IFA setting up a pension

Andymac1987 · 25 May 2018 at 3:52PM

Hi all,
I would be very grateful for your help.
I am a self employed dentist and have recently tasked an IFA with helping me set up a private pension.
After our initial consultation, he has come back to me today with an Aviva pension I was actually looking in to myself before I sort his advice, and is applying an initial charge of £3160 with an ongoing 0.75% charge yearly.

Is this fee reasonable?
Based on the limited information I've provided, is there anything stopping me backing out and setting this up myself or is an advisor really necessary?

It just seems a lot for me to pay when I would have ended up at the same destination anyway?
Many thanks for your help.

Brynsam · 25 May 2018 at 4:38PM

Ask him what he's doing for that fee that you couldn't do for yourself - and point out that you had already looked at that fund for yourself.

Check what you are contractually obliged to pay him; if he's done a fact find etc then it is not unreasonable that he should be paid for his professional time.

I'm sure others will ask this, but do you do any NHS work? If so, have you joined the NHS pension scheme in respect of that?

Andymac1987 · 25 May 2018 at 5:00PM

Thanks for your reply.

Yes I have worked in the NHS but have recently joined a fully private practice so no longer pay in to my NHS pension.

I don't seem to have signed a contract with respect to his charges, indeed presenting me with the Aviva keyfacts was the first time I saw his fee and was expecting half that. I fully expect to remediate a professional for their time, and he has gained commison on changing my critical illness and professional insurance (which I also have some issues with).

If his fee is about normal for this sort of work, and his ongoing fee reflects some work behind the scenes to manage my portfolio in a way that I couldn't, I'd be happy to pay up and carry on with it, otherwise I feel like cancelling his during the cooling off period and just doing it myself. Is it reasonable to set up one's own pension?

Thanks again!

zagfles · 25 May 2018 at 5:18PM

If it's just the Aviva stakeholder or personal pension, you can get that via Cavendish for a £35 setup fee and around 0.4% or so annual charge (depending on fund size), see https://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/

dunstonh · 25 May 2018 at 6:03PM

After our initial consultation, he has come back to me today with an Aviva pension I was actually looking in to myself before I sort his advice, and is applying an initial charge of £3160 with an ongoing 0.75% charge yearly.

That is a high fee for just setting up a new personal pension. The ongoing is fair enough if you are using more advanced investment options but the initial is high.

is there anything stopping me backing out and setting this up myself or is an advisor really necessary?

An adviser is not necessary just like a dentist isnt. The key is to knowing what you are doing. If you want to DIY and DIY well, then you can save money. If you DIY badly, it can cost you more money.

It just seems a lot for me to pay when I would have ended up at the same destination anyway?

What destination will that be?

therwise I feel like cancelling his during the cooling off period and just doing it myself.

Do be aware that cancelling within the cancellation rights period avoids provider fees (which Aviva have no initial fees) but still leaves you liable for the advice fee.

sandsy · 25 May 2018 at 10:09PM

It's a dodgy IFA who doesn't give you charges information at the first meeting - it's actually a regulatory requirement!

Don't proceed with the product purchase with the idea of cancelling - as soon as you tell him to proceed, you'll be liable for his fee.

Andymac1987 · 26 May 2018 at 9:40AM

Many thanks for everyone's reply, you've all been immensely helpful.

I think I need to go back to him and explain the fees weren't discussed at the start and they were higher than I expected, and that I don't understand the benefit in going though him. Looking at what the advisor charges equate to over time is shocking!

Can anyone tell me if there is any reason why I shouldn't just go direct to Aviva, and what is the advantage of going through a broker like Cavendish or this IFA. He mentioned he "monitors" the fund but wouldn't that be done by the Aviva fund manager?

Thanks for your help again and sorry for my ignorance!

zagfles · 26 May 2018 at 10:26AM

Andymac1987 wrote: »

Many thanks for everyone's reply, you've all been immensely helpful.

I think I need to go back to him and explain the fees weren't discussed at the start and they were higher than I expected, and that I don't understand the benefit in going though him. Looking at what the advisor charges equate to over time is shocking!

Can anyone tell me if there is any reason why I shouldn't just go direct to Aviva, and what is the advantage of going through a broker like Cavendish or this IFA. He mentioned he "monitors" the fund but wouldn't that be done by the Aviva fund manager?

Thanks for your help again and sorry for my ignorance!

I don't think Aviva sell their pensions direct, you have to go through a middleman, eg an IFA or a broker.

tacpot12 · 26 May 2018 at 11:00AM

"Monitoring" the fund is a not worth 0.75% pa. You can either
- pay for discretionary management of your portfolio (i.e. you give the IFA the right to decide what to invest in),
- pay for a regular review of the portfolio.
- manage the portfolio yourself with no professional support.

If you are a novice investor, you might want to pay for a full discretionay management service, or if you are somewhat confident but want to have an IFA undertake a regular (e.g. annual) review you might want to retain the IFA for this. 0.75% is cheap for a discretionary management service, but too much for an annual review.

dunstonh · 26 May 2018 at 11:39AM

Looking at what the advisor charges equate to over time is shocking!

However, be aware that if the adviser is running a bespoke portfolio then the returns could be higher as well. I gave someone an example of our portfolio after charges vs a low cost option and it had returned almost double the low cost option.

Charges always need to be in context. If you are put in a cheap fund then it doesn need ongoing servicing (unless you have other advice events). If you are in a bespoke portfolio it does.

Can anyone tell me if there is any reason why I shouldn't just go direct to Aviva, and what is the advantage of going through a broker like Cavendish or this IFA.

Aviva's direct product has a higher charge than the IFA version. If you use Cavendish, you get the early 2000s product versions that do not support the pension freedoms of 2015 and are more expensive than their current product version.

He mentioned he "monitors" the fund but wouldn't that be done by the Aviva fund manager?

No. Pension providers have no input on the investment selection. You either self-select, use the default (which tends to be a middle of the road fund easily beaten) or your adviser picks them.

bostonerimus · 26 May 2018 at 12:18PM

What would your IFA be doing for that 0.75%? Aviva has a fee schedule for "managing" your pension which is around 0.35% up to 200k and then you'll be paying fund fees too which are 0.35% for one of their ready made funds so you are looking at a headwind of about 1.5% for a pretty simple pension.........no wonder UK investors often think the system is rigged.....because it is. Everyone gets a pound of your flesh.

As a comparison on my US equivalent of a private pension with Vanguard I pay 0.04% a year in fees.

Now if the fees you pay provide you with convenience you might think they are worth it, but they cannot be guaranteed to provide you with superior returns. Of course the industry that gets those fees has to justify them, and it's up to you to judge the validity of those justifications.

IFA setting up a pension

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