Fee for IFA

wjr4

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?

Firstly ask for the client agreement which will show fees. 

dbrookf

Managed to negotiate down to 1.3% from 2% (£9k instead of £15k 🫣) and the IFA tells us her fees are £300 per hour. Ah well, you live and learn.

dunstonh

dbrookf said:

Managed to negotiate down to 1.3% from 2% (£9k instead of £15k 🫣) and the IFA tells us her fees are £300 per hour. Ah well, you live and learn.

£9k is still outrageous, in my opinion.  its more than double our decency cap.

dbrookf

IvanOpinion said:

What does the 1.3% cover? I would be expecting that to cover IFA, platform and OCF charges - and even then would consider it to be high.

“ Initial Advice Charges

There are initial charges in relation to our advice, and the implementation of the annuities “

Bostonerimus1

dbrookf said:

Managed to negotiate down to 1.3% from 2% (£9k instead of £15k 🫣) and the IFA tells us her fees are £300 per hour. Ah well, you live and learn.

I’m in the US so my experience isn’t really relevant, but I can buy an annuity directly from the insurance company for no upfront fees and the payout rate is higher than I see on the H&L rates summary page. What is common practice in one place would be an outrage in another.

dunstonh

Bostonerimus1 said:

dbrookf said:

Managed to negotiate down to 1.3% from 2% (£9k instead of £15k 🫣) and the IFA tells us her fees are £300 per hour. Ah well, you live and learn.

I’m in the US so my experience isn’t really relevant, but I can buy an annuity directly from the insurance company for no upfront fees and the payout rate is higher than I see on the H&L rates summary page. What is common practice in one place would be an outrage in another.

In the UK, it was deemed that the commission factored into products gave a worse outcome than a fee.

UK annuities use gilts.  I doubt US annuities use Gilts.

QrizB

Bostonerimus1 said:

dbrookf said:

Managed to negotiate down to 1.3% from 2% (£9k instead of £15k 🫣) and the IFA tells us her fees are £300 per hour. Ah well, you live and learn.

I’m in the US so my experience isn’t really relevant, but I can buy an annuity directly from the insurance company for no upfront fees and the payout rate is higher than I see on the H&L rates summary page. What is common practice in one place would be an outrage in another.

US annuity rates are (or seem to be) generally higher than UK ones. I suspect this is a reflection of lower US life expectancy.

RogerPensionGuy

dbrookf said:

Managed to negotiate down to 1.3% from 2% (£9k instead of £15k 🫣) and the IFA tells us her fees are £300 per hour. Ah well, you live and learn.

9K at say £300 per hour is 30 hours work to achieve an annuity product for a customer already paying on drip.

I didn't think an experienced IFA would need 30 hours to achieve the above. 

Going on the above, an IFA doing just 10 similar annuities a year getting 90K sure could have a good golf handicap and has 42 weeks to pick the holidays.

MarkCarnage

US annuities will use Treasury Bonds plus $ credit.
Better rates probably reflect lower US life expectancy. 

Bostonerimus1

dunstonh said:

Bostonerimus1 said:

dbrookf said:

Managed to negotiate down to 1.3% from 2% (£9k instead of £15k 🫣) and the IFA tells us her fees are £300 per hour. Ah well, you live and learn.

I’m in the US so my experience isn’t really relevant, but I can buy an annuity directly from the insurance company for no upfront fees and the payout rate is higher than I see on the H&L rates summary page. What is common practice in one place would be an outrage in another.

In the UK, it was deemed that the commission factored into products gave a worse outcome than a fee.

UK annuities use gilts.  I doubt US annuities use Gilts.

The general account that funds the annuity contracts for my life insurance company is invested in public and private bonds, some mortgages, real estate, private equity and natural resources. The insurance part of the company is regulated at the state level.