Fee for IFA

dbrookf

We’re currently going through a purchase of an annuity with our IFA. We assumed this would be part of the 2% fee we pay him annually but there seems to be an extra substantial “ initial charges in relation to our advice, and implementation” of 2%! Is this normal because it amounts to £15k?

dunstonh

We assumed this would be part of the 2% fee we pay him annually 

Are you sure you pay the adviser 2% p.a.?   That is ridiculously high fee and way above the typical range of 0.x% to 1%.  I am not even sure that providers would allow a 2% ongoing charge (I know some will have a maximum below that).

 but there seems to be an extra substantial “ initial charges in relation to our advice, and implementation” of 2%! Is this normal because it amounts to £15k?

Annuities are a transactional product and a fee for arranging one is normal.     Typically, 1-2% is a common ballpark but often you see tapering or caps on the monetary amount to stop the amount being obscene.     This can lead the overall percentage being lower where caps and tapering are used.     If your fee is showing as £15,000 then that is obscene.   £1500 for an annuity purchase is more ballpark expectation.

If you are using a non-advised annuity purchase service that is paying commission, then these are usually uncapped and not tapered and can lead to obscene amounts.

Whatever it is, if the monetary amount is £15,000 then you are paying around 10x more than you need to.

Marcon

dbrookf said:

We’re currently going through a purchase of an annuity with our IFA. We assumed this would be part of the 2% fee we pay him annually but there seems to be an extra substantial “ initial charges in relation to our advice, and implementation” of 2%! Is this normal because it amounts to £15k?

Are you sure this is an independent financial adviser...? They'd be out of business in no time with charges at this level, because anyone with any sense would soon go elsewhere.

Bostonerimus1

Those fees sound extortionate.

Ibrahim5

£15k will be about 'ballpark'. They do have a form forms to fill out. That's not cheap. And they have insurance to pay also.

MallyGirl

Ibrahim5 said:

£15k will be about 'ballpark'. They do have a form forms to fill out. That's not cheap. And they have insurance to pay also.

this is not helpful. Your dislike of IFAs is well known but @dunstonh post above indicate that these fees are not ballpark.

dbrookf

dunstonh said:

We assumed this would be part of the 2% fee we pay him annually 

Are you sure you pay the adviser 2% p.a.?   That is ridiculously high fee and way above the typical range of 0.x% to 1%.  I am not even sure that providers would allow a 2% ongoing charge (I know some will have a maximum below that).

 but there seems to be an extra substantial “ initial charges in relation to our advice, and implementation” of 2%! Is this normal because it amounts to £15k?

Annuities are a transactional product and a fee for arranging one is normal.     Typically, 1-2% is a common ballpark but often you see tapering or caps on the monetary amount to stop the amount being obscene.     This can lead the overall percentage being lower where caps and tapering are used.     If your fee is showing as £15,000 then that is obscene.   £1500 for an annuity purchase is more ballpark expectation.

If you are using a non-advised annuity purchase service that is paying commission, then these are usually uncapped and not tapered and can lead to obscene amounts.

Whatever it is, if the monetary amount is £15,000 then you are paying around 10x more than you need to.

Sorry our IFA charges 1% p.a.! Thanks for your reply- much appreciated. We’re going back to our IFA for explanations.  Can I ask you another question please - do the fees typically come from the tax-free cash or the actual annuity payment therefore reducing the annual annuity value?

dunstonh

Can I ask you another question please - do the fees typically come from the tax-free cash or the actual annuity payment therefore reducing the annual annuity value?

Choice is available although some providers limit options.

Ideally, you want the fee to come from the 75% element rather than the 25% TFC.  Some providers, but not all, support that.
Some will take it from the transfer value received and then split the residual balance 75/25.
Alternatively, you can pay out of the 25% element but that is likely to be the worst option.

With commission based sales, they don't take the commission out of the put but they reduce the annuity rate.  Advised sales cannot be on commission.  Only direct to provider or website style sales can.

artyboy

Ibrahim5 said:

£15k will be about 'ballpark'. They do have a form forms to fill out. That's not cheap. And they have insurance to pay also.

Remind me, what was that film, the one with Bill Murray, the one where he had to put up with the same tedious nonsense over and over and over again? To the point where he felt like stepping in front of a bus? And even then it Just. Didn't. Stop.

Asking for an IFA friend...

dbrookf

dunstonh said:

We assumed this would be part of the 2% fee we pay him annually 

Are you sure you pay the adviser 2% p.a.?   That is ridiculously high fee and way above the typical range of 0.x% to 1%.  I am not even sure that providers would allow a 2% ongoing charge (I know some will have a maximum below that).

 but there seems to be an extra substantial “ initial charges in relation to our advice, and implementation” of 2%! Is this normal because it amounts to £15k?

Annuities are a transactional product and a fee for arranging one is normal.     Typically, 1-2% is a common ballpark but often you see tapering or caps on the monetary amount to stop the amount being obscene.     This can lead the overall percentage being lower where caps and tapering are used.     If your fee is showing as £15,000 then that is obscene.   £1500 for an annuity purchase is more ballpark expectation.

If you are using a non-advised annuity purchase service that is paying commission, then these are usually uncapped and not tapered and can lead to obscene amounts.

Whatever it is, if the monetary amount is £15,000 then you are paying around 10x more than you need to.

“If your fee is showing as £15,000 then that is obscene“. Being rather a novice in all this, how would you suggest me addressing the obvious over inflated fee with them? Could I quote your more ballpark expectation?

Marcon

dbrookf said:

dunstonh said:

We assumed this would be part of the 2% fee we pay him annually 

Are you sure you pay the adviser 2% p.a.?   That is ridiculously high fee and way above the typical range of 0.x% to 1%.  I am not even sure that providers would allow a 2% ongoing charge (I know some will have a maximum below that).

 but there seems to be an extra substantial “ initial charges in relation to our advice, and implementation” of 2%! Is this normal because it amounts to £15k?

Annuities are a transactional product and a fee for arranging one is normal.     Typically, 1-2% is a common ballpark but often you see tapering or caps on the monetary amount to stop the amount being obscene.     This can lead the overall percentage being lower where caps and tapering are used.     If your fee is showing as £15,000 then that is obscene.   £1500 for an annuity purchase is more ballpark expectation.

If you are using a non-advised annuity purchase service that is paying commission, then these are usually uncapped and not tapered and can lead to obscene amounts.

Whatever it is, if the monetary amount is £15,000 then you are paying around 10x more than you need to.

“If your fee is showing as £15,000 then that is obscene“. Being rather a novice in all this, how would you suggest me addressing the obvious over inflated fee with them? Could I quote your more ballpark expectation?

One possible way is to express mild(!) surprise and ask them how many man hours it will take, and at what rate, to accomplish the task in question; and where the non-labour costs bring the figure up to £15K.