Choosing an IFA

kjs31

Having just taken VR from work and moved house I am now revisiting my retirement options. I probably need help from an IFA to a. Move my 2 DC pensions to a relatively low cost platform and b. start setting it up for drawdown in tax year 25/26. I was looking at Advisorbook and searched for confirmed independent and offers fixed fee. That search returns 6 IFAs of which only 3 claim to be retirement planning specialists. Is that really the best way to find an IFA? What sort of amount will a fixed fee be? 

My DC pensions are relatively large (just over 1.3M in total currently) so I’m thinking fixed fee will be more palatable than a percentage. I’m guessing that I don’t need to be too adventurous with my investment approach as I only intend to drawdown around 3% PA so just looking for something basic and safe(ish) that will go through the mechanics of allowing drawdown really. I did look at Interactive Investor as it seems relatively low cost for my investment amount but I do probably need assistance with what funds to invest in. Ideally I want to stay below the higher rate tax band as my smallish DB pension and savings interest will take me up to that level once I’ve drawn down circa a bit less than 3% so I’m thinking that I might drawdown at the end of the tax year when I know what my taxable income from other sources will be. I don’t want to do anything this tax year as I will have earned roughly 100k already so looking to start my pension next tax year but I know these things can take some time to sort out. 

jaypers

I am also in the fortunate position to have a relatively large pension pot. I’ve been with https://cmswealth.co.uk/ for the last 5 years who are excellent. Dave Carter and Greig Ross have given me some excellent advice. They are completely independent and nothing lost in having a chat with them. 

dunstonh

That search returns 6 IFAs of which only 3 claim to be retirement planning specialists. Is that really the best way to find an IFA? What sort of amount will a fixed fee be? 

Currently, there is no reliable IFA directory.  Most of the directories are dominated by FAs.   Google is as good as any to find a local IFA and then check as many FAs try to hide the fact they are not independent.  Adviserbook does check IFA status but its not a big player and many IFAs won't even know of its existence.

Fee will depend on the work involved, your location and the adviser location.   The job will need to be known and priced up.  In some cases, it could be greater than alternative fees to allow for contingency issues.

My DC pensions are relatively large (just over 1.3M in total currently) so I’m thinking fixed fee will be more palatable than a percentage. Not necessarily.  Many IFAs have tiered charges or have a cap.

Ibrahim5

You normally meet the adviser who asks a few questions and fills in a few forms. The average fee for that is 2.4% which will be £31200. They will want you to pay an ongoing average fee of 0.8% or £10400 for an annual review lasting a few minutes. IFAs are obsessed by FUM (funds under management). They will want your £1.3M in their FUM which means that your custom will provide large ongoing fees for very little work. When the IFA has enough FUM they will sell their business and throw you under the bus and you will find yourself with a new advisor who probably won't be independent.

kjs31

Ibrahim5 said:

You normally meet the adviser who asks a few questions and fills in a few forms. The average fee for that is 2.4% which will be £31200. They will want you to pay an ongoing average fee of 0.8% or £10400 for an annual review lasting a few minutes. IFAs are obsessed by FUM (funds under management). They will want your £1.3M in their FUM which means that your custom will provide large ongoing fees for very little work. When the IFA has enough FUM they will sell their business and throw you under the bus and you will find yourself with a new advisor who probably won't be independent.

Well I absolutely won’t be paying 31k and nor am I likely to commit to ongoing advice. Hence the search for a fixed fee IFA. Once the pensions are consolidated and put into drawdown I likely won’t return for advice unless there is an obvious need for this. 

gm0

You have some time (VR).  Depending on next steps.  Not hurrying and learning about investment, risk, the differences in deaccumulation vs saving up is either

a) good preparation to DIY

b) preparation to participate more meaningfully in fact find, goal and risk discussions with the eventual IFA you hire

I made the advice vs no advice decision quite late in my own journey towards early retirement. 
And asked many of my stupid arcane questions here, watched videos, read books etc.

You have a "can I be bothered" / "do I find it interesting to learn about / keep brain active" decision to make about the use of and value of your own time

An ongoing advice relationship *does* mean you can mostly not care about the whole subject and have it monitored and have tax planning on tap.

But over the life of a 40 year pension this will cost you 10%-12% of the initial pot in fees. 
As drag on cumulative returns.  Are you 150k not bothered ? 
For me that's worth some work and attention.
You do you - age/health/spouse etc.

It is harder to get confident to setup than it is to run.  Products are readily available - retail to the UK consumer.

Now for sure:

Bad DIY decisions / tax misunderstandings can crimp your wealth in retirement. 

As can getting trapped by an FA firm or sold to an FA by an IFA which can be an unhelpfullly expensive yet bad experience where you put up with it.  Or have to do it all again.  This is a bad "finding an adviser" decision. 

A professional genuine IFA will take you on for a low initial charge and 0.5% per year.  Possibly with some cap on the arrangement.  Finding 3 independent ones locally to check personal fit - and compare offers/contracts may be harder than you think.

In thinking about your financial plans for the next stage by either route - the following template may be of assistance. 

As you will discover the questions here are the same things you will need to be able to articulate should you hire somebody to colour in the implementation for you.

- Plan duration and basic parameters about you and any spouse/dependents

- Future income both needs and wants separated out

- Capital - Initial DC pot(s) and other capital  events - house downsizing/inheritance/bank of mum and dad

- Risk taking *required* to match required and desired income to capital

- Sources of guaranteed income and its impact on risk taking

- Handling sequence of return in deaccumulation

- Writing an investment statement based on the above and portfolio selection and design

- Platform and specific fund selection

- Scheme transfers and implementation of drawdown, annuities / whatever it is

- Rebalancing, monitoring and ongoing work

Post/dm if anything unclear.

LHW99

kjs31 said:

Ibrahim5 said:

You normally meet the adviser who asks a few questions and fills in a few forms. The average fee for that is 2.4% which will be £31200. They will want you to pay an ongoing average fee of 0.8% or £10400 for an annual review lasting a few minutes. IFAs are obsessed by FUM (funds under management). They will want your £1.3M in their FUM which means that your custom will provide large ongoing fees for very little work. When the IFA has enough FUM they will sell their business and throw you under the bus and you will find yourself with a new advisor who probably won't be independent.

Well I absolutely won’t be paying 31k and nor am I likely to commit to ongoing advice. Hence the search for a fixed fee IFA. Once the pensions are consolidated and put into drawdown I likely won’t return for advice unless there is an obvious need for this. 

OP this poster (ibrahim5) can exaggerate things (generally in one direction).

There are different estimates, but average initial fees seem to be less than 2%:

https://moneytothemasses.com/help-and-guidance/how-much-does-financial-advice-cost

Many advisers I understand will reduce the % as the amount involved increases, and Unbiased suggests between £500 and £5000. https://www.unbiased.co.uk/discover/personal-finance/savings-investing/cost-of-advice

Any IFA should be clear on fees at the start - and would provide an initial 1/2 hour to see if you like them and they think they can work with you.

Advice will cost but with a large amount, if you are inexperienced, you could lose more than the fees if you DIY badly, although many here are happy to DIY (or have to as their pots are quite small).

Ibrahim5

I was using data from the Financial Conduct Authority rather than "vouchedfor" whoever they are.

Scrudgy

Unless there are some issues that complicate things (like GMP etc) DC pensions are usually very easy to transfer and consolidate by yourself at zero cost. Pick a platform like Interactive Investor and your platform fees will be about £13 per month. If you choose low cost passive investments you could be as little as 0.15% PA. I have consolidated 3 DC pensions at zero cost, and encouraged my friend to do the same with 4 that he had after he was quoted 3% to do the work and again it cost him zero to do it himself.

Setting up Interactive Investor for either flexi access drawdown or UFPLS or a mixture of the two is a breeze. As you have £1.3m, ii will be really cheap as they charge a fixed monthly fee, not a percentage.

As far as investment help, you might want help with that to pick a strategy that suits you, but if you are comfortable with self investing, your costs can be very low. 

Tax efficiency planning, optimum use of tax free sources (ISAs etc), inheritance tax planning, cash flow modelling is important, so if you haven’t thought much on this then a retirement planner could be money well spent if you get a favourable price. I made my own plan for all of the above, but wanted it sense checked, so paid a chartered retirement planner a one off fee for advice. This was £3k.

JohnWinder

Another way to look for an advisor is to use this service: https://www.evidenceinvestor.com/find-an-adviser/ No direct charge to you.

cfw1994

Scrudgy said:

Unless there are some issues that complicate things (like GMP etc) DC pensions are usually very easy to transfer and consolidate by yourself at zero cost. Pick a platform like Interactive Investor and your platform fees will be about £13 per month. If you choose low cost passive investments you could be as little as 0.15% PA. I have consolidated 3 DC pensions at zero cost, and encouraged my friend to do the same with 4 that he had after he was quoted 3% to do the work and again it cost him zero to do it himself.

Setting up Interactive Investor for either flexi access drawdown or UFPLS or a mixture of the two is a breeze. As you have £1.3m, ii will be really cheap as they charge a fixed monthly fee, not a percentage.

As far as investment help, you might want help with that to pick a strategy that suits you, but if you are comfortable with self investing, your costs can be very low. 

Tax efficiency planning, optimum use of tax free sources (ISAs etc), inheritance tax planning, cash flow modelling is important, so if you haven’t thought much on this then a retirement planner could be money well spent if you get a favourable price. I made my own plan for all of the above, but wanted it sense checked, so paid a chartered retirement planner a one off fee for advice. This was £3k.

I have also consolidated several DC pensions of mine in the past.  

Provided the companies are part of “Origo Options”, it is a pretty straightforward thing to do.

You should check if there are any guarantees attached, which might make them wise to leave alone.
DB pensions are most likely best left alone if you have any.

Decent post from gm0 above 👍

I kind of feel if you cover those & have the interest, you are probably well placed to manage them yourself, but as someone above put it: you do you!

Take a browse up at https://kroijer.com to perhaps demystify some of the topic - you might agree that investing in the world at a low cost is the right thing to do 🤷‍♂️