Restrictive Advice

Mr_Benn

Hi all.  Ive just started talking with a Financial Adviser regarding my retirement pensions / annuities. 

She was recommended to me by a friend, which is usually good.  Im fairly savvy having read so much on here, but I also understand that good advice can be worth more than the fees paid to a professional. 

When I asked if she is an Independent, she said that she uses 'Restricted Advice', as she ultimately works for a company called Quilter. (but she also added something about that they can still use 'all of the market').  Ive read some articles since about them, they are obviously a big firm, and it seems that all their advisors are now Restrictive'.  It doesnt seem to list anywhere what companies are in their restrictive list.  

If Im looking for an advisor for an Annuity, should I really be looking for an IFA, or will the differences on say a £40k Annuity probably not make much difference ? She said that they will charge 3% after any tax free cash sum is taken.  Does that sound high ?  

El_Torro

3% does sound high to me, it should be between 1% and 3%. When you say the annuity is worth £40k, is that the total sum of the pot? If so it doesn't surprise me that a Financial Advisor would charge on the high end for a small pot. 

You won't find many people on this forum advocating for a Financial Advisor rather than an IFA. Probably doesn't make such a big difference when buying an annuity though.

dunstonh

 If Im looking for an advisor for an Annuity, should I really be looking for an IFA, or will the differences on say a £40k Annuity probably not make much difference ? She said that they will charge 3% after any tax free cash sum is taken.  Does that sound high ?  

Lifetime Annuities are a bit of an anomaly: they require investment-level permissions to provide advice on them, but are insurance products, not investment products.  So, most restricted models (where investments are restricted, like Quilter) will go whole-of-market on annuities.

With a small fund value of £40k,  a 3% charge seems reasonable (relative to that fund value).   You can get cheaper, but realistically,  £40k is not IFA territory unless the IFA is quiet at the moment and the difference between a few hundred pounds in fees is not going to make much of a difference to the annuity rate.

Mr_Benn

Thank you both for the replies. 

Yes the pot for this Annuity is only about £40-50k.  My plan is to just have my bills and annual spend covered by the State Pension, plus a small DB and this Annuity. 

I guess I can wait to see what she comes back with regarding the Annuity, then compare that with what I can get using the calculator on the Moneyhelper website and then going direct to their top picks. 

dunstonh

I guess I can wait to see what she comes back with regarding the Annuity, then compare that with what I can get using the calculator on the Moneyhelper website and then going direct to their top picks. 

Most of the annuity providers dont allow you to buy direct from them.  And if they do, they will include  a commission that is often higher than the fee an adviser will make.  Although in the case of £40k, that is unlikely.  It is more likely to be similar or slightly lower. 

af1963

If you get specific quotes from the online sites which offer to arrange annuities  - e.g. Hargreaves Lansdown, Retirement Line - these will give you personal figures to compare against the FA, not just generic rates.  Those quotes will  also remain valid for several weeks, so you can choose to go with them if rates have fallen in the interim, or you can get new quotes if rates have risen.

ali_bear

Damn - I thought this could be a new thread about some new form of BDSM practice   

Fermion

af1963 said:

If you get specific quotes from the online sites which offer to arrange annuities  - e.g. Hargreaves Lansdown, Retirement Line - these will give you personal figures to compare against the FA, not just generic rates.  Those quotes will  also remain valid for several weeks, so you can choose to go with them if rates have fallen in the interim, or you can get new quotes if rates have risen.

Also the quotes are commission free - (viz. there is commission but it's paid directly by the annuity provider to the broker, not from your pension pot - typically about £4K in the case of HL)

dunstonh

Fermion said:

af1963 said:

If you get specific quotes from the online sites which offer to arrange annuities  - e.g. Hargreaves Lansdown, Retirement Line - these will give you personal figures to compare against the FA, not just generic rates.  Those quotes will  also remain valid for several weeks, so you can choose to go with them if rates have fallen in the interim, or you can get new quotes if rates have risen.

Also the quotes are commission free - (viz. there is commission but it's paid directly by the annuity provider to the broker, not from your pension pot - typically about £4K in the case of HL)

However, that commission is paid by lowering the annuity rate.  
In theory, a fee of £x and commission of £x would result in the same outcome.   4x5 vs 5x4.
However, having run commission vs fee quotes a number of times on executon only cases, using the same monetary amount, the fee option comes in slightly better. (on 40k ish, it wouldn't be enough to worry about).

Fermion

dunstonh said:

Fermion said:

af1963 said:

If you get specific quotes from the online sites which offer to arrange annuities  - e.g. Hargreaves Lansdown, Retirement Line - these will give you personal figures to compare against the FA, not just generic rates.  Those quotes will  also remain valid for several weeks, so you can choose to go with them if rates have fallen in the interim, or you can get new quotes if rates have risen.

Also the quotes are commission free - (viz. there is commission but it's paid directly by the annuity provider to the broker, not from your pension pot - typically about £4K in the case of HL)

However, that commission is paid by lowering the annuity rate.  
In theory, a fee of £x and commission of £x would result in the same outcome.   4x5 vs 5x4.
However, having run commission vs fee quotes a number of times on executon only cases, using the same monetary amount, the fee option comes in slightly better. (on 40k ish, it wouldn't be enough to worry about).

Interesting that both myself and my wife have both just arranged Joint Life Annuities with L&G for £300K and £175K respectively. In both cases the HL Commission was £4998. I just wonder if HL have agreed a fixed -price commission fee with L&G for Annuities above a particular value??

dunstonh

Interesting that both myself and my wife have both just arranged Joint Life Annuities with L&G for £300K and £175K respectively. In both cases the HL Commission was £4998. I just wonder if HL have agreed a fixed -price commission fee with L&G for Annuities above a particular value??

And for context, I did one last month for over £440k with a £2200 fee.

The commission being the same in both is possibly because they use a percentage for the commission, but set a maximum cap.      Commission is nearly always based on a percentage, but decency caps are increasingly common.

In your case, using a local IFA to you would have almost certainly yielded a better annuity rate, as what you paid in commission is very expensive.