SIPP IFA management fees

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Its_mine
Its_mine Posts: 2 Newbie
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in Pensions, annuities & retirement planning
Is £15,000 per year a reasonable fee to pay to an IFA for managing a SIPP, with a current transfer value of £1 million ?
I was taken back a bit when the 1.5% fee is calculated and presented in pounds, and the reality that this is paid irrespective of whether the fund makes gains per annum or not.
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  • greatkingrat
    greatkingrat Posts: 325 Forumite
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    Depends what the fee is for. Is it 1.5% just for the advice, or is that a total fee including the fund charges?
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    I'd rather pay messrs Vanguard a tenth of that.

    By the way, have you really got a whole million with one provider? Why?
    Free the dunston one next time too.
  • sandsy
    sandsy Posts: 1,720 Forumite
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    No, it's not but as per previous poster, are you sure that's just the advisers's fee and doesn't include charges related to managing the investment? Or perhaps there's a discretionary fund manager involved?
  • jsinc
    jsinc Posts: 306 Forumite
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    Let's assume the investments make 5% pa after inflation. Then e.g. fund charges of 0.25% and SIPP platform charges of 0.25% - leaves 4.5%.

    At 1.5% you'd then be paying away one third of remaining real gains in management fees (1.5/4.5). More than that when factoring in compounding effects over time. Plus as you say the fees aren't performance dependant.

    That wouldn't be reasonable to me on an ongoing basis, but depends what you want and maybe what the fees include.
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    Is £15,000 per year a reasonable fee to pay to an IFA for managing a SIPP, with a current transfer value of £1 million ?

    Are you sure the adviser is charging 1.5%? That sounds more like total fee (adviser, platform/provider and funds).

    As confirmed by the FCA just recently, the most dominant adviser charge is 0.5% pa. (with 1% more likely with small values).

    So, broadly speaking, you would expect ballparks of adviser: 0.5%, platform 0.2x%, funds: 0.3x%-0.8%

    Also, if you are looking at figures that include transaction costs, then disregard the transaction costs column. It is a flawed EU directive that treats profit/loss on trades as a fee. Profit/loss is not a fee and should not be treated as one but the EU directive requires it.
    and the reality that this is paid irrespective of whether the fund makes gains per annum or not.

    just as it should be. Otherwise you introduce the risk of bias into the decision making and that is not desirable.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    Its_mine wrote: »
    Is £15,000 per year a reasonable fee to pay to an IFA for managing a SIPP, with a current transfer value of £1 million ?
    I was taken back a bit when the 1.5% fee is calculated and presented in pounds, and the reality that this is paid irrespective of whether the fund makes gains per annum or not.

    What do you get for this 1.5% and what does it include? IFA fees, platform fee, fund fees? If it's a total cost it sounds like the usual rip off amounts that many investors pay. If you were to DIY with a low cost platform you could easily cut those fees in half. FYI in the US on around 3x your current transfer value I paid around £2,000 in fees last year.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    If you were to DIY with a low cost platform you could easily cut those fees in half.

    But not necessarily end up with better returns.
    If it's a total cost it sounds like the usual rip off amounts that many investors pay.
    Where is the rip off?
    FYI in the US on around 3x your current transfer value I paid around £2,000 in fees last year.

    But be honest and tell the OP that you restrict your investments to passive only and just two areas. Something that is not popular in European investing.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    dunstonh wrote: »
    But not necessarily end up with better returns.
    True, portfolio returns are seldom certain, you might end up with worse returns, but you also might end up with better returns and you are certain to have a bit of a head start from the lower fees.
    Where is the rip off?

    In the eye of the beholder.
    But be honest and tell the OP that you restrict your investments to passive only and just two areas. Something that is not popular in European investing.

    Yes dishonest by omission. I own US and global cap weighted equities and US bonds mostly in large passive funds.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • Alibert
    Alibert Posts: 113 Forumite
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    kidmugsy wrote: »
    I'd rather pay messrs Vanguard a tenth of that.

    By the way, have you really got a whole million with one provider? Why?

    How many providers would be sensible for a £1m pot ?
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    Alibert wrote: »
    How many providers would be sensible for a £1m pot ?

    dunstonh told us recently that if you hold a personal pension, or stakeholder, with an insurer you can expect the whole million to be covered in the event of fraud and whatnot. (I'll bet I oversimplified that but that was the gist of it.)

    Anyhow, in an ordinary SIPP on a platform you're covered up to £50k, rising to £85k in April. You might like to read this:

    http://monevator.com/even-brokers-can-fail-you/comment-page-1/
    Free the dunston one next time too.
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