Managed Pension charges and IFA charges

Bostonerimus1

Nebulous2 said:

My plumber is extremely good. He put in my boiler and services it every year to maintain the 12 year warranty. 

Mostly retired, with time on my hands, we've been DIY-ing a fair bit, we have just installed a new shower room. 

Our plumber uses copper pipes, brazes all the joints, and his work is very neat. We use plastic pipes, pushfit connectors and it can look a bit like spaghetti junction, though it is out of sight, unless you look very hard. 

The plumber would fit a new bathroom in 3-4 days. It took us 3 months. I've had to buy a few new tools, and consumables such as jigsaw blades and drill bits in addition to the cost of materials.  

We can use all the analogies we like, but many (most?) people would never pick their own investments, just as most people would never plumb their own bathroom. 

With a modest sum invested, an even more modest sum in cash, most of my needs met by a DB pension, and all of them met by secure income once the state pension kicks in, I feel very little need for an IFA. Yet I've a feeling that I'm getting the plastic jumble instead of the neat copper pipes. 

IFAs can be appropriate in some circumstances and the levels of financial ignorance and the hurdles placed in front of people can make their use seem necessary. But most people don't need complex financial solutions or on going services...you don't pay a plumber every year to check the pipes they installed.  In retirement total fees of 1% will probably be at least a quarter of your income from DC pension accounts, so your IFA and fund charges could be your largest expense. It sounds to me as if you have a pretty good financial set up with the DB and SP.

zagfles

Secret2ndAccount said:

Some people fix their own plumbing. Some people call a plumber. Some people manage their own money. Some people use an IFA.

I had a leaking tap, so I called a plumber. He said he would come and fix my tap. The estimate was £150. But before he would fix it he wanted to do a full survey of my house’s plumbing. The fee would be 1% of the value of my house. Then he would be my on-call plumbing expert. I said the fee seemed high.

“Look”, he said. “We are talking about potential escape of water here. If I make a mistake the damage could run into hundreds of thousands, and leave you with after-effects for years to come. I have studied, and passed exams. I have to register with a professional body, and stay up to date with current legislation. I keep detailed records, and you should see my Liability Insurance premiums. I can't just fix a tap without seeing the full picture.” So, reluctantly I agreed. He fixed the leak, carried out the survey, then put me on an annual contract. Every year he visits the house and checks over the plumbing to make sure everything’s okay. For this he was charging 0.5% of the value of the house.

2 years ago I noticed the fee had gone up by 0.2%. I checked his invoice and it said something about a DFM. I asked what a DFM was. “Oh, he said. That’s a drainage expert. I’m good at plumbing, but these guys are really good with drains. So I subtcontract the drainage work to them, and you pay them 0.2%. I’m still in charge of everything though, so I’m not reducing my fee." Reluctantly I agreed.

The final straw came last year. My plumber retired and sold his business to a large national chain. I wanted a new shower, so I called them. They sent a nice young man over. He was very pleasant, but he only seemed to want to sell me one of their own brand showers. I thought there was a wide range of showers available, but this chap’s catalogue only had a small number to choose from.

Do you think I’m getting good value from this contract or should I go it alone? I haven’t had any problems with my plumbing in a long time, and I’m worried what will happen if I turn off my annual contract.

  
And you'll probably find that even though the plumber's charging you 0.5% of the value of your house, if your house was damaged by a pipe or joint not performing as expected, the plumber would simply shrug his shoulders and say "not my fault mate, those pipes did always did well in the past" and you'd have to suck up the loss. 

zagfles

Nebulous2 said:

My plumber is extremely good. He put in my boiler and services it every year to maintain the 12 year warranty. 

Mostly retired, with time on my hands, we've been DIY-ing a fair bit, we have just installed a new shower room. 

Our plumber uses copper pipes, brazes all the joints, and his work is very neat. We use plastic pipes, pushfit connectors and it can look a bit like spaghetti junction, though it is out of sight, unless you look very hard. 

The plumber would fit a new bathroom in 3-4 days. It took us 3 months. I've had to buy a few new tools, and consumables such as jigsaw blades and drill bits in addition to the cost of materials.  

We can use all the analogies we like, but many (most?) people would never pick their own investments, just as most people would never plumb their own bathroom. 

With a modest sum invested, an even more modest sum in cash, most of my needs met by a DB pension, and all of them met by secure income once the state pension kicks in, I feel very little need for an IFA. Yet I've a feeling that I'm getting the plastic jumble instead of the neat copper pipes. 

I just 3D printed our bathroom using an off the shelf multi bathroom components set. Our requirements for sink, bath, shower, toilet are the same as thousands of other bathrooms in the country so we didn't need our own bespoke design. There's even an option where the bathroom automatically transforms into a wet room as you get older and too infirm to use a normal bath/shower. 

RogerPensionGuy

dunstonh said:

I spoke to a large UK insurance company that I have a SIPP & GIA on their platform.
Just asking if that can provide me an annuity and purchase life annuity quote from the whole of market. 
They said no problems, but they will charge me 5K as they need to ask me lots of questions as per the rules, even though I'm 100% only going to get one or both products previously mentioned. 

If you ask an in-house salesforce you expect to pay in-house salesforce rates.

Apart from the 5K I guess they get a nice % from the product supplier. 

No. Commission was banned from 1st Jan 2013.   It was replaced with fee.    Only non-advised sales can still take commission.

I understand rules and requlations can often be great stuff, but these charges can be pretty blunt. 

If the fee is a fixed £5k then it tells you a lot about their target market.  i.e. don't want values of £50,000k but more interested in values of £250k+

Thanks for the post, but reference the following quote.
***
"Apart from the 5K I guess they get a nice % from the product supplier. 
No. Commission was banned from 1st Jan 2013.   It was replaced with fee.    Only non-advised sales can still take commission."
***

When I was chatting to that big UK insurance company I was under the impression they would do a whole of market search and we picked an outside organisation, the annuity/PLA offer would have a commission/fee inside the offer, so the outfit I use will get the 5K fee from me and the commission/fee from the product.

When I saw a few IFAs early 2024 they all produced offerings for annuities and PLAs and they showed/explained the cost of buying said products and the outflows back to me and showed me the X £s they would receive being part of the deal, IIRC Canada Life offered best outcomes for me on 90% of the quotes.

Going back to early 2024 I was surprised that a product costing 100, 200, 300 or 400K was very fixed geared on value for me the customer, say 5, 10, 15 or 20K PA. I asked the IFAs why don't I get more % return for the 400K product as I may as well buy 4 X 100K products and value would be the same for me, obviously more hassle, but I did with this fixed gearing, maybe do some products fat say just ten years the spending years, then a medium time period and maybe one for life with a spouse bolted on........

IFAs said if I did a big say 400K product they could would their take and in essence I would get more cash.value out of the product.

Currently I am happy to keep playing about on GIAs and odds and sods, but still feeling I want a locked, loaded, sealed inbound cash flows before age 70 when I may not be happy or able to keep tinkering and trying to be as tax efficient as I can be.

dunstonh

When I was chatting to that big UK insurance company I was under the impression they would do a whole of market search and we picked an outside organisation, the annuity/PLA offer would have a commission/fee inside the offer, so the outfit I use will get the 5K fee from me and the commission/fee from the product.

That would be a breach of FCA rules.    If advised (so on fee basis), the annuity rates will be the nil commission rates.   If non advised, then no fee but commission can be paid and the annuity rates reduced to reflect the commission taken.

Going back to early 2024 I was surprised that a product costing 100, 200, 300 or 400K was very fixed geared on value for me the customer, say 5, 10, 15 or 20K PA. I asked the IFAs why don't I get more % return for the 400K product as I may as well buy 4 X 100K products and value would be the same for me, obviously more hassle, but I did with this fixed gearing, maybe do some products fat say just ten years the spending years, then a medium time period and maybe one for life with a spouse bolted on........

Some providers do increase with the amounts but some do not.  We are in a cycle where the ones currently coming top (and have been for a while) don't increase with the amount.

RogerPensionGuy

dunstonh said:

When I was chatting to that big UK insurance company I was under the impression they would do a whole of market search and we picked an outside organisation, the annuity/PLA offer would have a commission/fee inside the offer, so the outfit I use will get the 5K fee from me and the commission/fee from the product.

That would be a breach of FCA rules.    If advised (so on fee basis), the annuity rates will be the nil commission rates.   If non advised, then no fee but commission can be paid and the annuity rates reduced to reflect the commission taken.

Going back to early 2024 I was surprised that a product costing 100, 200, 300 or 400K was very fixed geared on value for me the customer, say 5, 10, 15 or 20K PA. I asked the IFAs why don't I get more % return for the 400K product as I may as well buy 4 X 100K products and value would be the same for me, obviously more hassle, but I did with this fixed gearing, maybe do some products fat say just ten years the spending years, then a medium time period and maybe one for life with a spouse bolted on........

Some providers do increase with the amounts but some do not.  We are in a cycle where the ones currently coming top (and have been for a while) don't increase with the amount.

Tks for information above. 

So in simple terms to keep costs and cash inbound flows best tor customer. 

If say wanting an annuity or PLA for say 100K cost on the open market, say it was Canada Life as best return, paying 5K fee to an IFA if advised customer would get essentially 5% chopped off the deal overall, getting same product via an IFA on a "non advised" and basis the IFA may get say 2K do customer only gets a 2% reduction.

If on the other hand getting a 1M annuity or PLA the advised IFA fee of 5K is only a chop of 0.5% of that 1M, but using a non advised IFA the chop would be 2% or 20K.

So I'm I'm correct on the above there's a value point at which customer gets better net outcomes as the purchase cost of the product goes up or down. 

So if the above is correct and my maths is okay, a product costing 250K is the neutral point where the lines cross.

So below 250K non advised is best customer option and above 250K an advised IFA route is best for customer.

Is all the above correct? 

QrizB

Someone (dunstonh?) recently suggested in a similar thread that the breakeven was somewhat less than £100k.

bjorn_toby_wilde

RogerPensionGuy said:

dunstonh said:

When I was chatting to that big UK insurance company I was under the impression they would do a whole of market search and we picked an outside organisation, the annuity/PLA offer would have a commission/fee inside the offer, so the outfit I use will get the 5K fee from me and the commission/fee from the product.

That would be a breach of FCA rules.    If advised (so on fee basis), the annuity rates will be the nil commission rates.   If non advised, then no fee but commission can be paid and the annuity rates reduced to reflect the commission taken.

Going back to early 2024 I was surprised that a product costing 100, 200, 300 or 400K was very fixed geared on value for me the customer, say 5, 10, 15 or 20K PA. I asked the IFAs why don't I get more % return for the 400K product as I may as well buy 4 X 100K products and value would be the same for me, obviously more hassle, but I did with this fixed gearing, maybe do some products fat say just ten years the spending years, then a medium time period and maybe one for life with a spouse bolted on........

Some providers do increase with the amounts but some do not.  We are in a cycle where the ones currently coming top (and have been for a while) don't increase with the amount.

Tks for information above. 

So in simple terms to keep costs and cash inbound flows best tor customer. 

If say wanting an annuity or PLA for say 100K cost on the open market, say it was Canada Life as best return, paying 5K fee to an IFA if advised customer would get essentially 5% chopped off the deal overall, getting same product via an IFA on a "non advised" and basis the IFA may get say 2K do customer only gets a 2% reduction.

If on the other hand getting a 1M annuity or PLA the advised IFA fee of 5K is only a chop of 0.5% of that 1M, but using a non advised IFA the chop would be 2% or 20K.

So I'm I'm correct on the above there's a value point at which customer gets better net outcomes as the purchase cost of the product goes up or down. 

So if the above is correct and my maths is okay, a product costing 250K is the neutral point where the lines cross.

So below 250K non advised is best customer option and above 250K an advised IFA route is best for customer.

Is all the above correct? 

Your slight link has turned into a whole new thread. Pretty sure the OP has tuned out

Ibrahim5

Yes you always get someone who goes off at a tangent and changes the nature of the thread. Hopefully the OP is busy disposing with the services of the IFA.