Ongoing advisor charges

matthewhodges

I run a limited company just employing myself. Seven years ago I set up a directors pension with Royal London – I did this through an advisor who was recommended to me. I am paying an ongoing advisor charge of 0.5% of the value of the plan.

Is this money for old rope? Obviously as the plan grows so does the charge. It's still not a huge amount of money, but they essentially do nothing for it – I don't receive any advice, and any correspondence I receive is direct from Royal London.

Am I within my rights to stop paying this charge and deal with Royal London directly, or would that be a bad idea for any reason? My original FA has since retired, so I am now paying this fee to the company who absorbed his business, who I have no connection with.

Any advice on this topic gratefully received!

dunstonh

Is this money for old rope?

It depends on whether you value their service offering or not.   If you don't then tell them thank you very much but please cease ongoing servicing.   If you do value it then you probably wouldn't be asking this question.

I don't receive any advice, and any correspondence I receive is direct from Royal London.

For any plan set up after 1st January 2013, you should be receiving a service in exchange for the fee.   if you are not, then you have the right to ask for the money back for any year you have not received service (yearly since 2018 but could be every 2 or 3 years before that).

I tend to use Royal London for transactional clients.  i.e. those that don't need ongoing servicing.    I don't tend to use it for servicing clients as we have more involvement in the investment structure with those that we cannot replicate on RL.

matthewhodges

Thanks for the advice.

If Royal London is your choice for transactional clients (I asume this means you're an FA yourself), it's curious that I'm being charged an ongoing fee.

Do you have any opinion on whether dealing directly with Royal London (i.e. ceasing ongoing servicing with my FA) would be a bad idea? Is it likely there would be any issues that I couldn't deal with myself? Appreciate you have no details about my business, but in general is it fine to deal directly with your pension provider? Asked another way, is it possible my FA actually is doing work with my pension provider on my behalf, and I just don't know about it?

Albermarle

Many of us on here deal directly with our pension providers with no issues.
However be clear that you are then responsible for choosing the investment(s) and deciding when might be a good time to change them ( as you get older for example). Plus you ideally need to understand the tax regime around pensions.
However for the investment side RL have simple well known managed funds for a relatively low fee, so if you are already in one of these, it may just be the case of leaving things as they are for now.

Just FYI ;
FA - Means an advisor tied to a product range.
IFA - Means one who can choose across the market.

matthewhodges

However for the investment side RL have simple well known managed funds for a relatively low fee, so if you are already in one of these, it may just be the case of leaving things as they are for now.

This is what I was thinking. My pot is fairly small at this point, and I don't foresee needing to make any changes for some time (other than upping my contributions) so paying the advisor charge seems unecessary, as they aren't really doing anything for it.

However, if I did get rid of my IFA (thanks for the clarification!), is it possible I would struggle to get a new one on the same terms in the future? i.e. is 0.5% actually a decent rate that I should not just give up?

Albermarle

matthewhodges said:

However for the investment side RL have simple well known managed funds for a relatively low fee, so if you are already in one of these, it may just be the case of leaving things as they are for now.

This is what I was thinking. My pot is fairly small at this point, and I don't foresee needing to make any changes for some time (other than upping my contributions) so paying the advisor charge seems unecessary, as they aren't really doing anything for it.

However, if I did get rid of my IFA (thanks for the clarification!), is it possible I would struggle to get a new one on the same terms in the future? i.e. is 0.5% actually a decent rate that I should not just give up?

0.5% as an ongoing charge is more normal for bigger pots ( say >£0.5 Million) For pots below £100K, then 1% seems more the normal.

dunstonh

If Royal London is your choice for transactional clients (I asume this means you're an FA yourself), it's curious that I'm being charged an ongoing fee.

I am an IFA, not an FA.
However, we do have a couple of clients on RL with ongoing servicing.  However, for them, its about the other services we provide.  The product itself isn't important to them.  The outcome of what they want is.

Do you have any opinion on whether dealing directly with Royal London (i.e. ceasing ongoing servicing with my FA) would be a bad idea?

If you are not getting contacted annually then you should cease the service.   It is a mandatory requirement that the adviser make contact with you "at least annually".  Typically, that is by tax year rather than calendar year (which fits with annual tax year work to use allowances etc).

RL is fine for dealing with directly.

 Is it likely there would be any issues that I couldn't deal with myself?

Providers will not give you advice or opinion.  They take instruction from you or your adviser.  If you know what you are doing, then you don't need advice.  If you don't know what you are doing and make a mistake, it can be costly.

Appreciate you have no details about my business, but in general is it fine to deal directly with your pension provider?

Absolutely, that is why use RL for transactional/one off/ad hoc clients.

Asked another way, is it possible my FA actually is doing work with my pension provider on my behalf, and I just don't know about it?

No. In some scenarios it is possible but not with RL and not from what you describe.

Often there is work going on that you don't see.  For example, we have our servicing clients on modelling that is updated weekly and gives us a report of those that are outside tolerances to allow us to act on them.  Sometimes the person won't see what we decide, but sometimes they do.  However, it is part of the "at least annually" review.  You haven't been getting that,

ali_bear

Does it make a difference if you engaged this advisor as an individual retail client, or as a Ltd Co?