IFA wants to increase charge on existing pension

dunstonh

 It 's a 'drawdown' fund and It has 3 or so years until it matures. 

Royal London plans in drawdown do not mature.   As you have already taken the 25% TFC, the tax paid  on drawing £100k in one go is going to be  massive hit.      Do you have a spending need that requires you to do that?

What does your adviser say about your plans?   (I would have thought a better plan would be in place to reduce tax or misunderstanding)

Can I just tell him I don't need him any longer or does the fact that I agreed to use him mean I have to keep him?

It's pay-as-you-go.   If you tell the adviser you are going to go DIY with your pension in future and no longer require their services, then they will turn off the ongoing adviser charge.

bjorn_toby_wilde

Bostonerimus1 said:

Albermarle said:

Bostonerimus1 said:

wjr4 said:

jim8888 said:

This is a thread that seems to highlight the fact that learning how to manage your money is one of the best investments you can make, and not just on the financial side. It seems to me that many IFAs are good salespeople who probably have convinced themselves that they do work hard in their client's interests, and many of them do. I know my mum and dad were reluctant to ditch their IFA because "he's such a nice bloke" (he always sent a Christmas card too.) So dealing with an IFA can be an emotional stress as well as a financial one.

This is the same with everything right? If we all had time to DIY, we would. Do you say the same about solicitors & accountants? 

I would never pay an IFA because I can do what they do and I think the vast majority of people can too. There will be some specialized circumstances where an IFA is needed and there will always be people who simply want an IFA, but with some basic knowledge managing your money is something that should be relatively simple. I have paid lawyers for estate planning as they have skills and knowledge that I don't and I will pay tax experts if my tax situation becomes more complex than it is now. 

Learning about pensions and investing does take a bit of time, but once the basics are mastered then actually managing your money should take very little time. I DIY and I basically do nothing because I have my asset allocation set appropriately for my circumstances; I use index trackers and do not "trade". In the "Great British Invest Off" thread that's been going since October 2017 I started with a portfolio of 50% US equity, 25% International equity and 25% US bonds. I have averaged a 9% annual return and have done absolutely nothing to "manage" my portfolio. This has put me in the middle of the pack with other active and some passive portfolios, which is exactly where I'd expect to be. My real life portfolio has done considerable better as my bond allocation is 10%, but I also don't spend any time at all managing it.

If you find yourself spending lots of time managing your money then you are doing something wrong.

However you could sit some people in a room for a days teaching on these matters, and they would be no wiser at the end of it.
I have a friend ( who was in a commercial environment when working) who employed an IFA to tidy up his pension etc
The IFA seems fine with regular reviews and explanations of why certain actions are taken etc 
I have also explained things as well. However when talking to my friend, it is clear that only about 10% has sunk in .

Agreed, people are different. However, I think there is a lot of unjustified fear which stems from a dislike of maths and some parts of the financial services industries making it seem more complex than it is. Combine that with mis-selling and fraud and I can see why some might want or need an IFA. But I stand by my belief that personal finances and investing should be simple and that anyone with a basic understanding on things like percentages and income tax can manage their own affairs. Throw in some comprehension of compound interest and you are flying. Drawdown is probably the most complex situation people will come across and for that more people will probably need advice.

I have to disagree strongly with you here. It’s been pointed out many times on this forum that contributors here are, by the very fact that they post, interested and motivated to understand pensions.

The vast, vast majority (I’d love to see some research on this) are not so inclined and pensions are a mystery to them. You only have to look at this and other MSE forums to see examples every day.

I think you’ll find you live in a highly educated, mathematically literate bubble.  I have friends and former colleagues educated to degree level and above who have not the first clue about pensions and no interest in learning.  They are quite happy to trust an advisor to do it for them.

You’re right that pensions should be simple but they are in fact far too complex for most.

Bostonerimus1

bjorn_toby_wilde said:

Bostonerimus1 said:

Albermarle said:

Bostonerimus1 said:

wjr4 said:

jim8888 said:

This is a thread that seems to highlight the fact that learning how to manage your money is one of the best investments you can make, and not just on the financial side. It seems to me that many IFAs are good salespeople who probably have convinced themselves that they do work hard in their client's interests, and many of them do. I know my mum and dad were reluctant to ditch their IFA because "he's such a nice bloke" (he always sent a Christmas card too.) So dealing with an IFA can be an emotional stress as well as a financial one.

This is the same with everything right? If we all had time to DIY, we would. Do you say the same about solicitors & accountants? 

I would never pay an IFA because I can do what they do and I think the vast majority of people can too. There will be some specialized circumstances where an IFA is needed and there will always be people who simply want an IFA, but with some basic knowledge managing your money is something that should be relatively simple. I have paid lawyers for estate planning as they have skills and knowledge that I don't and I will pay tax experts if my tax situation becomes more complex than it is now. 

Learning about pensions and investing does take a bit of time, but once the basics are mastered then actually managing your money should take very little time. I DIY and I basically do nothing because I have my asset allocation set appropriately for my circumstances; I use index trackers and do not "trade". In the "Great British Invest Off" thread that's been going since October 2017 I started with a portfolio of 50% US equity, 25% International equity and 25% US bonds. I have averaged a 9% annual return and have done absolutely nothing to "manage" my portfolio. This has put me in the middle of the pack with other active and some passive portfolios, which is exactly where I'd expect to be. My real life portfolio has done considerable better as my bond allocation is 10%, but I also don't spend any time at all managing it.

If you find yourself spending lots of time managing your money then you are doing something wrong.

However you could sit some people in a room for a days teaching on these matters, and they would be no wiser at the end of it.
I have a friend ( who was in a commercial environment when working) who employed an IFA to tidy up his pension etc
The IFA seems fine with regular reviews and explanations of why certain actions are taken etc 
I have also explained things as well. However when talking to my friend, it is clear that only about 10% has sunk in .

Agreed, people are different. However, I think there is a lot of unjustified fear which stems from a dislike of maths and some parts of the financial services industries making it seem more complex than it is. Combine that with mis-selling and fraud and I can see why some might want or need an IFA. But I stand by my belief that personal finances and investing should be simple and that anyone with a basic understanding on things like percentages and income tax can manage their own affairs. Throw in some comprehension of compound interest and you are flying. Drawdown is probably the most complex situation people will come across and for that more people will probably need advice.

I have to disagree strongly with you here. It’s been pointed out many times on this forum that contributors here are, by the very fact that they post, interested and motivated to understand pensions.

The vast, vast majority (I’d love to see some research on this) are not so inclined and pensions are a mystery to them. You only have to look at this and other MSE forums to see examples every day.

I think you’ll find you live in a highly educated, mathematically literate bubble.  I have friends and former colleagues educated to degree level and above who have not the first clue about pensions and no interest in learning.  They are quite happy to trust an advisor to do it for them.

You’re right that pensions should be simple but they are in fact far too complex for most.

I agree that many people (maybe most) are bad at managing their finances and don't know much. My point is that even those people are capable of managing their finances with a little education. There are many vested interests that want to make things complicated and people are all too willing to avoid the little bit of work required to take control of their finances and buy into the idea that they need ongoing advice to be successful. We live in a capitalist society and so the most basic skills to survive are financial. This is why I have little sympathy for people  like your "friends and colleagues" who end up paying high fees for advice or end up with silly portfolios or buy funds like Woodford's because they "heard something somewhere".

jaypers

I have a healthy fund and I’m with a top class IFA. I pay around 0.25% (it’s a fixed amount rather than a percentage). 1% is a rip off. Move IFAs. You don’t even need to tell the previous IFA you’re moving….Once the new one takes on your portfolio it just moves across once they have instructed your pension pot provider(s) under your authority. 

barnstar2077

jaypers said:

I have a healthy fund and I’m with a top class IFA. I pay around 0.25% (it’s a fixed amount rather than a percentage). 1% is a rip off. Move IFAs. You don’t even need to tell the previous IFA you’re moving….Once the new one takes on your portfolio it just moves across once they have instructed your pension pot provider(s) under your authority. 

From what I have read previously, the higher charge is linked to how small the pot is.  It's like a tradesman giving a high quote for a job he doesn't want to do.  If you take it they are being well compensated, if you don't, then no loss to them as it wasn't worth their time.

cfw1994

jim8888 said:

This is a thread that seems to highlight the fact that learning how to manage your money is one of the best investments you can make, and not just on the financial side. It seems to me that many IFAs are good salespeople who probably have convinced themselves that they do work hard in their client's interests, and many of them do. I know my mum and dad were reluctant to ditch their IFA because "he's such a nice bloke" (he always sent a Christmas card too.) So dealing with an IFA can be an emotional stress as well as a financial one.

I think this is spot on, & something I have tried to install with our offspring.
Fees are the only thing you can proactively impact in your long term investments, and they can have a massive impact.   Example of why fees matter.

The challenge is that many (most?) people are not willing to invest a little time to understand these things.  

They don’t get financial education at school and will often say they are rubbish with money.
They might put everything into cash ISAs even though that will invariably lose out to inflation over an extended period.  They might pull all money out of S&S investments at the point the funds have dropped.   

They need guidance & education.

IFAs do get ‘Svengali status’ with many of their clients, who enjoy an annual lunch and Christmas card 🤦‍♂️

I have a pal who is very good friends with his IFA, including going away with their partners.  The very idea fills me with horror - he doesn’t do that with his mechanic or dentist - but he is happy with it, so who am I to question him 🤷‍♂️

barnstar2077

cfw1994 said:

jim8888 said:

This is a thread that seems to highlight the fact that learning how to manage your money is one of the best investments you can make, and not just on the financial side. It seems to me that many IFAs are good salespeople who probably have convinced themselves that they do work hard in their client's interests, and many of them do. I know my mum and dad were reluctant to ditch their IFA because "he's such a nice bloke" (he always sent a Christmas card too.) So dealing with an IFA can be an emotional stress as well as a financial one.

I think this is spot on, & something I have tried to install with our offspring.
Fees are the only thing you can proactively impact in your long term investments, and they can have a massive impact.   Example of why fees matter.

The challenge is that many (most?) people are not willing to invest a little time to understand these things.  

They don’t get financial education at school and will often say they are rubbish with money.
They might put everything into cash ISAs even though that will invariably lose out to inflation over an extended period.  They might pull all money out of S&S investments at the point the funds have dropped.   

They need guidance & education.

IFAs do get ‘Svengali status’ with many of their clients, who enjoy an annual lunch and Christmas card 🤦‍♂️

I have a pal who is very good friends with his IFA, including going away with their partners.  The very idea fills me with horror - he doesn’t do that with his mechanic or dentist - but he is happy with it, so who am I to question him 🤷‍♂️

I have heard on these forums before people saying how their IFA takes them out for a free lunch to chat, not realising that the combined fees of all of the IFA's clients must incorporate the cost of those meals or it wouldn't be sustainable.  There is no such thing as a free lunch after all.

As is often said though, people using this forum regularly are much more likely to be value for money orientated.

wjr4

IFAs rarely take people out to lunch now, I find the idea of that very outdated. If you don’t understand that you’re paying the annual fee for, question it.

Albermarle

wjr4 said:

IFAs rarely take people out to lunch now, I find the idea of that very outdated. If you don’t understand that you’re paying the annual fee for, question it.

It is not just IFA's, it is a general trend.
When I first started in ( industrial B2B )  sales many years ago, it was normal to take customers out to lunch on a regular basis. This started to decline about 15? years ago. Some evening dinners continued and occasional hospitality days, but this also went into slow decline, but never completely stopped. 
In other European countries it is still more prevalent.

dunstonh

wjr4 said:

IFAs rarely take people out to lunch now, I find the idea of that very outdated. If you don’t understand that you’re paying the annual fee for, question it.

I know one IFA that does but he targets high net worth and charges them a fortune.  So, they are effectively buying the IFA lunch.     The whole thing is prestige but he is city based and they go for that sort of thing.

But when you have SJP charging clients £25,000 for an investment vs £2,500 for the IFA then that is an awful lot of lunches that could be paid for.