

Consider making buying the thing "compulsory" - blocking product access entirely without advice in this context. 

You can't trust the poor ignorant laity/consumer not to screw it all up on their own.  Look at all the trouble it causes. Too much cash being held.  Bad portfolio and early retirement decisions. Tax free cash being taken when it shouldn't be risking falling back on the state and claiming pension credit later. Rich people and their lambos.
Not enough of the investing going into UK equities on LSE.   Whatever "sinful" thing we have all done, or not done - this time that can be paraded to the media as the excuse for an illiberal and authoritarian interevention. 
No No.  We the paternalistic government must "save them from themselves and their poor choices" and take this in hand.  Not actually do it obviously.  Just commission a swarm of new spivvery to execute a compulsory process on consumers to compel them to *do as they are told* via regulation. In a more expensive way than necessary.  The road to hell is paved with good intentions.  I am liking my religion analogy today.

FCA have rather desired making advice compulsory for a while. And the kite gets flown in problem solving consultations.  But it is problematic on the "adequate supply" end. As well as from a personal liberty point of view. 

Without universal compulsion you have the adverse selection problem that the people you want to do over financially in the charging framework to cross subsidise the others will - of course - opt out. e.g. If there was more supply in care home sector.  Another sort of discretionary service in that you choose who to buy it from.  With more supply self funders would not be done over quite so regularly - in exactly this rate stacking customer A in order to pay for shortfall (from LA) for part of customer B as well as their own.

General taxation is the better, simpler, but more visible solution to many of these.
So they pick the complex inferior one - mostly.  Not party political.  Institutional habit of mind.

Back to my church analogy.  They want to make us all go.  But don't think they have enough pews.  And also think it would be wildly unpopular.  And are therefore a bit  frit. 

Let's see what happens next.  It'll be amazing. And if not amazing.  Amusing.

What an interesting perspective 

LHW99

dunstonh said:

Is a transactional base fee model just not worth the hassle for an IFA due to all the regulatory costs etc?

It depends on the IFA, time of the year, overall workload and business model of the IFA.  

And if there's an 'r' in the month?