Personal pension advice

TeeDubya · 17 April 2018 at 5:16PM

Hi

I'm after some general personal pension advice. I was in a workplace pension with Aegon until a couple of years ago when I left to work for myself. I kept contributing to the Aegon pension but following advice from an IFA I moved it from a lifestyle univeral fund into about a dozen separate funds. These funds have higher fund changes but apparently perform better that the previous one.

A year on from that I thought I should get some further advice to see how the pension is doing. I contacted the previous guy who advised on the dozen funds. He now recommends I go for a managed pension with him and pay 1% amc and move it elsewhere for a further 2%. I went through unbiased and spoke with a couple of other people who said that they can help me but one wants 3% initial followed by 1% amc. I also spoke with a prudential adviser who said that it would be 2% transfer in and 1.2% amc.

I'm pretty confused by it all and also a bit mistrusting. I'm not competent enough in this area to want to manage my own pension so I'm happy for someone else to do it but am wary of getting bad advice, not getting value for money or frankly getting ripped off.

Does this ring true for anyone else out there. Can anyone offer me some advice or recommendations as to what to do?

Thanks

Brynsam · 17 April 2018 at 6:06PM

A year is a very short time in pensions, so moving funds so soon after you've set up these funds is quite a strange thing to do, unless there are really good reasons for a change of direction. Ask him why he is now suggesting you change again.

dunstonh · 17 April 2018 at 6:10PM

I kept contributing to the Aegon pension but following advice from an IFA I moved it from a lifestyle univeral fund into about a dozen separate funds.

Was that proper advice (written report etc) or man-down-the-pub style advice?

I contacted the previous guy who advised on the dozen funds. He now recommends I go for a managed pension with him and pay 1% amc and move it elsewhere for a further 2%.

Has his status changed? A lot of IFAs have been giving up their IFA status to go restricted. Many of these restricted models have own-brand funds. These are usually best avoided as they rarely offer value for money.

I'm happy for someone else to do it but am wary of getting bad advice, not getting value for money or frankly getting ripped off.

Advisers deal with 3.2 million customers a year. Yet the FOS only have around 2500 complaints a year against IFAs. So, the odds of getting bad advice are low.

However, if you use a restricted FA rather than an IFA you are less likely to get value for money if they only offer their own in-house funds. If you use an IFA, they typically deal with larger investors and some may price smaller investors more expensively (to act as a passive blocker).

Whilst ongoing servicing is optional, you tend to find IFAs will use model portfolios only if there is an ongoing service. This is because more ongoing work is required. If you go transactional (one off advice) then you are more likely to end up in a simple solution that is cheap but offers less potential than a model portfolio.

zagfles · 17 April 2018 at 6:28PM

TeeDubya wrote: »

Hi

I'm after some general personal pension advice. I was in a workplace pension with Aegon until a couple of years ago when I left to work for myself. I kept contributing to the Aegon pension but following advice from an IFA I moved it from a lifestyle univeral fund into about a dozen separate funds. These funds have higher fund changes but apparently perform better that the previous one.

A year on from that I thought I should get some further advice to see how the pension is doing. I contacted the previous guy who advised on the dozen funds. He now recommends I go for a managed pension with him and pay 1% amc and move it elsewhere for a further 2%. I went through unbiased and spoke with a couple of other people who said that they can help me but one wants 3% initial followed by 1% amc. I also spoke with a prudential adviser who said that it would be 2% transfer in and 1.2% amc.

I'm pretty confused by it all and also a bit mistrusting. I'm not competent enough in this area to want to manage my own pension so I'm happy for someone else to do it but am wary of getting bad advice, not getting value for money or frankly getting ripped off.

Does this ring true for anyone else out there. Can anyone offer me some advice or recommendations as to what to do?

Thanks

You're right to be skeptical. He suggests a complete charge of direction after one year? For which he'll charge you 2%??!! Ask him why his advice of a year ago was so wrong. Or have circumstances changed dramatically?

zagfles · 17 April 2018 at 6:30PM

dunstonh wrote: »

Advisers deal with 3.2 million customers a year. Yet the FOS only have around 2500 complaints a year against IFAs. So, the odds of getting bad advice are low.

Do you really think every bit of bad advice results in a complaint? Quite often people won't even know they've been given bad advice.

dunstonh · 17 April 2018 at 8:12PM

zagfles wrote: »

Do you really think every bit of bad advice results in a complaint? Quite often people won't even know they've been given bad advice.

I sure your comment is very helpful to the OP. Keep it up.

zagfles · 17 April 2018 at 9:52PM

dunstonh wrote: »

I sure your comment is very helpful to the OP. Keep it up.

I will. To expand on the point, and perhaps be even more helpful: I don't believe the proportion of complaints can in any way reflect the proportion of bad advice given for the following reason.

For a customer to put in a complaint of bad advice, the customer would need to know, or at least strongly believe the advice was bad. Except in the most glaringly obvious of cases, that would require the customer to have sufficient knowledge to make a judgement that it was bad, that an alternative approach would have been better, and that the IFA should have taken that approach and their reasons for thinking so (without using the benefit of hindsight).

If the customer had such knowledge, they wouldn't have needed the advice in the first place!

TeeDubya · 18 April 2018 at 9:27AM

Perhaps I'm doing this guy an injustice. I believe the reason was that the existing advice was based on keeping the funds within Aegon to save the costs of transfer elsewhere. The following advice was considering moving to better funds outside of Aegon.

I'm curious about what you say about moving the funds after only a year. The reading and general advice I read about suggests that you should regularly keep an eye on funds to make sure that hey are performing and if not then switch them. Isn't this part of the service that an IFA offers?

TeeDubya · 18 April 2018 at 10:58AM

Thanks dunstonh

He was the real deal rather than bloke down the pub, although I do have a couple of mates at the local that I can trust whether the advice is totally professional or not.

I'm interested to know what you mean by a simple solution for one off advice rather than a model portfolio.

dunstonh · 18 April 2018 at 11:08AM

I'm curious about what you say about moving the funds after only a year. The reading and general advice I read about suggests that you should regularly keep an eye on funds to make sure that hey are performing and if not then switch them. Isn't this part of the service that an IFA offers?

Reviews result in changes. The weightings in each fund can be x% one year but y% the next. Also, you may get the odd fund that you feel needs changing.

However, what you describe is a wholesale change of strategy from using single sector funds to using a multi-asset fund. Now this could be down to your wording or our interpretation. I read "managed pension with him" to be multi-asset using in-house funds. However, based on your latest post, it may be that the strategy is going to remain multiple single sector funds but just with a new provider. That may well make sense as the workplace schemes are typically limited in what they offer and most do not give the IFA access to the data and fund details. So, if the adviser is being employed to provide the advice, they will usually want it with a provider that deals with IFAs.

I'm interested to know what you mean by a simple solution for one off advice rather than a model portfolio.

IFAs can provide one off advice or ongoing advice. When the advice is one off, you are likely to end up with more simple options, like a single multi-asset fund. We find our model portfolio has higher returns than most multi-asset funds but we still use multi-asset funds for people that dont want ongoing advice. Some prople are cost focused. Some are returns focused. Its a case of catering for all types.

OldMusicGuy · 18 April 2018 at 11:46AM

Several thoughts here:

- What are your investment objectives? That's the most important thing to define. If you don't do that you will be easily swayed by someone saying "this option is better than what you are doing now". Chopping and changing all the time is not a good strategy and will be expensive.

- If your strategy is growth in your pension pot, a higher risk investment strategy could be the way forward. In that circumstance, using an IFA could make sense if you don't want to pick the funds yourself.

- If your strategy is protecting the gains you have made, then low cost investing using multi-asset funds like Vanguard Lifestrategy could make sense. This is what I am doing. I have just retired and am looking to protect my pot and only want minimal growth. So my strategy is low cost and defensive.

- You said the IFA you worked with said his choices would outperform the Aegon fund. Did they, and by how much? You can look at how the Aegon fund performed on a site like Trustnet or Hargreaves Lansdown. How much better/worse did that fund do compared to your pension pot over the last year? That might help you gauge how good the initial advice was.

- Like others said, you need to question your previous IFA and ask why the recommended strategy has changed so drastically. That does not sound good to me. Like Dunstonh said, there may be some tweaking and rebalancing of funds but a wholesale change after one year sounds like a bad idea to me, unless there is a really good reason. Again, Dunstonh's advice is good - has this guy become a tied FA and is therefore trying to sell you a new bunch of stuff for no other reason than he has effectively changed jobs?

- Do some reading and educate yourself. Go to sites like Monevator and read on this forum about multi-asset passive funds so that you can understand the difference between a more actively managed portfolio and low cost investing.

Hopefully that will give you better grounds for making a decision.

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