Pension adviser charges, pros and cons

itm2

We've just been talking to a pension adviser (sourced from unbiased.co.uk) regarding my wife's assorted pension schemes. She has 4 DÇ schemes which are worth c£98k collectively (two of them are worth less than £3.5k each). The largest pot is with Aviva (c£77k), then Clerical Medical/Scottish Widows (c£16k).
My wife has just turned 60, and is in no immediate need of a pension income as (a) I pay the bills, (b) we pay no rent or mortgage and (c) she has rental income from a flat which covers her annual spending.
I am retired, and manage our other retirement funds myself (including a SIPP, ISA and various unwrapped savings accounts).
The adviser has checked out the existing pension schemes for guarantees/benefits/fees etc which would make it unwise to transfer out, and has found nothing, so he is recommending consolidating all of the schemes into a new pension which he would recommend. He is self-employed, and would shop around for a product/platform amongst existing providers. I have no idea who these providers might be.
The adviser has quoted an initial cost of 2% (so around £2k) for the initial setup (research, admin, arranging the transfers, etc). This would be deducted directly from the pension fund. Then an ongoing annual charge of around 0.7-0.85% for management of the portfolio (which would be done by whichever product provider he recommended). This was based on our preference for a medium risk investment strategy, based on ethical investments, with a blend of active and passive management. I asked him whether this ongoing charge would include all investment management/platform charges from the chosen provider, and he said that it would.
My wife quite likes the idea of her pensions being independently managed, mainly because she has no interest in finance, but also because she would be able to deal with the pension provider directly in the event that anything happens to me. She would not be confident about tackling the various investments/platforms that I currently manage. I am also leaning towards the idea, partly because it also offers diversity from whatever choices I make in the investment of our other retirement funds. Not necessarily diversity in terms of the actual investments, but in terms of the way the pot is managed and the blend of investment types.

I was wondering whether anyone had any views/feedback/advice about the wisdom of following this approach, and the 0.7-0.85% ongoing fees?

flaneurs_lobster

If you're happy with the advisor's proposals then why not let him manage your portfolio too?

itm2

flaneurs_lobster said:

If you're happy with the advisor's proposals then why not let him manage your portfolio too?

(a) I'm not sure how happy I am with his proposals - in particular the 0.7-0.85% fees, and 
(b) 0.7-0.85% of my portfolio would be ALOT more money

flaneurs_lobster

itm2 said:

flaneurs_lobster said:

If you're happy with the advisor's proposals then why not let him manage your portfolio too?

(a) I'm not sure how happy I am with his proposals - in particular the 0.7-0.85% fees, and 
(b) 0.7-0.85% of my portfolio would be ALOT more money

That's rather what I meant, you seem OK-ish with the advisor's suggestions (maybe haggle about the fees) when he's only dealing with your wife's, shall we say, modest sums but he's clearly not up to managing a proper Big Boy's Pension. 

Dazed_and_C0nfused

itm2 said:

flaneurs_lobster said:

If you're happy with the advisor's proposals then why not let him manage your portfolio too?

(a) I'm not sure how happy I am with his proposals - in particular the 0.7-0.85% fees, and 
(b) 0.7-0.85% of my portfolio would be ALOT more money

But the 0.7-0.85% is probably connected, to some degree, to the size of the pot(s) being managed.

A much bigger pot would likely attract a reduced fee.  Which may still not be attractive to you of course.

I'm sure our resident IFA cheerleader will be laying with some sage advice in due course 😉

HedgehogRulez

IFAs aren’t worth giving the time of day 😗

dunstonh

The adviser has checked out the existing pension schemes for guarantees/benefits/fees etc which would make it unwise to transfer out, and has found nothing, so he is recommending consolidating all of the schemes into a new pension which he would recommend. He is self-employed, and would shop around for a product/platform amongst existing providers. I have no idea who these providers might be.

Most IFA firms are small with 1-5 advisers. So, a self employed adviser is quite normal if its an IFA.

The IFA probably knows exactly who they will be placing it with as they will be doing it daily and will be spotting trends and changes constantly.

The adviser has quoted an initial cost of 2% (so around £2k) for the initial setup (research, admin, arranging the transfers, etc). This would be deducted directly from the pension fund. Then an ongoing annual charge of around 0.7-0.85% for management of the portfolio (which would be done by whichever product provider he recommended).

 I asked him whether this ongoing charge would include all investment management/platform charges from the chosen provider, and he said that it would.

Is the adviser is doing it on transactional basis and there is no ongoing advice charge?

ESG investing is more expensive than conventional and managed funds would increase the charges.  Add the platform charge and TC in (most ignore TC but advisers have to disclose it)

My wife quite likes the idea of her pensions being independently managed, mainly because she has no interest in finance, but also because she would be able to deal with the pension provider directly in the event that anything happens to me.

With ongoing servicing, your wife would normally go to the adviser.    So, again, this hints at transactional advice rather than ongoing.

(a) I'm not sure how happy I am with his proposals - in particular the 0.7-0.85% fees, and 
(b) 0.7-0.85% of my portfolio would be ALOT more money

With your criteria, you have increased the charges.  ie. ESG investing and hybrid.   
The adviser follows your investment instructions.  So, you may need to reconsider that.

DT2001

I would be asking for a breakdown of the 0.7-0.85% fees. The IFA company we have just left were looking to increase our annual fee to in effect 0.8% (as there is an upper limit) on a much larger total portfolio. They were going to use a low cost platform (0.16%) and a passive fund (0.34%). So about 1.3% in total. The ESG and active options were more costly.

If something happens to you who will manage your investments? 

I have adopted a 2/3 ETF portfolio. Fidelity havé fixed fees for ETF holdings in SIPP £90  - combined with passive funds charges of about 0.2%.

I read lots on this forum, Monevator (Investment portfolios), twoetfs, Lars Kroijer and YouTube videos by James Shack. There are quite a few simple options.

 I am in the midst of completing a breakdown of my plan so that my OH or one of the adult children can take on the process of decumulation. It will be simple. It won’t maximise the return however it will achieve the goals and not be too time consuming. The caveat is that I am willing to take transactional advice if circumstances change.

dunstonh

I would be asking for a breakdown of the 0.7-0.85% fees. The IFA company we have just left were looking to increase our annual fee to in effect 0.8% (as there is an upper limit) on a much larger total portfolio. They were going to use a low cost platform (0.16%) and a passive fund (0.34%). So about 1.3% in total. The ESG and active options were more costly.

0.34% doesn't sound passive.  0.08 to around 0.15% would be the ballpark for actual tracker funds held. 
0.2x% would be closer for multi-asset or MPS portfolios with underlying passive funds
0.34% sounds more like hybrid (mix of active and passive).

However, there are some FAs or wealth management firms with passive options that are more expensive.   So, it could be one of those.

Cobbler_tone

itm2 said:

The adviser has checked out the existing pension schemes for guarantees/benefits/fees etc which would make it unwise to transfer out, and has found nothing, so he is recommending consolidating all of the schemes into a new pension which he would recommend. He is self-employed, and would shop around for a product/platform amongst existing providers. I have no idea who these providers might be.

A question...and not a leading one as I don't know the answer!

If you trust the information that there is nothing to stop you/lose from transferring out. Will an IFA have access to any better products/investment funds that you could find yourself?
Surely if the income isn't that important, you could lump it all into one and either buy an annuity, draw it down or do whatever you want to do a lot easier. It doesn't sound like you are aiming to try and convert it into a million. 

Albermarle

As already said it would be useful to see a breakdown of the annual charge.

An ongoing financial advisor fee would typically be about 1% a year for a £100k pot.
Then plus pension provider fees and investment fees.

Maybe you have declined ongoing advice from the advisor, and are just paying the one off 2% to set the new pension up?